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How Crowd Sourced Funding Works

I’ve been reading about the crowdfunding phenomenon lately and I’m still amazed at how brilliant (and brilliantly simple) these programs are. What crowd sourced funding does is prove the power of the small donation. Microfinance is here and it’s a powerful thing.

Let me start at the basics. “Crowd sourced funding” is a term used to describe people appealing to the masses for financing, usually in the form of donations, but occasionally in the form of loans. The masses are found on the Internet and includes anyone who happens to stumble across this person’s appeals for money. This mass of people is known collectively as “the Crowd”.

You’ve probably heard about how the Barack Obama campaign built up a huge war chest in 2008 by appealing to people to make donations of $100 or less. By getting micro-financing from 1,000,000 people, those small contributions added up to a whole lot more than what John McCain did through traditional fundraising–with a much smaller number of big donors. That’s how crowdfunding works: asking a lot of people to make a tiny contribution (often $1 or $5 or $10).

How To Get Funded by the Crowd

Those are the basics, at least. In truth, it’s not as easy as it sounds. Most people are skeptical of giving charity money away to people online. They assume that someone who can post to a blog or make a video should be able to do other things to make money. The last thing people want to do is get scammed by someone who doesn’t have a legitimate need for funding.

Another thing is getting attention for your plight or cause. It doesn’t matter how needy you are or how noble your cause is, if no one hears your appeals, nobody is going to fund your project. That’s why the crowdfunding websites exist.

Dedicated Crowdfunding Websites

Web marketers have figured out that targeted traffic is a lot more efficient than volumes of untargeted viewers and readers. That is, if people are going to a website they know to be about microfinance, social lending, or crowdfunding, they’re a whole lot more likely to donate money to a cause than if they’re just surfing Youtube for fun and see the same video. That’s why websites exist specifically to get the word out about a person’s cause of project.

Crowdfunding started as a venture to get creative projects funded. That continues to be the main reason for the existence of many of these sites. If you have a book you want to publish or a tv show you want to produce or a musical compilation you want recorded in the studio (and paid for by fans), you can go online to one of these sites and ask the crowd for funding. Obviously, this works best when a band, production company, or famous person with a set of fans makes the appeal.

Those aren’t the only people who get funded on sites like Kickstarter and Indiegogo. If you can make your project sound interesting, get buzz about what you have in mind and go viral, you can fund whatever dream project you have. People with no resume in the creative industries have gotten 1.7 million hits on their project videos before. If you’re an artist or creator in some way and this sounds like a way to make your dreams come true, check out the following list of sites that help artists, musicians, and directors.

Crowdfunding for Creative and Artistic Projects

Kickstarter – Creative Projects (USA)
Rocket Hub – Creative Projects (Global)
Indie Go-Go – Creative, Commercial, and Cause-Related Projects (Global)
Mobcaster – Independent TV Programs
Helpers Unite – Artistic Projects and Business Ventures
8-Bit Funding – Indie Gaming Design Projects

Often, a person offers sneak peaks of their coming product, early releases from the project, or some other form of special access which appeals to fans. Sometimes, people donate money for the love of the project or hopes of seeing it come to life and nothing else. Sometimes, people donate for the sake of interacting with a (minor web) celebrity or someone they admire. However the case, crowd-sourced funding was made for the creative process.

Crowd Sourced Funding for Causes and Crises

That isn’t to say it’s the only reason. Pretty soon after crowdsourcing became a phenomenon and crowdfunded projects got big, people started launching sites for those who needed money for other good reasons. Scientific research, environmental projects, and innovative science have been funded with these initiatives. People with crippling medical bills or terminal medical conditions have gotten funding to help them continue the fight. College students have gotten funding. You name the ways people can get in debt holes and you’ll find crowdsourced funding out there. Name technology and scientific projects and you’ll find someone trying to get financing. The sites listed below are places where people with causes are asking for crowdfinancing.

You Caring – Adoptions and Medical Expenses
Give Forward – Medical Crisis
Take-a-Shine – Underprivileged College Students
Fundly – Nonprofits needing Donors
Microryza – Innovative Research
Petri Dish – Science and World Knowledge
Green Unite – Environmental Projects

Open-Ended Crowdfunding Sites

Some site aren’t nearly as targeted. Instead, they want communities and resources for anyone who needs a cash influx to make their appeal. They don’t want to limit someone because they don’t fit into a narrow category, so they offer an open-ended forum for online people to make their cause known to the crowd. People who need car repairs or who are about to be evicted might make their appeal. Those wanting to save a historical site or renovate their community ask for a donation. Name the cause–any cause–and someone has probably asked the online crowd to microfinance something similar.

Crowd Tilt – Anything Through “Campaigns”
Go-Fund-Me – Fundraising for Anything

How Often Does Crowd Sourced Funding Work?

Don’t get me wrong here: this isn’t the answer for anyone with cashflow problems. Certain, this isn’t going to be a source of revenue for scammers and scam artists. People aren’t stupid and they catch on pretty quick, especially when you’re asking them for their money. Also, even the best of causes sometimes suffer from bad timing, the inability to get the word out, or a less-than-appealing presentation. The truth is, only about 40% of all projects on the leading crowdfinance sites get funded. In many cases, the whole project must be funded or all money goes back to those who are pledged. So before you start your campaign for crowdfunding, come up with a brilliant idea, an inventive way to promote your cause, and sound humble and genuine when it’s time to make your appeal. Good luck.

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