Have a terrific idea or need donations to improve your organization? Crowdfunding sites can fill that need. Over the past few years, sites such as Kickstarter.com, Indiegogo.com, and Crowdfunder.com (well-known sites -two are donation based, the other is investment based) have funded thousands of projects and ideas.
The Way Crowdfunding Works
The concept is simple: You’re looking for money to start a company, fund a product or project, or repair something that other’s will benefit from, so you post your need on one of the various crowdfunding sites. You tell your friends and family, and hopefully the project is exciting enough to be shared among their friends and family. People donate to your cause and voila! you have the money you needed.
I made that sound very simple, didn’t I? In theory, it is simple, however each crowdfunding site works a little differently in how (and if) the money is distributed. Some sites, like Kickstarter, require that you reach your monetary goal. If you are even a dollar short, you don’t get any of the donations. Yet, IndieGogo allows you to cash out any donations you’ve accrued whether you’ve reached your goal or not. And for educators, Donors Choose purchases the items for you as long as your project meets it’s funding goal. (Blatant plug to visit and donate to a good cause: Tablets for Teaching).
So how do you know which crowdfunding site is the right one to use?
First, decide which model best suits your project. There are two models to choose from, donation-based funding or investment funding. With donation-based funding, the person donating the money receives “thanks”, perks, rewards, or possibly the “product” which is dependent on the amount of their donation. Kickstarter is probably the most popular of these donation-type models. With an investment type model, the investor becomes a shareholder and will receive a percentage of the profit. Crowdfunder is a popular investment model that’s picked up a lot of steam over the past year or so.
Once you’ve determined which model is for you, the next step is deciding which website to use. Some sites, like Kickstarter, focus on creative endeavors, whereas Indiegogo is open to just about any idea. If you have an invention that you want to get off the ground, Quirky might be a better option. Are you an educator looking for classroom materials? Then Donors Choose is a good option.
A couple of great resources to check out before deciding which site is best for your idea are Forbes list of Top 10 Crowdfunding Sites and 22 Crowdfunding Sites which also offers an infographic flow map to help you make your decision.
Have you launched an idea or project with a crowdfunding site? Have you donated to one?
6 Comments
I actually know quite a few people who are trying their hand at crowd funding. There are plenty of success stories. If you do it right, you can really generate some serious funding.
@The Wallet Doctor – I think it depends on your networking skills and if your product or venture makes sense to most people.
I have never donated to one, but had though about investing in some. The interest rate return looks great, but so far I have not pulled the plug.
It’s a lot easier to lose money, than to make it.
@No Nonsense Landlord – Definitely true – easier to lose money than to make it. I think the point with the donation sites is to help out causes, not so much to make money. I think crowdfunding is still in its infancy.