Crowdfunding

At the request of a reader - shout out to Johnny S - this month's post is on crowdfunding.

The notion of "crowdfunding" is actually as old as - well, as old as the early days of shipping ventures, when individuals would buy into a ship's fortunes as it sailed off to bring back valuable cargo (we're talking as early as the 1600s, the East India Company [1700s] that went off in search of cotton, silk, indigo dye, salt, saltpetre, tea and opium) and other joint ventures into which people would pour their money, hoping that their "ship would come in."

A good company, headed by a smart trader, could make investors rich.

Today we have the stock market, which sells "shares" of a company - representing miniscule bits of ownership, but which might just make you wealthy if the company fares really well.

The notion of crowdfunding today is somewhat different, though the general principal remains the same.

Back in the bad old days, and even today with the stock market, it's difficult to know what company to invest in - where to put your money. But today, with the Internet, it's  possible to get up close and personal with people and organizations who want you to invest.

However, the aim of crowdfunding isn't necessarily to "get rich." It's to support an effort you believe has merit, for whatever reason.

Not too long ago, a few websites sprang up that allowed groups and individuals to post requests for funding for projects. They might be in the arts, the humanities, they might be humanitarian. It might be to make a video for a new CD - or the CD itself - for an aspiring band. It might be the money for a program for students, or a TV pilot. Whatever the objective, if it met the site's criteria, and it had merit, it was up for grabs for the public to support.

As Wikipedia enlightens us: "An early precursor of the crowdfunding business model was Praenumeration, a Subscription business model, which was used in the 17th century to finance book prints. Similar to crowdfunding an additional benefit to donors was offered like the mentioning on the title page.

In 1884, the American Committee for the Statue of Liberty ran out of funds for the Statue’s pedestal. Newspaper publisher Joseph Pulitzer urged the American public to donate money toward the pedestal in his newspaper New York World. Pulitzer raised over $100,000 in six months. More than 125,000 people contributed to the cause with most donations being $1 or less.



In 1997, fans underwrote an entire U.S. tour for the British rock group Marillion, raising $60,000 in donations by means of a fan-based Internet campaign. The idea was conceived and managed by fans without any involvement by the band, although Marillion has since used this method with great success as a way to fund the recording and marketing of its albums from Anoraknophobia (2001), Marbles (2004), Happiness is the Road (2009) to Sounds That Can't Be Made (2012)."


"Investors" are rewarded a number of ways, but most of them are non-financial. It might be credits on a video, or on a product. It might simply be the good feeling of having done something decent and good for a community. Or it might be a return.

Two of the more well-known are Kickstarter and Indiegogo, but by 2012 there were at least 450 crowdfunding platforms. You can search on such platforms for projects that meet your criteria, such as music, drama, art, civic activities, and so on. Then, you can contribute whatever meets your budget and your interests.

An added benefit of crowdfunding to the creator is exposure. People who are interested in funding this way are also likely to be connected socially on the Internet, and will share this information with friends who share it with friends, and you know how that story goes. The downside is that there is the "indie" stigma that is still (for however long, my personal opinion is its days are numbered) attached to DIY products, programs, and efforts. If you can't get VC - venture capital - can you possibly be really any good? If you can't qualify for a government grant, can your program really be of any benefit to the greater public?

For my money, all irony intended (is that really irony? I'm told Americans don't "get" irony), crowdfunding is the ideal way for people to vote with their pocketbooks. They're going directly to the source, rather than hearing it from an analyst, or believing a pundit. They can sample a product offering, listen to some music, look at some artwork or read a prospectus. If they like it, they support it. It's that simple, that direct, that honest.

True, there are so many out there it can be difficult to get attention, but that, of course, is where social media comes in. You "broadcast" the story to like-minded people, and together, you can make things happen. Kickstart them, as it were.

So what are you waiting for? Find something you believe in, and kick it!

Comments

Daniel Grannis said…
Very interesting, and I love the concept. I want to visit the sites you mentioned and get involved. Thank you!

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