The Success of Crowdfunding

December 4th, 2008 in News, by Head Honcho

Sometimes, having a great idea is not enough. You also need to raise funds to make your idea into a reality. You can shell out your own money, but it may not be enough. More often than not, you need outside help for funding.

The easiest way to raise funds is by asking help from your friends. But even friends find numerous ways to not give you money with open hearts. Either they are: (1) stingy or (2) are not much better off than you. Banks can be another source of funding, but they require too much paperwork. Angel investors are much more willing to open their wallets, but they are hard to find. And Bingo Night is not for everyone.

There is a better way of raising funds than those mentioned. And that is through crowdfunding.

Crowdfunding happens when fundraising meets crowdsourcing. Through crowdfunding, a large group of people pool their money together for a common idea, goal or cause.

Crowdfunding is not an entirely new idea. Numerous fundraising efforts have been made involving the public through traditional media. For instance, telethons are often resorted to in order to raise funds for worthy causes.

But the internet has made it possible to raise funds for a wider array of ideas and for bigger sums of money. The larger audience that the internet provides means that more people can have access to your idea - leading to a possibility raising more funds. Here are some success stories of crowdfunding:

Personal Loans: Through Prosper, members can borrow money from fellow members. A borrower can set the interest rate he is willing to pay. On the other hand, a lender can bid a loan as low as $50 at the rate he is willing to receive. Bids with the lowest rates are combined into one simple loan to the borrower. Prosper currently has 830,000 members, and has funded $178,000,000 worth of loans. See also Zopa.

Politics: The U.S. Democratic Party made it easier for supporters to contribute to it through the website ActBlue. Anyone can fundraise for any Democratic candidate for Federal and state office: Since 2004, ActBlue has raised over $84 million from contributors.

Fashion: Catwalk Genius gives anybody the chance to support the designers listed in their website in creating their new collection. The support comes in the form £50000 - raised by purchasing  £11 shares. When the designer’s line goes on sale, the profits are shared between the designer, the website and the shareholder.

Philanthropy/Microfinance: Kiva is a new take on philanthropy. It lets a “donor” lend to a specific entrepreneur - empowering the latter to lift himself out of poverty. To know more about Kiva, click here.

Music: Fans can contribute as low as $10 to help out their favorite artists through SellaBand. The $50000 raised by a band will be used to record their album. Through the website, 29 artists have raised $50,000 and 15 albums have been released.

Here is a news clip about crowdfunding: