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Raising Money with Crowdfunding

Updated on June 20, 2013
Harness the power of the crowd
Harness the power of the crowd | Source

One the the latest areas that has harnessed the power of the Internet is the application of crowdfunding to raise money for new creative projects. The idea behind crowdfunding is to get small donations for a product from a huge number of people, which can raise a lot of money as long as the project is popular and catches the attention of the crowd. It also means that even the smallest individual can help support ideas that they like. You don't need to have a lot of wealth to back a project anymore.

It also means that unconventional ideas can actually see the light of day without having to convince mainstream financial institutions of their worth.

Overall, it's a great option for creative minds who want produce something a little different. That's what progress is all about, isn't it?

The popularity of online or digital financial mediums (like Paypal), also makes it easier to join in the fun. You no longer have to send a cheque or give out credit card numbers in order to make a donation. An impulse decision and a few mouse clicks are all it takes.

More and more sites are popping up that let people connect with new projects, but Kickstarter is the biggest one right now. Indiegogo is another. There are others, including several smaller ones that focus only on certain types of projects.

But to take a closer look at Kickstarter for now. It offers up categories for all sorts of projects but it is the video game, film and music categories that have the most activity. Kickstarter has a minimum threshold before any money is actually collected from interested donaters. So if too few people are interested, the project will close and no money is taken from individual's accounts.

Though not all crowdfunding websites operate the same way, this is generally not seen as an investment. Your money is strictly a donation, though there may be perks or gifts given for certain donations (like T-shirts, or even initial prototypes of the product). Don't expect to get a share of any future profits. Giving to a Kickstarter project is something you do because you like or believe in the idea, not because you want to earn money from it.

You also need to remember that you have no guarantees that a project will be handled properly once they have their collected funds, or that it even gets done at all. That's just the risk you take.

Most projects are fairly small and only need a few thousand dollars to get going. But the most successful Kickstarter item so far has been the Pebble, which is a watch with many smartphone features. They raised more than 10 million dollars through donations from nearly 70,000 people. Fans who wanted a Veronica Mars movie took to crowdfunding to get that dream off the ground too. They raised more than 5 million and it looks like the movie will get made.

So if you think you have the next genius idea that might catch the imagination of the masses, look to crowdfunding as a possible way of raising your initial capital. You might be the next big thing on the Internet.

Would You Consider Crowdfunding for a Project of Your Own?

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