Crowd Funding: Getting Money from the Masses

Crowd Funding: Getting Money from the Masses

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Most start-ups aren’t successful in raising funds using the traditional methods, but a new trend of tapping into the power of crowds is emerging. Crowdsourcing has become popular in many areas of business, so it was only a matter of time before it made its way into funding. A number of international crowdfunding sites like ProFounder.com, Kickstarter.com and Peerbackers.com allow entrepreneurs and artists to find donors to support their projects.

The Concept

Crowdfunding sites let entrepreneurs combine social networking with project fundraising. Financial assistance received through crowdfunding isn’t paid back. Nor does it require pledging collateral, offering personal guarantees or giving up equity. The funds are outright donations from friends and strangers who believe in the dream and want to help. The model is an option for businesses that can launch on a shoestring.

How It Works

IndieGoGo and the more recently launched Invested.in — whose web banner reads ‘Because banking executives just don’t get it‘ — are standouts in the entrepreneurial arena. Project owners from 120 countries have participated in more than 5 000 projects on IndieGoGo.com. Here’s how to go about it:

1. Create An Account

Once you’ve created an IndieGoGo account, the website walks you through setting up a project description, fundraising goals and perks. Projects on IndieGoGo range from a kosher wine bar to a 3D movie called The Dead of Nowhere.

2. Pitch Your Idea

Show your passion, be real and make it scream ‘Great idea!’. Use photos, videos and recordings. Answer who, what, when, where, why (especially why) and how, and give people a reason to want to see your project funded.

3. Offer Perks

Perks entice people to contribute at various levels. Think outside the box and give them character. Think financial (discounts, two-for-ones), personal (their name in lights) and scarcity (only five available).

4. Promote

Find the influencers and get people talking about your project. Use social media, ask for help and make it easy to refer friends. Thank everyone.

IndieGoGo earns its perks by taking 9% of whatever you raise. If you meet your fundraising goal in the time you’ve set, you’ll earn a 5% bonus from the site. If you don’t meet your goal, you still keep the money you raised. Contributions can be paid directly to you via Amazon, PayPal, credit card or cheque.

Case Study

When Fans Become Funders

By Chana Boucher

An all-guns-blazing, pedal-to-the-metal, rock ‘n roll vampire film is on its way to South African screens, and its producers are calling on fans for funding. The film makers are aiming to cover 50% of the production expenses for Afrikaans vampire flick Bloedsuiers through crowdfunding.

Fans were invited to register on the movie’s website at the beginning of March. They were then given pledge categories ranging from R30 to R2 000. Each amount had different perks, including merchandise, limited edition DVDs and even a spot in the movie. Once the amount was selected, members were diverted to a secure online payment facility to enter their credit card details. The money was taken from their credit cards and transferred to a holding account which the producers could only access once a certain undisclosed amount was raised.

International fans were invited to contribute through Bloedsuiers’ IndieGoGo.com account.

Benjamin Cowley, a producer of the film, confirmed that the response had been encouraging and that money had already been raised.

Before funding was open, a major viral campaign was launched with three teasers released two weeks apart. By doing so the producers also created demand and awareness for the film.

Gwen Moran
Gwen Moran is co-author of The Complete Idiot's Guide to Business Plans.
  • evly.com is a South African internet startup, that combines crowdsourcing & crowdfunding – we have already held our first crowdfunding challenge after we were approached with an interesting cause. Our crowdfunding templates will be released later this year. If you have an interesting crowdfunding challenge, please get in touch with us, and we’ll consider featuring you as a “case study” before we allow others to start using our crowdfunding module.

  • PanzaPath

    PanzaPath has just launched its Crowd Fund donor drive with Indiegogo wich you can see here: http://www.indiegogo.com/PanzaPath

  • We are in the process of setting up a crowdfunding platform. We looking a the reward based platform, for all who needs funds. Let me know what your thoughts are: i1ubuntu.wordpress.com