Many people believe that crowdfunding is a relatively new form of financing, even though it is a type of funding that has been executed for many decades via benefit events, mail order subscriptions, and other methods of raising monetary contributions from the public — in this case, the “crowd.” However, crowdfunding has revolutionized via online portals like KickStarter and GoFundMe. The modern crowdfunding model operates within three steps: a project is initiated and proposed to the crowd, groups and companies who are doing the funding part and supporting the idea, and the platform that moderates these two parties. Online crowdfunding sites typically act as the operator or middleman, with different sites fleshing out different aspects of crowdfunding. Crowdfundsocial is here to help you understand the history of crowdfunding.
Popular “Crowdfunding” Events – Before The Platforms
Crowdfunding efforts have been normalized with the help of the Internet — but there was a time before social media where Crowdfunding influenced the standard. One of the first examples of public funding happened in 1997, when a rock band financed their tour via online donations from supporters. The crowdfunding effort was so successful, that the ArtistShare platform came into fruition, becoming one of the first dedicated crowdfunding platforms in 2000. Almost a decade later, and crowdfunding is seemed as a major funding source, with many entrepreneurs having their ideas and inventions validated with a very high compounded annual growth rate. It helps entrepreneurs skip the bureaucracy of business loans, and secure a source of funding that has become a lot more reliable. By 2012, the president signed the Jumpstart Our Business Startups to help lessen regulation on small businesses who wanted to secure funds from crowdfunding. By this time, crowdfunding has become a reliable, influential and innovative method of financing – and it still is.
KickStarter and GoFundMe Changed Everything
Launched in April 2009, KickStarter has a unique feature for projects posted on the platform: people who back up a particular KickStarter project are offered tangible rewards in exchange for their monetary pledges. It allows the person pledging to enjoy different levels of rewards — some people may not be all that interested in the final project, but other elements of it. The particular model of raising money on KickStarter is derived from the subscription model of arts patronage, where creatives would ask for funds for their work. Raising money on KickStarter revolutionized the crowdfunding space by streamlining and simplifying the rewards system of crowdfunding, where the exchange of value between creators and those who are pledging benefits everyone.
Yet one of its potential weaknesses is that KickStarter operates within the “all or nothing mentality” mantra — where if a project isn’t 100 percent funded, the creative or small business owner will not be able to secure funding. Raising money on GoFundMe takes care of that niche where companies may need to fund something on a rolling basis. GoFundMe does not require a deadline or goal limits.
Interested in Crowdfunding? Here’s What to Look for
There is a myriad of crowdfunding platforms to choose from, but there are certain guidelines that you need to be cognizant about. For example, if you are an established business who wants to fund a new project or product, then you will benefit from the web traffic from established sites like KickStarter. However, if you need funds for more personalized items or goals, then raising money on GoFundMe will be the preferred platform since it will let you keep all the raised capital.
Raising money on Indiegogo is subject to tax-deductible funds, lending for some financial flexibility. Data-driven insights ensure that your message connects with potential customers. Raising money on Indiegogo is akin to GoFund – you keep all the money raised.
Hands-on customer support is imperative, especially if this is your first time using a crowdfunding platform. Make sure that you receive assistance on your site and obtain help with marketing. Crowdfunding is more than just creating a listing and letting it sit there on a website — it requires careful marketing to connect with potential customers and interest groups. Comprehensive crowdfunding platforms will further supply unique tools for A/B testing and marketing, with easy customization to spotlight your story, business plan, and the meaning of your goals.