(What I am finding is more interesting than cryptocurrency)
I have always been mesmerized by the concept of crowdfunding.
Not because of the stories about people raising millions of dollars for their project, but because of many other reasons:
- It is a great way for creators to get the word out for their projects.
- To find out if anyone else is interested in their project
- Get enough money to start the project.
- Sell before they actually build
- Reason to go actually finish and deliver the product.
But my interest had been superficial. I had never gone to a crowdfunding site to find out what kind of projects are being funded, who are floating them, and the benefactors.
Until recently, when I bought a book bundle (where multiple authors get together and release a number of books at low prices), and one of the books was Crowdfunding Your Fiction: A Best Practice Guide by Loren L. Coleman.
The book revived my interest, and I started going to the crowdfunding sites just like a new writer would explore Medium. It is early days but what I have discovered so far is really interesting and encouraging.
What is crowdfunding anyway?
According to Loren Coleman, a veteran in crowdfunding, it is a little bit eBay, a little bit Etsy and a whole lot of speculation.
You have a project you want to create, a story, a board game, a piece of technology, you post your idea on the crowdfunding market and make a promise.
If X number of people agree to give you Y dollars each, you will create the item in Z amount of time and send all your backers a copy.
That’s it.
There is no rocket science to it.
Although it is considered a new concept, the core idea of “the crowd” funding ventures is nothing new.
The history of crowdfunding.
Between 1200 –1800 traders used to finance shipping ventures. The trading expeditions used to be very risky, expensive, and yet exceptionally profitable. Traders would get a share of the profit or bear a part of the loss. This approach would provide shipping companies with a sensible risk management strategy.
In 1713, a young poet, Alexander Pope, raised money to translate the ‘Iliad.’ Alexander Pope was quite keen on translating Homer’s epic poem, ‘The Iliad’, into English but lacked the necessary resources to publish it. He asked donors to pledge two gold guineas to support his work in exchange for having their names published in the book. He was perhaps the first one to run a reward-based crowdfunding campaign and successfully completed a creative project.
In 1783–84, fans crowdfunded Mozart’s tour. Mozart was performing three piano concerts in the Viennese concert hall but didn’t have enough money to travel. He sent an invitation to prospective backers offering concert manuscripts in exchange for financial support for the tour. 176 backers donated enough funds to make his tour happen.
In 1885, New Yorkers donated millions to install the Statue of Liberty. The Statue of Liberty was a diplomatic gift from the French people to the US. But the efforts to raise funds for its pedestal stalled. When all means failed, Joseph Pulitzer decided to launch a fundraising campaign through the newspaper. More than 160,000 New Yorkers chipped in. $100,000 was raised in five months.
Digital crowdfunding.
The modern digital crowdfunding has its roots in 1996–97 funding of British rock band Marillion. Marillion’s fans raised $60,000 through an internet campaign to support their tour to the United States.
The first online website, “fan-funding,” to raise funds for artists, was launched in 2003. Soon after ArtistShare platform was established where artists could seek funding from their supporters to cover their production costs in exchange for free, early access to their album, song, or another piece of art.
The first peer-to-peer lending platform Zopa kicked off in 2005 in the UK. Zopa was followed by Lending Club and Prosper in the US in 2006.
In 2007, the Australian Small Scale Offerings Board (ASSOB), which is considered the world’s first equity-based crowdfunding platform, was established.
After the 2008 financial crisis, people turned to the internet to seek funding. IndieGoGo and Kickstarter, launched in 2008 and 2009, respectively, made crowdfunding a household word. Many other platforms started, and in just five years, crowdfunding grew 1000%.
To date, people have raised more than $34 billion worldwide using these platforms.
Whatever your reason for raising money, there is a crowdfunding site for you.
Just how much money can be raised by crowdfunding?
In few words, much more than your target.
In 2015, Pebble Technology started a campaign to raise $500,000 to build a smartwatch. They were at the right time at the right place. This was their second Kickstarter campaign which beat their original Kickstarter record from 2012 by over $10 Million dollars. They raised $20,338,986.
The biggest amount ever raised is by Cloud Imperium Games which has raised over $317 million for the development of their video game Star Citizen, breaking a record funding volume for a single project. They have been crowdfunding since 2012, both through crowdfunding platforms such as Kickstarter and their own website.
Travel Tripod by Peak Design, Goal $500,000; Raised $12,143,435.
The World’s Best Travel Jacket, Goal $ 20,000; Raised $9,192,055.
The Veronica Mars Movie Project, Goal $2,000,000; Raised, $5,702,153
Okay, these some of the extra successful projects.
For every successful crowdfunded project, there are many unsuccessful projects.
But that is not the bad news.
In fact, the news is mostly good for crowdfunding.
In July 2018, The Conversations (a research-based news and analysis publication) analyzed Startnext, (the biggest German crowdfunding platform), to figure out what was behind crowdfunding’s success?
At that time Startnext had more than 100,000 pledges to more than 2,000 projects. They gave The Converstaions access to their whole database.
This is what they found:
- It was never too late to get a campaign on a successful track — provided its creator manages to get a surge in pledges rolling.
- Attracting a lot of support in the first day or two was considered a crucial indicator of quality. The Conversations analysis found that even projects that fell short of this average path to success, succeeded. Nearly 90% of the projects that are under track after two-thirds of the campaign still become success stories.
- Even more strikingly, 40% of severely under-track projects still make it in the end. These are projects that are more than 70% off their targeted amount with a handful of days to the deadline.
- A large fraction of successful projects (23%) were late bloomers. Meaning the average crowdfunding campaign started off with a healthy amount of pledges, levelled off in the middle of the funding phase, and then got a boost in the last few days.
Their biggest insight, it is never too late with crowdfunding.
Crowdfunding is best learned by participation.
Just like Medium or a social media platform, crowdfunding is a community bases activity. It can be best learned by participation.
There are many platforms. Some are listed below.
- Best Overall: Kickstarter
- Runner-Up, Best Overall: Indiegogo
- Best for Nonprofits: Causes
- Best for Creators: Patreon
- Best for Personal Fundraising: GoFundMe
- Best for Equity Crowdfunding: CircleUp
- Best for Business Loans: LendingClub
Source: The Best Crowdfunding Sites
Hop on to anyone and participate. Follow and back campaigns. You can invest with as little as $1. There is a merit in doing that because then you will start getting emails about how the campaign is going.
Build sample campaigns for yourself, even if you don’t intend to launch everyone.
Research by surfing your preferred categories at least weekly and other categories at least monthly.
Watch the failed campaigns too, you will learn a lot from them.
When a project interests you for content or just for the campaign, back it. Leave a word of encouragement under comments. Encourage good campaigns.
References:
- The History of Crowdfunding
- Crowdfunding success and failure: what actually happens during a campaign.
- Top 20 Most Funded Kickstarter Projects of All Time (2019).
Let me know what your thoughts or experiences are about crowdfunding.
In my next article I will write about crowdfunding your book project.
Photo by alex bracken on Unsplash
