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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