We’ve all seen the explosion of crowdfunding projects – where the founders offer a cool product or experience in exchange for a “contribution.”
48Days.net member Seth Gore raised $6,300 to launch his Portland Boat Tour business. Connie Foster raised the money she needed to publish her first book. When I launched Wisdom meets Passion we decided to have a memorable book release party at the Vanderbilt Legends Club. We set up an Indiegogo project to offer special Wisdom meets Passion packages – with the goal of raising $4,800 for our party expenses. $12,461 came in before the short deadline we established.
And then there are the outrageous examples like the Pebble watch. Customers essentially pre-ordered the watch, bringing in $10,266,845 before any manufacturing was completed.
This is a new area of financing. Please understand that while the term “contribution” is being used, those contributors are still expecting to get something in return. Sites and projects that just expected to get “donations” have struggled and disappeared. This is a gray area. It’s not regulated like making an “investment” would be but the people involved still expect to receive something for their participation.
Here are the most popular “CrowdFunding” sites. Each name is hyperlinked for further exploration. You’ll find some cater to artists, designers, inventors, musicians, social entrepreneurs, and more.
KickStarter When Donald Miller announced that a movie based on his book Blue Like Jazz had been put on hold because there was not enough funding, a couple of fans decided to take matters into their own hands. They placed a notice on KickStarter and said they wanted to raise $125,000 to complete the movie production. They had $345,992 pledged and the movie was completed. Check it out – Blue Like Jazz The Movie
These organizations connect people who want to invest money with people who want to borrow money
As crowdfunding continues to grow we are seeing lots of new sites pop up to address the unique needs of the market. And of course we are seeing sites close down just as quickly. Any new opportunity like this will attract those with a weak model or just simply having missed the window of opportunity.
Kickstarter won’t approve a project to throw a party with your friends, but Zokos will. You can chose a menu, invite your guests and suggest a per person fee to attend. Thus, your party is funded as your guest list is confirmed.
If you’re planning your wedding you can set up with Wanderable or Honeyfund to tap into your friend network to fund an amazing honeymoon. Want to bring your favorite band to your city? Use Song Detour to commit tickets and get the attention to make it happen. DonorsChoose directs donations to your preferred public school classroom. Want to have a special showing of a movie for you and your friends? Check out Tugg to select the movie and share your event.
This whole phenomenon is like the wild, wild west right now. It is being used for disaster relief, support of artists by fans, political campaigns, software development, invention development and much, much more. But like in the wild, wild west there is a lot of abuse. People are raising money and not delivering – leaving a sour taste for the people who “contributed.” Unrealistic promises are being made and some people are just raising money for their own use. We can be confident there will be regulations coming shortly that will dramatically change this open space.
Like the Groupon discount program (and the thousands of spinoff companies) this unregulated crowdfunding will likely see a peak and then fade down into a reasonable model to continue.
What would you do in your business if you had an extra $50,000? For some of you, this may just be the window of opportunity you need to launch something extraordinary. Don’t wait until that window closes.