Group items tagged

The future of crowdfunding is allowing investors equity in an idea or business. If we can fund ideas from friends who want to see us become successful, imagine if those friends actually got to participate in the revenue stream. Wouldn’t you give a little extra if, instead of receiving a simple return, you had the opportunity not only to make a profit but also to own a percentage of the company itself?

While the phenomenon is not new, it is still not a mainstream concept and therein lies it beauty.

Three things to consider for taking your project to the crowdfunding street:

you have to be able to complete the whatever-it-is because the nature of crowdfunding demands completion.

the U.S. House of Representatives passed a crowdfunding bill that will allow startups to offer and sell securities via crowdfunding sites and social networks.

If passed by the Senate and signed off by the President, the bill will become a law, giving entrepreneurs new options for raising money for their companies.

The company may only raise a maximum of $1 million, or $2 million if the company provides potential investors with audited financial statements.

Kickstarter notes that it took 16 months to reach the first 200,000backers, while the last 200,000 signed on in only three months. Funding projects ishabitual, according to Kickstarter’s figures. Out of 1,013,725 total backers,166,823 have funded two or more projects, 66,676 have backed three or more, and23,601 have backed five or more.

Kickstarter revealed some usefulinsights on what types of projects get the most traction on their creative-orientedplatform. Music, film and video are the clear frontrunners

With such growth, critiques are inevitable. Perhaps most common is the fearthat we’re in a crowdfunding “bubble”.

On November 3, the U.S. House of Representatives passed H.R. 2930 (the “Entrepreneur Access to Capital Act”), a crowdfunding bill that will allow startups to offer and sell securities via crowdfunding sites like Kickstarter, as well as social networking sites such as Facebook and Twitter.

this change could be huge for startups and lifts certain securities law prohibitions that have been on the books since the 1930s.

Until the crowdfunding bill becomes law, startups should avoid selling stock or other securities via crowdfunding sites or social networking sites.

With credit still tight and venture capital out of reach for many small firms, "crowdfunding" sites such as Crowdcube offer an attractive alternative.

By raising small sums from many individuals, businesses can access the capital they need to grow and thrive, often more quickly and on better terms than with conventional sources.

Crowdcube, founded in 2010 in Exeter, calls its crowdfunding model "the next generation of business investment."

The values transformation is the result of a number of different forces including climate change, rampant distrust of and disillusion in the political process, the collapse of the financial markets, the introduction of species extinction risk into the discourse, alienation and fragmentation within western culture, global economic inequity, terrorism and war, the erosion of the importance of spirituality and a sense of higher purpose in western culture etc...the list goes on. The conjunction of all of the above is leading a massive sense of discontent that is permeating our collective consciousness.

The values transformation is the result of a number of different forces including climate change, rampant distrust of and disillusion in the political process, the collapse of the financial markets, the introduction of species extinction risk into the discourse, alienation and fragmentation within western culture, global economic inequity, terrorism and war, the erosion of the importance of spirituality and a sense of higher purpose in western culture etc.

This transformation in values that is taking place is simultaneous with, and in part the result of, the rapid evolution of the technological infrastructure that is substantially increasing connectivity and communication across the world.

The people who really need to hear, read, and see these messages are those who would never sign up for a newsletter about economic inequality or watch a YouTube video about climate change. That's what makes Loudsauce such a unique player in the crowdfunding market. Unlike Kickstarter, which focuses on funding individual creative projects, and IndieGoGo, which caters to "anyone with an idea," Loudsauce was designed specifically to transform the medium of advertising from one that primarily drives consumption to one of civic participation.

In this way, Loudsauce can almost be considered a second-stage crowdfunding service: it gets people to help not just in the early stages of a socially responsible project, but then to help amplify these projects and get them out into the mainstream consciousness.

Other Loudsauce successes include running a commercial about the Story of Stuff during an episode of Hoarders (potentially reaching 2 million people and resulting in 40,000 visitors to the Story of Stuff website)

One of the most impressive qualities of crowdfunding is its versatility. Feature films, music releases, web startups, gadgets, art projects, urban farms, journalism, open-source platforms, and social activism comprise only a short list of the types of projects that have been funded by crowdfunding. And as we’ve explored during this week’s Crowdfunding Nation series, it's only expanding.

Find A Crowd

It’s about getting a lot of people involved in your cause. So you’ll need a crowd of people who want to see your project succeed.

Tell A Good Story

Because prices can be set across a range, price sensitivity can be explored. But crowd-funding patrons are creatures of the market here as everywhere. Provide too many options, and the potential contributor faces too much choice, and may leave without posting a contribution.

The $50 tier dominates, bringing in almost 25% of all earning. Surprisingly, $100 is a not too distant second at 16%. $25 brings in a healthy chunk too, but the overwhelming conclusion from this data is that people don't mind paying $50 or more for a project they love.

The lower priced levels are also significant. Reward tiers under $25 constitute a combined 38% of pledges and 10% of dollars raised on Kickstarter. $10 rewards are the third-most popular (ninth in dollar contributions to the site), and $5 rewards are the sixth-most popular (seventeenth in dollar contributions).

[1] The platform focuses on a specific vertical; film and music are the most common at this time --suresh2323 July-15-11 9:24:36 AM[2] There is a focus is on for-profit ventures. Note that a platform can support for-profit ventures without them being the primary focus. --suresh2323 July-15-11 9:21:58 AM[3] There is a focus on creative projects; art, music, film etc. Note that a platform can support creative projects without them being the primary focus --suresh2323 July-15-11 9:22:37 AM[4] There is a focus on projects designed to bring about social change. Note that a platform can support social change projects without them being their primary focus --suresh2323 July-15-11 9:22:53 AM[5] The funder/fundee relationship is structured so that compensation for funders might be in the form of future revenue, equity or profits --suresh2323 July-15-11 9:23:07 AM[6] The full amount of the funds being sought needs to be pledged in order for funds to be released to the fundee. --suresh2323 July-15-11 9:23:22 AM[7] Whatever amount of money is pledged at the end of the campaign is released to the fundee regardless of whether they accomplished their funding target --suresh2323 July-15-11 9:23:37 AM[8] A threshold amount somewhere below the target for the campaign is determined. Once this threshold is reached, funds are released. --suresh2323 July-15-11 9:24:09 AM[9] The platform has community and/or collaboration features built in --suresh2323 July-15-11 9:24:51 AM[10] The funding process is not one time. It is set up so that the fundee receives money on a regular basis --suresh2323 July-15-11 9:25:16 AM[11] Provides infrastructure and/or processes to coordinate investors so that they invest in projects together --suresh2323 July-15-11 9:25:30 AM[12] Provides infrastructure or resources to coordinate the funding of projects so that they can seek funding together. Currently no one is doing this. This is what is proposed in the Ecosystem Pooled Fund Model: http://www.slideshare.net/sureshf/ecosystem-social-ventures --suresh2323 July-15-11 9:25:42 AM[13] The model is structured with a view to cultivating a relationship between funder and fundee. This is to be contrasted with one time project financing --suresh2323 July-15-11 9:26:03 AM[14] Support very small donations (under $1, fo example) --suresh2323 July-15-11 9:26:19 AM

While the VC community seems stuck in an old boys network mentality, crowdfunding is radically re-shaping business investment and neutralizing gender bias, for both investors and entrepreneurs. According to Danae Ringelmann, co-founder of crowdfunding site IndieGoGo, 42 percent of successful funding campaigns are women-led.

At the low end of the financing curve, crowdfunding is creating a vibrant way to launch small projects and businesses, especially those with smaller capital needs. But as one pushes further up in seed funding needs, equity financing becomes increasingly more important. Investors need more upside potential to balance out the higher risks of investing in pre-revenue ventures.

Investors of early startups shouldn't put all of their money in any one investment. Rather, they should hold a diversified basket of startup investments. If they do, a systemic level of 1 or 2 percent fraud is nearly irrelevant.

The intersection of the social web and social good is flipping the traditional funding process upside down. And it's going to revolutionize how we create and scale impact.

The phenomenon, called crowdfunding, also powers something as -- or even more -- important than money: it powers community.

Crowdfunding, because of the possibility of hundreds or thousands of potential investors or donors, amplifies our natural human tendency to become a cheerleader for something we've already committed to supporting.

The Obama campaign, through harnessing small contributions from millions of supporters, fueled a funding phenomenon already taking hold in the art and music worlds. Social entrepreneurs (i.e. entrepreneurs solving social and environmental problems through business practices) are taking notice.

Thousands of social entrepreneurs are in need of a disruptive financial innovation: a way to connect with the with the vast pool of capital in the hands of our friends, our family, and the growing number of people who believe social entrepreneurship allows for a deeper, more sustained impact than traditional models.

Startups don't just need money -- they need expertise. In the current scheme of things, investors often provide that expertise. They became wealthy because they know something about how to run a successful business.

But in a crowdsourced model, no one investor has substantial money in the venture. So there's no one who could insist on a board seat as part of their deal, or otherwise make an entrepreneur take their ideas seriously for how to grow the business. That makes the startup a riskier venture, both for the investors and the entrepreneur.

Seeded by the Grameen Bank, industry trailblazers like Kiva and Prosper applied the concept of microlending to the Internet, spawning people-to-people lending. The newest breed of microfinance — crowdfunding — is fast growing in popularity.

A majority of our contributions came from people we know. Our enthusiastic team of Tweeters, Facebookers, and staff who supported the campaign and alerted their friends and followers brought us a strong a first-tier network of funders.

The IndieGoGo staff selects campaigns they believe exhibit a high “GoFactor” to highlight on the first page of results

There are loads of articles on the web with ideas for perks from successful campaigns, but keep in mind that those benefits should be thoughtfully tied to your core project.

1.  More than 50% of companies funded by angel investors fail, with most returning nothing to investors.  And, less that 10% of these angel-funded companies are home runs, providing exciting returns on investment to angels.  These home runs often take a decade or more to mature to the point that investors can exit.  Since investing in startup companies is very risky, the only winning investor strategy is to pick well and invest in many companies.

downsides to crowd funding.

Crowd investors will not be in a position to demand board representation on new companies and will likely suffer from lack of feedback from funded companies.

Crowdfunding is a natural fit for an independent game developer who needs to connect with an audience and secure funding at the same time; rather than having to "prove" your game to a publisher, you're "proving" it directly to your customers, and you don't have to go out on a limb funding it yourself with no idea of whether or not you'll sell enough copies to recoup your investment.