CrowdFunding

Last updated on December 6, 2010

In my philosophy of making the world a better place, I come up with a LOT of ideas, from the very small (treat a friend to coffee) to the huge (C4I for Humanity).  In the process, people have given me a lot of positive feedback, but my own circle of friends lacks the financial power to back the vast majority of these concepts.

I’ve recently been turned on to an idea called “crowfunding” which I think is positively BRILLIANT.  It uses the idea of crowdsourcing to solicit donations or investments from the general population.  With this, a person with an idea can get their funding with a hundred thousand people donating just their pocket change rather than a small handfull of investors who are only interested in the payback.

This concept brings public opinion into the equation. By making it donation based, individuals can give micro grants as small as $1 to ideas and projects they like.  This is neither a loan nor an investment, but a donation.  Thus the paperwork is simplified, the money is all used to make the idea grow, and the person who’s idea it is can judge the public reaction before spending a load of money.

So I’ve been looking into crowdfunding for business.  The idea has been around for years for non-profits, but it’s pretty new for actual for-profit enterprises.  With Kickstarter as one of the top sources in the non-profit sphere, here are a few I’m looking at for the for-profit and personal project sectors:

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  ChipIn – By far this is the simplest system.  You set goals for the amount and deadline and you collect your donations direct to your PayPal account.  The donations go right in and that’s it!  This doesn’t have quite the features I’m looking for, such as pledges and incentives, but it is very easy to use and understand. The service is free and uses a Flash based widget you can embed in a web page.  They also have plugins and widgets for many social media and blogging systems.  PayPal fees are applied as per their terms.  If you’re looking for simplicity, this is it.

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  PeerBackers – These guys are new players in this game.  They seem committed to good funding and good projects.  All projects are reviewed for approval.  They are goal-oriented.  This means you set a goal and if the finding isn’t sufficient (80% of the goal), no money changes hands.  Their site has great tips and advice.  You can also offer a tiered rewards system to your contributors to sweeten the offer.  They offer link sharing buttons to post your project to most major social media sites, etc.  If you’re looking for a site with a lot of success stories, you might want to wait a little while.  PeerBackers is so new, there aren’t many to see here yet.  But fear not, they look like they know what they’re doing.  Keep an eye on these guys.  They have potential to shine!

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  GoFundMe – Kind of a cross between the previous two, this company does direct PayPal transaction of your donations AND has a ton of social media features. They seem to be pretty easy to use, too.  They are another fairly new company and like PeerBacks, their site says they are still in “Beta” testing.  You can set your goals and track your donations over time.  Their video tour of the site is helpful.  GoFundMe does charge a 5% fee on each transaction (and PayPal will also charge you their fee).

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  RocketHub – These guys have a great theme to their site. Your new idea is like a rocket ship.  Your donations are the fuel.  They are goal and pledge oriented – You don’t get your funding till there are enough funds.  What makes them unique, is how the contributors work.  A contributor buys “rocket fuel” and then pledges it to the projects they like.  Then, if the tank is full, the rocket takes off.  If not, the contributor can re-pledge to a different project.  The good is that contributors are encouraged to donate to more causes and projects if one fails to be funded.  The bad is the rocket fuel is purchased.  The contributor puts their money in right away rather than pledging to do so later.  This is really not a bad idea.  It encourages people to fund a new project in the demise of their first pick.  This keeps the capital flowing and that’s a good thing.  I like the fact that by doing this, they encourage people to both keep giving and also check out other projects.  this benefits the projects greatly and makes it well worth the higher fees. Rockethub takes an 8% cut once a project is funded.

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  IndieGoGo – Like we have been seeing among the others, IndieGoGo has it’s own take on things.  Here, they transfer each donation to you but hold back 9%.  If your project succeeds, they send you 5 of that and only keep 4% for handling charges.  PayPay fees still apply.  They boast over 13,000 projects over the 2+ years they’ve been in operation.  As one of the first crowdfunding sites, they are proud to have become a sort of industry standard against which most other sites are compared.  It seems they were originally focussed on independent artists but have branched out to become less specialized.  In addition, they have a pretty impressive array of corporate partners including MTV and Facebook.

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  Give.fm – Here, the crowdfunding site with the best name, in my opinion, breaks off from the pack.  They boast the ability to solicit recurring donations.  This means that the contributors pledge a certain amount a day and are billed monthly for it.  Recurring payments, especially automatic ones are brilliant in that you keep interaction up as well as continue to get money.  Additionally, many people might forget and as it’s all automatic, the money keeps on coming.  This is how many magazines keep coming and how some electronic cigarette companies are going about their business.  While IndieGoGo is partnered with Facebook, Give.fm is fully integrated with the Causes Application on Facebook.  This gives tremendous leverage of the millions of Facebook users out there.Give.fm charges a flat $5 a month for each campaign and there is an additional transaction for  for the Causes application.

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  Invested.in – These guys seem like they’ve broken from the pack in a very good way.  First thing you see on their site are their success stories.  Second thing I found poking in there is that they boast some of the lowest fees out there at 3%.  Third, they focus on showing off the projects they host.  Fourth they offer a scalable platform so you can run a crowdfunding campaign on your own server, and over all they seem focused on soliciting support for the projects more than getting more new ones.  The way this system works, is that like IndyGoGo, they collect donation funds at the time of the pledge and make those funds available to the project when the goal is reached.  What if the goal fails?  Well, it can’t really.  With Invested.in you set either a time goal (raise as much as possible by a certain date) or a monetary goal (raise a certain amount of money).  You can stagnate but you can’t lose.

In all they are very similar with a slightly different way of doing things.  I was hoping to find a business crowdfunding site that worked exactly like Kickstarter, but I did not find one.  In stead, I found 7 good sites that do things 7 different ways and not one fit the goal I had in mind.  From the look of things, I may need to revamp my hopes here and use a different crowdfunding site for each idea I have… Pitty.

If you know of a business crowdfunding site that works like Kickstarter, please let me know, either in the comments here or by other means.

Additional Note: M. Shane Hill of http://www.TheDownTag.com and an IndoGoGo project coordinator, has let me know that PeerBackers also requires that you host your project *exclusively* with them in order to use the PeerBackers service.  I agree with Mr. Hill that his probably is not the best policy, but if you don’t mind it for your project go for it.  As with all crowdfunding sources, you should choose the one (or more!) best suited for your project.  So do your homework, folks, and while you’re at it, toss a few bucks to TheDownTag over at IndieGoGo.  The life you save could be your own.