Crowd Funding

Thanks to all of the Neon Guild members that could come and see me in person last night – I enjoyed speaking with you very much. At the event I promised everyone I would put together this summary and references. I thought I would share it here in case others find it useful.

In the past 2 years crowd funding has become extremely popular. The number of sites and projects has exploded although experts disagree on the exact number of each, the scale is striking. According to Google Trends data the number of people searching for crowd funding has increased 50x during 2012 and then doubled from its peak in 2012 to its peak in 2013. For some other statistics from May of this (2013) year :
– $5.1 Billion is estimated to have been raised in 2013
– More than 1 million successful campaigns in 2012
– 43% use an escrow account model, 63% use PayPal
– Average successful campaign is around $7000 and lasts 9 weeks.
Many consider this report by to be the first comprehensive report on crowd funding (also available in PDF format). I find it interesting that the location with the most activity is Netherlands.

There are various types of crowd funding.
– Donation-based crowd funding: The ancient form of crowd funding. This is the form of crowd funding where people contribute to a cause or charity with no expectation of return. Though tithing goes back to the dawn of the written word, there are many recent web sites developing a new take on this model. For an example see Giv2Giv.
– Reward-based crowd funding: The most talked about form and the form I have studied and discussed most. This form of crowd funding promises rewards, or the hope of a reward once a target is met, for contributing. This too can be considered an older form though it had not been thought of a “crowd funding” traditionally. When you give to a local NPR state like WMRA you get a coffee mug, a tote bag, or Nano Wireless Mini-Speakers in exchange for your donation. The modern incarnations of this model are sties like KickStarter and Indiegogo. These two sites were the focus of my talk and will be discussed more below.
– Loan-based crowd funding: The crowd funding that pays you back. Though loans go back to the dawn of time, the idea of asking exponentially larger groups of strangers for loans is new. The way these programs work is the relatively straightforward; the contributors expect to be paid back over time, with interest.
– Equity-based crowd funding: Crowd funding for Wall St. Similar to loan-based crowd funding at least within companies this general idea is not new. What is new – at least in the USA – is the idea of getting contributions from direct investors in exchange for a portion of the company outside the confines of an exchange. Recently the laws around equity investments in non-public companies where greatly relaxed as part of the Jobs Act.

It is predicted that many crowd funding portals will start falling by the wayside unless they find their own niche markets. As the field gets more crowded it will be harder for so many sites, and subsequently projects, to draw contributors. To distinguish themselves, many are looking for this niche. For instance:
– Crowdtilt is focused on pulling pools of friends together to fund projects.
– Quirky offers a more hands approach, they use visitor input to help decide which projects will be allowed in and then will crowd source team members to work on it.
– Some like Crowdfunder and WeFunder. are starting up just to support the Jobs Act legal changes.

I focused on the two that are generally considered the top two reward earning crowd funding sites: KickStarter and Indiegogo.
Feature KickStarter Indiegogo
Fees Goal Met:
– 5% for KickStarter
Goal Not Met – no money transferred, no fees.
– 3-5% for Amazon Payments Goal Met:
– 4% for Indiegogo
Goal Not Met (KWYG):
– 9% for Indiegogo
– 3% for PayPal plus $25 wire fee for non-us campaigns
Non-Profit 501(c)(3)
– 25% of Indiegogo’s portion
Locations severed – Cards accepted: US, UK, Canada
– Project founders in: US, UK, Canada, New Zealand, Australia “anyone, anywhere, to raise money for anything”
Project scope – Must be a “project” with a completion and a product outcome. Guildlines
No scope restrictions
Financing structure Contributions held in escrow by Amazon Payments service Contributions moved to project sponsor’s PayPal account. Note here.
Statistics Has a stats section on their site
I have not found a good source

The growth of crowd funding is much like the growth of mobile apps. In 2008 any simple iStore app like iFart could make $10,000 a day. Now app developers have to work very hard and be outstanding to make any money. As and example, by 2011 according to Time there were 1,123 fart apps for iPhone. Crowd funding is the same, when it was a new idea for the online world, as Indiegogo and KickStarter began, there were few projects to browse so even the ones that were not excellent would get attention. You now need to work to get that attention:
– Be Professional. No cell phone videos, or slapdash editing.
– Promote the Campaign at lots of places and with many people BEFORE you launch!
– Pre-Plan updates. Even write updates before you launch. What will you say if it is going great? What if you are not getting contribution as fast as you would like? Have you thought about stretch goals beyond your set goal? Keep in mind you need to keep updates coming so that there is a sense that people are contributing to a viable project with a committed team.
– Build buzz! (You can Google a million ways to build creative buzz, of course if you can Google it, how creative is it really?) You need to do this before, during, and after the campaign! One of the big advantages of crowd funding is that building buzz should generate loyal customers before you even have a product! Be creative! Think of things to do that may not have been done before. Would you consider gorilla street theater to promote your campaign? Have you done that already?

– A definition of crowd funding from Wikipedia
– Some sties/blogs about crowd funding – some better than others, some selling services more than others:
– Crowd Crux
– The 47 Day Crowdfunder
– Crowdfunding PR
– Daily Crowdsource
– Crowdfunding Website Reviews
– Go Get Funding
– KickStarter Specific
– Starting a Campaign
– Stats from Kickstarter themselves
– Stats from Kick Traq
– Indiegogo Specific
– Starting a Campaign
– Other:
– Jobs Act
– Complete Pulse
– Google search trends
– Comparison of crowd funding services from Wikipedia
– And a pile of books on the topic