Do you need money to fund your great business idea, your latest invention, your breast implants? Do not fear, crowd funding is here. Asking people for money is an idea as old as time, but since appearing on the Web in 2008 crowd funding as we now know it has fueled a financial revolution.
“It completely eliminates the gatekeepers to financing,” says Josef Holm, founder of TubeStart.com. “Anyone who has a good idea has the option of getting it crowd funded.”
And, he really means anyone, as there are some 700 different crowd funding sites to choose from. A number of niche efforts have debuted in the past two years. There are crowd funding sites for musicians, for fashion designers, for gamers, for solar energy projects — and yes, even one that raises money for breast implants.
Most operate in a similar manner. Someone solicits a certain amount of funds from the public, the public responds and the individual either gets the money or not. When Holm founded TubeStart — crowd funding for You Tubers — he took a slightly different approach known as subscription crowd funding.
“As a You Tube creator, you don’t make enough money on You Tube to sustain a business,” he says. With TubeStart.com, fans pledge a small monthly fee to support creators of You Tube content.
The host site typically takes a percentage (up to about 13 percent) of what is raised as a fee. More ambitious people or larger institutions may decide to create their own crowd funding site rather than rely on other companies. Georgia Tech, for example, created a website to crowd fund research.
Some crowd funding pitches are altruistic — aimed at helping a cause or civic project — and offer the donor only gratitude or some small token for helping. Others seeks to fuel a new business. Next year, with the release of guidelines from the Securities and Exchange Commission governing their operation, equity based crowd funding sites will hit the market allowing donors to own a piece of whatever is being funded.
With some $2.8 billion flowing through crowd funding sites worldwide, crowd funding expert Kendall Almerico says the door is wide open. “What I love about crowd funding is anybody can try it and the crowd will tell you yes or no.”
The Tampa-based entrepreneur recently launched a crowd funding effort called crowditforward.com which offers up random acts of crowd funding. The random acts currently include raising money for the families of Washington Navy Yard victims.
The arts is the most prevalent type of crowd funding, Almerico says. Followed by products or inventions, then charitable causes and finally a collection of other things. Do you have something you want funded? Keep these tips in mind:
Create a realistic goal. Only two companies in the history of online crowd funding have raised millions of dollars, Almerico says. Be sure your goal is realistic and break it down into steps if it is too ambitious.
Be cautious when contributing. If you’re donating, poke around to be sure the individuals you’re giving money to are likely to use the money in the manner they say they will.
Start promoting. You cannot expect to raise money without promoting your idea, Almerico says. “If you have a good idea and a realistic goal and you promote it heavily for 30 to 60 days, you have at least a 40 percent chance of success,” Almerico says.
People who don’t have a crowd can’t expect to miraculously find one online, Holm says. “It is not online panhandling, you need a crowd.” If your primary and secondary social network can’t fund at least 80 percent of the campaign, crowd funding may not be for you.
Use video. “A lot of people successfully crowd fund without a video, but you talking to people and explaining your idea shows the sincerity and dramatically increases the chance of your being successful,” Almerico says. “A simple video, shot on your iPhone will do.”
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