Getting started with Crowdfunding

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There is a lot of interest and hype right now around Crowdfunding as a new way to fund innovations. The success and exponential growth of platforms like Kickstarter, Crowdcube, indiegogo and Crowdfunder means that there is lots of choice, but also quite a lot of confusion at the moment.

So is crowdfunding a flash in the pan or is it here to stay? We thought we’d share our thoughts and experience in the space for those trying to understanding the pro’s and con’s of when and how to use crowdfunding as a way to secure investment for new ideas and projects.

What is crowdfunding?

Crowdfunding is the collective effort of people who pool their money (and effort) to support a specific goal. It’s “all or nothing” approach within a specific time limit and there are often other benefits in return for investors (good, events, kudos, experiences, or even equity etc.).

Whilst crowdfunding is growing fast and powered by the web, the concept is not new. For instance the Statue of Liberty was crowd funded by the citizens of USA and France and many church spires etc. have been crowdfunded over the years.

Who is crowdfunding for?

Lots of small companies are extending their reach and successfully raising investment through crowdfunding. However some larger organisations such at LEGO (with their excellent Cuusoo programme), Zopa (with their peer2peer finance models), Unbound (with their crowdfunded book publishing model) and CRUK (with their innovative My Projects approach to fundraising) are implementing some of the elements of crowdfunding to back new and interesting ideas.

Benefits of crowdfunding

There are many reasons why crowdfunding might be the right approach for you and your project. Four of the main benefits of crowdfunding in our experience are as follows:

  1. The best crowdfunding projects are those that both improve their proposition through feedback from the community  – both positive and negative.
  2. The ability to build potential customers before you’ve gone any further and, in the case of product innovation, invested lots of time in production costs.
  3. The ability to find collaborators with complementary skills who can help me develop and improve my proposition
  4. The ability to fundraise very quickly compared with traditional funding routes

Challenges of crowdfunding

As with all things there are also many reasons why crowdfunding might not be the right approach for you and your project. Four of the main challenges of crowdfunding in our experience are as follows:

  1. Crowdfunding is increasingly competitive and being able to ‘stand out from the crowd’ is increasingly challenging
  2. Crowdfunding can become something of a beauty contest, where the best videos and pitches succeed but not necessarily the best ideas (but isn’t that true elsewhere as well?)
  3. Even though crowdfunding is a more democratic form of fundraising, the biggest and arguably best crowdfunding platforms still have gatekeepers who can stop your project being listed
  4. There is a risk that innovators will overpromise and even abuse the good will of the community, though we are not aware of specific cases as yet.

Summary

In summary, whilst Crowdfunding is not necessarily new, and almost certainly over-hyped right now, it is also in many ways the future. Whilst the term may lapse with time, the concept of more people sharing more resources in new ways is increasingly becoming the business and investment model of the future.

by Roland

Image thanks to Projects2crowdfund 

Comments

  1. Do you know crowdfunding WESYM? https://wesym.com/ It’s a fantastic crowdfunding site in Japan. They hosts many projects in Japan.
    Many of the project is written in Japanese, but some of them are for
    foreign OTAKUs. Especially in case of idol projects, animation projects,
    I mean, Japanese cool cultural things. It’s like kickstarter, but their goal seems to cultivate Japanese culture.

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