Crowdfunding is the collection of money from backers, the "crowd" to fund an initiative and usually occurs on an Internet platform. The initiative could be a non-profit, to raise funds for a school or social service organization, political, to support a candidate or political party, charitable, to raise emergency funds for an ill person, or to fund a critical operation, commercial, to create and sell a new product or financing a campaign for a new start up company.
Crowdfunding models involve a variety of participants. They include the people or organizations that propose the ideas or projects to be funded, and the crowd of people who support the proposals. Crowdfunding is then supported by an organization (the funding site) which brings together the project initiator and the crowd.
Business and social issues have been “crowdfunded” for at least 400 years. The first books to be printed were backed by those people interested in introducing mass-produced education and entertainment. A more recent example is in 1884 when the Statue of Liberty fund ran out of money to pay for the pedestal for the statue on Bedloe’s Island, now Liberty Island. Joseph Pulitzer ran articles in his newspapers to ask for donations and they received $125,000 in 6 months.
But to say that the growth of these sites is exponential would be an understatement. There is no way of knowing how many exist and how many are going to spring up. There are two aspects to consider when participation is contemplated. All of the sites have a cost, usually between 5% and 10%. The fee will be paid either by the originator of the project, or the contributor. And in all cases, the potential to get “burned” is always present. Even the cause related sites have siphoned off funds for personal gain. And in one site that I have followed, Kickstarter, projects have failed to be finished, cost much more than expected, or have been totally fabricated. I am not picking on KS, but there is considerable risk when becoming part of a crowdfunded project. If you are thinking about joining in with the crowd, please do a lot of research! And, many of the sites are not secure so that is something else to consider before investing in the latest concept. The trend? There are always more people trying to separate us from our money. Caveat Emptor…
Crowdfunding models involve a variety of participants. They include the people or organizations that propose the ideas or projects to be funded, and the crowd of people who support the proposals. Crowdfunding is then supported by an organization (the funding site) which brings together the project initiator and the crowd.
Business and social issues have been “crowdfunded” for at least 400 years. The first books to be printed were backed by those people interested in introducing mass-produced education and entertainment. A more recent example is in 1884 when the Statue of Liberty fund ran out of money to pay for the pedestal for the statue on Bedloe’s Island, now Liberty Island. Joseph Pulitzer ran articles in his newspapers to ask for donations and they received $125,000 in 6 months.
But to say that the growth of these sites is exponential would be an understatement. There is no way of knowing how many exist and how many are going to spring up. There are two aspects to consider when participation is contemplated. All of the sites have a cost, usually between 5% and 10%. The fee will be paid either by the originator of the project, or the contributor. And in all cases, the potential to get “burned” is always present. Even the cause related sites have siphoned off funds for personal gain. And in one site that I have followed, Kickstarter, projects have failed to be finished, cost much more than expected, or have been totally fabricated. I am not picking on KS, but there is considerable risk when becoming part of a crowdfunded project. If you are thinking about joining in with the crowd, please do a lot of research! And, many of the sites are not secure so that is something else to consider before investing in the latest concept. The trend? There are always more people trying to separate us from our money. Caveat Emptor…
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