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By : Hardik Patel

Crowd Funding

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Also known as the crowd financing, equity crowd funding, or hyper funding.

It is a method of funding that allows individuals to utilize their personal networks to raise capital and support their cause or business. 

Campaign organizers create an online profile to explain their fundraise goals and share their project with friends, family, social networks, etc. 

It can be for profitable or non profitable purposes.

It has its origins in the concept of crowd sourcing.

What is Crowdfunding?

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It is used in support of a wide variety of activities including disaster relief, citizen journalism, support of artists by fans, political campaigns, start up company funding, movie, free software development, inventions development and scientific research.

Different Purposes of Crowdfunding :

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Crowd funding is a whole bunch of people giving you a little bit of help financing your project (artists or otherwise), it is a form of charity or donation that uses social media, online communities, and micropayment (paypal).

In Simple Meaning:

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Crowdfunding has a long and rich history with roots going back to the 1700's. 

1997- The Inception of Modern Day Crowdfunding 

2009- Crowdfunding Emerges as a Major Funding Source

2011- Crowdfunding Gains Washington's Support

2012- Fundable Launches the First Business Crowdfunding Platform

The History of Crowdfunding

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Crowdfunding is a rapidly growing industryAverage successful crowdfunding campaign is around

$7,000 and lasts around 9 weeks.Campaigns that can gain 30% of their goal within the

first week are more likely to succeed.Social Media is a critical factor in crowdfunding

success: for every order of magnitude increase in Facebook friends (10, 100, 1000),  the probability of success increases drastically (from 9%-, 20%, to 40%).

Individuals ages 24-35 and mostly men are much more likely to participate in crowdfunding campaign.

Those earning over $100,000 per year are the most likely to invest in startups through crowdfunding.

Crowdfunding Statistics

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Crowdfunding platforms serve as a “network orchestrators”. They create the necessary organizational systems and conditions for resource integration among other players to take place.

The emergence of CFPs around the globe is accelerating. By the end of 2012 there are expected to be more than 530 platforms, up 60% since last year.

Crowdsourcing.org breaks these down into four categories: Donation-Based, Reward-Based (accounting for the majority), Lending-Based and Equity-Based.

Crowdfunding Platforms:

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Some Famous Crowdfunding Platforms:

One Has to choose its suitable platform and understand which platform is the best to use depending on the type of project that one want to launch. There are fundamental differences in the services provided by many platforms.

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Led by the recent success of high profile and high capital funding campaigns Crowdsourcing.org predicts that the amount of money raised by CFPs during 2012 will reach $2,806m, up 91% since 2011.

In 2012, President Barack Obama signed the JOBS Act, legislation that effectively lifted a previous ban against public solicitation for private companies raising funds.

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Though funding is often the main goal of a campaign, it can also a fantastic way to gain visibility and grow your customer base.

Some additional ancillary benefits of a great fundraise are: TractionSocial proofPress coverageMarketing Potential investor interest.

Benefits:

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How Does Crowdfunding Works:

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The inputs of the individuals in the crowd trigger to crowdfunding process and influence the ultimate value of the offerings or outcomes of the process.

Each individual acts as an agent of the offering, selecting and promoting the projects in which they believe.

The will sometimes play a donor role oriented towards providing help on social projects. In some cases they will become shareholders and contribute to the development and growth of the offering.

Role of the crowd :

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Each individual disseminates information about projects they support in their online communities, generating further support.

Motivation for consumer participation stems from the feeling of being at least partly responsible for the success of others’ initiatives, striving to be a part of a communal social initiative, and seeking a payoff from monetary contributions.

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Social entrepreneurs of all varieties are turning to crowdfunding to launch or expand their social efforts; Here below are some examples of Social entrepreneurs who raised funds for their venture by using crowdfunding platforms.

Success Stories:

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Rebecca Pontius led the effort for an organization called the Do Good Bus to raise $100,000 on StartSomeGood to show people how to volunteer by taking them on a bus to volunteer all around the country.

Martha Griffin raised $31,763 on Kickstarter to publish a children’s book called Sam’s Birthmark.

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Jennifer Windrum raised $35,000 on StartSomeGood for SMAC—Sock Monkeys Against Cancer.

Kristopher Young, head of PROViDE, which provides care for people in Haiti, raised over $2,000 on StartSomeGood for a dry composting toilet. 

Brad Hurvitz, founder of Trek to Teach, raised $2,910 on StartSomeGood. 

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http://www.youtube.com/watch?feature=player_embedded&v=qZQlaZvzf78

The video below is saying more success stories:

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Richards, L. (2012, June 15). Crowdfunding in numbers: stats. Retrieved from http://econsultancy.com/ca/blog/10074-crowdfunding-in-numbers-stats

Thorpe, D. (2013, January 01). Crowdfunding success stories include $35,000 for sock monkeys and $2,000 for a dry composting toilet. Retrieved from http://www.forbes.com/sites/devinthorpe/2013/01 /30/crowdfunding-success-stories-include-35000- for-sock-monkeys-and-2000-for-a-dry- composting-toilet/

References:

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Gofundme. (2012, May 12). http://www.gofundme.com. Retrieved from http://www.gofundme.com/crowdfunding-websites/

Wikipedia contributors. (n.d.). Wikipedia, the free encyclopedia. In Wikipedia, The Free

Encyclopedia. Retrieved from http://en.wikipedia.org/wiki/Crowd_funding

Khorram, D. (Producer). (2012). Current method of capital acquisition vs new method of capital acquisition - cf donation type. Retrieved from http://www.crowdfundingplanning.com/blog-crowdfunding_planning-Conference-cloud_based_business_planning-crowdfunding_softwarecrowdfunding-crowdfunding_exchange/traditionalcapitalacquisition vscrowdfunding