Crowdfunding – A Great Way to Raise Money

Business LoungeJuly 26, 2017

Have you ever heard of crowdfunding? It is defined as the funding of a project or a hazard by raising money from a large number of people. Crowdfunding is a well-known form of crowdsourcing and it is estimated that approximate 35 billion dollars have already been raised this way. The concept is built on three sorts of actors:

The project creator who suggests the idea,
Groups or individuals who support the offered idea,
Moderating group or organization (popularly called “platform”) that gets the parties together for launching the idea.

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This type of funding has been used for funding many for-profit business ventures, for example, artistic and creative jobs, travel, medical, or community-oriented projects. For those who want to join the multiple crowdfunding platforms, or just to be informed about this popular method, here are some interesting facts about it.

Fact No. 1

The most popular platform for crowdfunding is Kickstarter. It is an enormous community which counts over 10 million people from many countries in the world. It offers a possibility for anyone to bring a project to life. When creating the project on this platform, you are creating a possibility for it to happen – that is precisely what 12 million people have already done through this platform. Up to this day, 2.8 billion dollars have been promised and more than 200.000 projects have been effectively financed. And although this is the strongest platform for crowdfunding, it is not the only one. There are more than 100 similar platforms that connect promoters and investors to fund needed projects. The platforms such as CrowdFunder, GoGetFunding, FundAnything or IndieGoGo started to specialize for certain kinds of niches to be funded. For example, CrowdBaron is a platform for real estate business in Asia, while SellaBand is for raising funds from people who love music. There are many other to be found, too.

Fact No. 2

Different platforms offer different funding models. Kickstarter tracks all-or-nothing model, which basically means that if the funding goal is not achieved, the entrepreneur will not receive any funds. Some other platforms use all-and-more funding model. This means that the funds can be kept even if the goal is not achieved. This model is used at IndieGoGo and RocketHub platforms.

Fact No. 3

The average funded project on Kickstarter is around $7.000, although some projects reach up to million dollars. Success rates aren’t known on every site, but Kickstarter published that theirs is about 45%. Successful projects exceed their goal for little amounts – near half receive 10% or even less above their aim. On the other hand, the unsuccessful projects get only about 10% of their aim. Just 10% of all the failed campaigns extent 30% of their goal, while 3% reach the half of their goal. It is interesting fact to mention that after reaching the goal, an individual has 95% chances for the success.

Fact No. 4

Jemastock/Shutterstock

The typical project of crowdfunding follows a path of the initial anticipation. It is a good thing to avoid long campaigns because they seem to have low chances of success, which may result from less confidence.

Fact No. 5

The very important aspect of crowdfunding is to be organized well, which is confirmed most significantly by adding a video to the campaign. This feature increases chances of success for 26%. Effective projects also offer updates on their social networks almost immediately when the campaign is launched. Deficiency of update can reduce chances for success for even 13%, which is similar as for the spelling errors.

Fact No. 6

As it was said before, social media can influent the success a lot. Having any account will help, but the best are those on Facebook, Twitter, and Instagram since they make the things more visible. Having a lot of friends on Facebook actually, increases success in funding projects. It seems that the Facebook accounts play the significant role in crowdfunding. The study shows that a usual author with 10 friends on Facebook has 9% chances of success, while one with 1.000 friends has a 40% chances of success. It is, however, logical how crucial are the social networks for this kind of projects. Many will share their events and projects on their social media accounts and make it visible to others that way. On the other hand, the people who are not familiar with the crowdfunding and still want to help will see this as an amazing opportunity to invest and help other people, which was the aim of the crowdfunding from the beginning.