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What the %$%£@#!! is Crowdfunding?

Posted July 23, 2013 by Stuart Wells in Articles

Welcome to our first article. Over the coming weeks we will build up a series of articles that will explain about crowdfunding and how to create a compelling campaign.

What is it?

Asking a crowd for funding. Crowdfunding has been around for centuries. However, relatively recently, it has exploded onto the scene as a viable source for funding many different types of projects. They key to the explosive growth is the internet’s ability to engage large numbers of people. There are several different models: Debt, Equity and Rewards.

Equity Based Crowdfunding?

Involves the selling of equity in your project. Funders will realise a profit by the increase in the value of their equity once the project is completed. An exit strategy for funders is important: investors will want to know how and when they will realise their investment.

Debt Based Crowdfunding?

Asking a crowd to fund your project for financial return. This does not involve banks but does involve asking for money and paying the debt back plus interest. This is a formal process that involves incorporating a company properly and developing business plans. Anyone considering lending money to your project will expect to see well thought out viable business documentation. This is similar to getting a bank loan.

Rewards Based Crowdfunding?

Usually used by creative industries. The rewards based model asks for donations and returns a reward based on the level of that donation. A film, for example, could pre-sell tickets to raise the capital to make the film.

Who is it for?

Ultimately investing your money into a crowdfunding scheme is a risky endeavour. Whether you are buying tickets for a movie that is yet to be made or investing $10k in a new venture. You may not receive your tickets and you may lose your $10k. Never invest any more money than you can afford to lose. That said crowdfunding is an easy way to get involved in interesting projects and limit your risk: pre-buy a ticket for $10, buy a slice of equity for $100. If you can afford to lose the $10 or $100 then you could be in for an exciting adventure and assist a passionate artist/ entrepreneur in realising a dream or a successful business.

What are the implications?

For entrepreneurs and artists banks and governments are singularly failing; banks are not investing in start-ups; governments are cutting support of arts organisations. New avenues are required for people to get funding to create businesses or realise ideas. The crowdfunding revolution is a revolution of ideas. Crowdfunding is extending democracy into the world of finance and the arts. Anyone with an idea can create a campaign, being successful, however, is a different matter.

For investors, and all funders are investors, there are exciting opportunities. Opportunities to assist in the development of exciting businesses or amazingly creative ideas. Want to watch a film? Buy a ticket and get the film made. Don’t sit back and bemoan the lack if imagination in Hollywood back one of the hundreds of films by passionate film makers listed on kickstarter or indiegogo.

For Zombies crowdfunding is an extraordinary opportunity. Those niche film projects that a studio or producer would never see as viable can be realised. Crowdfunding coupled with digital delivery will break the studios stranglehold on your attention. Steven Spielberg has already admitted this. A film maker can now create a pitch, distribute the film globally without access to theatrical distribution. With your help the opportunities are limitless.

About the Author

Stuart Wells