Crowdfunding Nation

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PDF version of Shareable's Crowdfunding Nation eBook. A collection of articles, how-to and legal guides, and case studies about crowdfunding. Also available as a Kindle eBook or ePub:

Transcript of Crowdfunding Nation

Crowdfunding NationThe Rise and Evolution of Collaborative FundingEdited by Paul M. Davis This eBook is available for $2.99 in the Kindle Store or as a non-DRM ePub le at Shareable.A collection of articles from Shareable Magazine. Cover image by Open, used under a Creative Commons Attribution-ShareAlike license. All of Shareables content is under a Creative Commons AttributionNonCommercial-ShareAlike license.

Crowdfunding: Its Evolution and Its FutureCrowdfunding Nation: The Rise and Evolution of Collaborative FundingBy Paul M. Davis

When Kickstarter was launched in 2009, it seemed like a unlikely proposition: fund your passion projects with money donated by eager supporters? Get strangers to fund your dreams with only an idea and a good pitch? While there were precedents, such as the micronance service Kiva, Kickstarterprojects thrived on the goodwill of the crowd while the world economy was in the midst of the global recession. Yancey Strickler, one of Kickstarters founders, had his own reservations before starting the company, noting in a New York Times interview that his initial response to co-founder Perry Chen was, Im not so sure about this...If you let people vote for what they want thats American Idol, that doesnt produce great art. Yet in the past two years, crowdfunding has exploded, thanks in part to the Kickstarters all-or-nothing model for funding. Its democracy in action: think you have a great idea? Convince enough people and you can make it a reality. If not, back to the drawing board. By turning collaborative funding into a high-stakes game, Kickstarter demands a certain level of quality from its creators, encourages that they work to promote their project, and gives backers condence that theyll only pay for projects that achieve a critical mass of support. Even as competing services launch, some serving different creators and audiences, many follow the model popularized by Kickstarter. The momentum shows no signs of letting up. Yesterday, Kickstarter announced that they hit their one millionth backer, with adoption increasing exponentially: on their blog, Kickstarter notes that it took 16 months to reach the rst 200,000 backers, while the last 200,000 signed on in only three months. Funding projects is habitual, according to Kickstarters gures. Out of 1,013,725 total backers, 166,823 have funded two or more projects, 66,676 have backed three or more, and 23,601 have backed ve or more. This phenomenon echoes Shareables view that sharing is contagious, and one shareable act begets more.

Graphs in this chapter via Kickstarters blog. In July, upon reaching 10,000 successfully funded projects, Kickstarter released metrics that revealed a 44% success rate among projects, and a rapid increase in the number of successful projects month-by-month.

Breaking down successful projects by category, Kickstarter revealed some useful insights on what types of projects get the most traction on their creative-oriented platform. Music, lm and video are the clear frontrunners:

Who would have thought that tapping your networks for donations would prove such a sustainable model? Certainly not myself last year, I discussedmy concern about impending crowdfunding fatigue from friends and colleagues who had been tapped for donations one too many times. But so far, the numbers haven't borne this out. The sheer breadth of successful campaigns launched in the past year are impressive, includingfeature lms, web series, musicians releasing records, web startups, gadget accessories, art projects, homebrew video games, urban farms, journalism, open-source projects, road trips, social activism, small businesses, even documentaries about the sharing economy the list goes on. Even if some of the projects are silly and ephemeral, that breadth demonstrates the fundamental strength of the platform. Kickstarter is the most visible of all the services, but far from the only one. A wide array of services aim to serve different constituencies. Kiva is one of the originals, garnering the attention of Oprah and facilitating $240,410,450 in microloans since its inception in 2005. This spreadsheet curated by Joe Brewer and Suresh Fernando, who are in the process of writing a Crowdfunding Manual for Social Change, demonstrates this wealth of options. There are creative-focused ones such as IndieGoGo, and

platforms specic to pursuits such asmusic, publishing, and even wine making. There is the journalism-focused platform, a community-funded reporting platform which Shareable and the Public Press have used to help fund investigative reporting. Peer-to-peer lending services like Lending Club aim to remove large banks as the middlemen for loans. The Occupy Wall Street Journal, the occupations newspaper of record, has raised $75,690 in funding on Kickstarter to cover publishing costs. Concurrently, theres an increasing number of social movementfocused platforms, such as the social enterprise-focused Start Some Good, and non prot-centric CauseVox. With such growth, critiques are inevitable. Perhaps most common is the fear that were in a crowdfunding bubble. In a blog post, designer Andy Mangold offered some well-directed critiques before launching his Kickstarter project, noting that selling an idea is much easier than selling an actual product, that these platforms prefer those with large established networks, and that the lack of insurance for backers could lead to backlash if the creators dont deliver what was promised. Consider the hype and backlash cycle endured by the people behind Diaspora, one of the most high-prole crowdfunded projects to date. The enthusiasm that greeted Diasporas plan to build an open-source alternative to Facebook quickly curdled among some supporters and journalists who felt that the development process took too long and were disappointed by the limited alpha release. While gathering funding from your networks and supporters can make otherwise impossible projects possible, creators may then face expectations they cant meet. In a social media climate where everyone has a voice, excitement can turn to disappointment or anger when money has been given up front. That said, crowdfundings momentum shows no signs of agging. There's no doubt that as adoption increases, so does competition, making it more crucial than ever to stand out from the crowd. Before starting a campaign, do your research, and be prepared to work hard. There are many how-to guides, including Shareables guides in these pages on how to run your own campaign and what youll need to start. Metalter founder and serial backer Matt Haughey offers a useful list of suggestions from the perspective of a funder, and the Modest Guide to Success on Kickstarter offers particularly useful advice. Common tips among the various how-to posts including dening success beforehand, communicating with backers transparently, and carefully structuring the reward system. In addition,

Kickstarters online school of how-tos and FAQS is a must-read, no matter which service you choose to use. Be sure to look at the prot/loss statements released by those who have successfully funded similar projects Diaspora released a detailed statement after their campaign, breaking down Kickstarters fees and promotional costs, and many have released similar statements, such as the documentary lmmaker Joey Daoud. Be realistic, and make sure youre setting the goal at something achievable if you cant hit that total, youll be walking away with nothing but squandered good will. Living in an era of unprecedented connectivity, crowdfunding represents a new way for creators, makers, entrepreneurs and social activists to realize their dreams. Moreover, the collaboration enabled by peer-to-peer social lending and funding platforms represents a unique opportunity presented byThe New Sharing Economy. Crowdfunding continues to evolve. Services such as Sprowd aim to make it a credible way to fund startups. Congressional Bill HR2930 could make it easier for businesses to raise equity from investors through campaigns. Joe Brewer and Suresh Fernando believe crowdfunding is a way social entrepreneurs and activists can fund the commons, inspire engagement, and foster movements. The rise of mobile devices hint at immediate and location-aware platforms that could support smallscale projects in real time. Will the bubble burst? Its too early to say, but the numbers show that the trajectory remains on a steadily upward path. No matter its future, crowdfunding represents collaboration and funding opportunities that would have been unthinkable only a decade ago, with a transformative impact on creators, makers, entrepreneurs, and social movements that cannot be understated.

Crowdfunding Social ChangeBy Suresh Fernando We are at an inection point in human history that requires that we answer the call. There is no more time to dawdle. This inection point can be characterized by the convergence of a transformation in values with a technological revolution. This combination will enable a techno-cultural re-ordering that will allow us to interact

differently. This will make it possible to organize and coordinate activity in new and innovative ways as well as to re-dene the very structure of our institutions since, no doubt, the structure of our institutions is deeply connected to how we interact with each other. A key feature of the reorganizing of our institutions will be the way that resources are allocated to change agents, visionaries, revolutionaries and the like. The emerging Internet and network infrastructure makes it possible both to coordinate activity as well as to source and access nancial capital in new and innovative ways; ways which circumvent the current institutional framework against which most change stand in opposition. Within this context many innovative models that enable us to coordinate activity and resource