What to know before you try crowdfunding

In just a few days, Michael and Whitney Lash, the Atlanta couple who suffered a home invasion on Sunday, became the beneficiaries of more than $80,000 in aid from family, friends and strangers. The money was raised on GoFundMe.com, a crowdfunding website for personal causes. The amount of money and the rapidity with which it was raised says as much about the kindness of strangers as it does the viability of web-based crowdfunding.
The page was created on Aug. 17 by Laura Baker, a friend of the couple, who categorized the fundraiser as “medical.” Lash was shot twice in the legs while trying to prevent teen intruders from entering the family’s home. According to some reports, a friend said Michael Lash will soon begin a new job and his insurance will not cover the expenses. During the incident, Lash’s wife, Whitney, ran for the door with the couple’s infant and was unharmed. Police have released a sketch of the shooting suspect and are offering a $5,000 reward.
You can find the Lash’s story among the more than 8,000 crowdfunding pages in the Atlanta metro area. The causes range from students seeking college tuition to adults looking for a down-payment on a home. Many of these causes never reach their goal — staying at zero percent or in the single digits before the campaign closing date. While some of the most well-funded causes are often connected to tragedies or young children or both. Artistic endeavors, entrepreneurial ventures or missionary work may also be well-funded depending on which crowdfunding platform is used.
Kickstarter, one of the first crowdfunding sites deals mostly in creative endeavors. Indiegogo, another early entrant, allows personal requests as well as those from groups and non-profits. With so many worthy causes, visibility is important, and as in the case of the Lash’s, exposure in local and national media can positively impact your chances of reaching your goal.
“It completely eliminates the gatekeepers to financing,” said Josef Holm, founder of TubeStart.com, a crowdfunding site for digital video creators and filmmakers. Anyone one with a great idea or a good cause can expect some measure of success, he said. And, he really means anyone, as there are more than 700 different crowdfunding sites to choose from.
GoFundMe bills itself as a DIY path to crowdfunding. A number of niche sites have debuted in the past few years with crowdfunding specifically for musicians, fashion designers, gamers, solar energy projects — and one site that raises money for breast implants.

Most crowdfunding sites operate in a similar manner. Someone asks the public for money to support an idea, project or cause, the public responds and the asker either gets the money or not. Kickstarter only offers an all-or-nothing model which means you don’t get the money unless you reach your goal. Sites like GoFundMe allow you to keep whatever money you make.

Some crowd funding pitches offer donors gratitude, a small token or first dips on a product being manufactured. In Georgia, investment crowdfunding, allows donors to fund project in return for a portion of the company.

Crowdfunding host sites take a percentage (up to about 13 percent) of what is raised as a fee. You can get around this by creating your own crowdfunding website —  Georgia Tech, for example, created a website to crowd fund research — but for the average person and some institutions, it is easier and faster to use one of the existing platforms. Yesterday, the Smithsonian Institution concluded a month-long campaign to digitize and display Neil Armstrong’s Apollo 11 spacesuit. They raised almost $720,000 from more than 9,000 donors, enough to also do the same for Alan Shepard’s spacesuit.

Of course there is a downside to crowdfunding, such as when projects or causes that donors have generously contributed to turn out to be totally bogus or just never quite get off the ground. There’s also the icky ethical concerns that some people have about giving money to people who are starting for-profit businesses.

Yet in 2013, crowdfunding sites worldwide had raised about $2.8 billion, said crowdfunding expert Kendall Almerico, a contributor to  Crowdfund Insider, a web site that covers news and information on crowdfunding and peer-to-peer lending. “What I love about crowd funding is anybody can try it and the crowd will tell you yes or no,” he said.

Do you have something you want to crowdfund or a cause you want to support? Keep these tips from Almerico in mind:

Create a realistic goal. Only a few companies in the history of online crowd funding have raised millions of dollars. 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, do some investigating 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. Promote your campaign for at least 30 to 60 days and you have at least a 40 percent chance of success. Rely mostly on your primary and secondary social network. They should be able to fund at least 80 percent of the campaign. You may only get big donations from strangers if your cause gets widespread media attention.

Use video. You can crowd fund without a video, but when you explain your idea, it shows you are sincere. Make a simple video with your iPhone. At the very least, including well-lit and flattering pictures can also help your chances of success.

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