Crowdfunding (Part 1 of 2)

by mcampbell on December 13, 2012

Crowdfunding is the process of obtaining investment from many people (called backers), in small amounts, to finance the undertaking of a project that these backers would like to bring to reality. There is a strong charitable element to this process, but the backers may derive some tangible benefits from the outcome.  For non-profit activities, crowdfunding can make small, but meaningful, projects possible. For new businesses, it is a method of bypassing the traditional vehicles of financing, such as loans and venture capital, which may not be available to the project or would only be available under unreasonable conditions. It also significantly reduces risk.

Advancements in technology continue to disrupt established systems by introducing the possible and challenging us to rethink convention. Below are two major internet-based companies that facilitate crowdfunding and may redefine how businesses, products, and services come into being: Indiegogo and Kickstarter.



Indiegogo – International funding platform for creative projects

Indiegogo was started in 2008 as a means to finance creative projects that otherwise couldn’t be made due to lack of funding. These include films, documentaries, books, art, music, and theatre. It has since expanded to include other types of projects such as inventions, entrepreneurial goods and services, and charitable causes.

The backers usually get some value for their money when a tangible good or service is being produced. Provided their donation is over certain amount thresholds, they are promised a copy of the final product or access to the service, and then perhaps some added content with increasing amounts. Large donations are often associated with some type of prestigious award, such as an invitation to an event held by the fundraisers or a higher value prize.

Success in fundraising does not guarantee project success. A contributor must keep in mind that the product or service may not ever materialize and, if it does, the quality may be disappointing.

In the case of charitable causes, projects may involve a single issue, such as funding surgery or working abroad. This allows the backer to become involved in issues that matter to them on a personal level (in a manner similar to that employed by Kiva and Zidisha). These are not projects, per se, and outcomes can be quite nebulous.


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