Crowdfunding, also known as crowd financing or equity crowdfunding, is the collective effort of individuals who pool their money, usually via the internet, to fund or support or raise money for a project or new venture.
There are many different sites that provide a medium for crowdfunding. A few of the most popular are:
http://www.indiegogo.com
http://www.kickstarter.com
http://www.rockethub.com
http://www.gofundme.com
http://www.microryza.com
http://www.prosper.com
http://www.lendingclub.com
http://www.AngelCrowds.com
http://dailycrowdsource.com
http://www.equitynet.com
What are my chances of success?
Small businesses and venture start-ups generally have a very small chance of succeeding and becoming a successful company.
Although the crowdfunding medium is so new, reports so far indicate that there is a much larger chance that they will succeed than those businesses that use the traditional method for raising money (asking relatives, using angel investors or venture capital).
Kickstarter, the most well known of the crowdfunding sites, has released data that claims a 43.77% success rate. The numbers were released by Kickstarter, but most other sites have not released data. There seems to be opportunity to analyze the traffic and success per post.
Why a project fails
What kind of money is out there if I try to use crowdfunding?
The SEC is working through the process to create specific laws for crowdfunding. While many of the specifics are yet to be determined, crowdfunding seems to be a process for raising capital that is here for good. Like the rise of venture capital in the late 1950s, crowdfunding has potential to release a large amount of capital into the market that has been pent up.
Kickstarter Total Successful Projects and Funding (US $ Millions) by Category (gigaom.com)
30% Rule
Statistics show, and articles have been written to explain, that the likelihood of achieving your total financial crowdfunding goal increases substantially once you have overcome 30% of your established goal. The graph below helps to visualize those chances in the different categories publicized by Kickstarter.com.
Analytics and Crowdfunding
Preparation for this blog post showed me that there is not much data released showing the success of a single venture opportunity in comparing traffic or page views to the success of meeting a financial goal. In other words, if I post an idea to one of these sites, how many eye balls need to look at my post on average before my funding goal is reached? This could be a business opportunity for someone to post and see if there is a demand for the idea.
Visit one of the popular sites to become more familiar
Now is your opportunity to be a venture capitalist to invest in the next big thing or to be a budding entrepreneur with a greater chance than ever you will receive funding to make your dream become reality!
Resources and more information:
All about Crowdfunding - Jason Best
gigaom.com
Kickstarter by the numbers
Magnet Labs
How to run a successful crowdfunding campaign
SmartMoney - Youtube video on how it all works
I've just assumed lately that this whole crowd funding thing was just a fad. You provide a ton of informative resources that make me think otherwise. It'll be interesting to see whether the new chairman of the SEC will favor this new form of capital raising. It seems like a lot is depending on her position. Good post.
ReplyDeleteI've heard of crowd-funding mainly for artistic endeavors (albums, film,...) but I had not heard of this being used for for profit funding.
ReplyDeleteI also thought originally this would be fad like. I first noticed Kiva.org years ago. They were on the front end of crowd-funding for micro-finance. It's very exciting to see all these emerging ideas, and this idea in particular helps other ideas come to fruition.