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:
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:
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.
Image thanks to Projects2crowdfund