CAPTURINGCROWDFUNDING

Crowdfunding is the child of crowdsourcing. Crowdsourcing is the process of connecting with large groups of people, generally via the

internet, and tapping into their pre-existing knowledge, expertise, time or resources. Crowdsourcing isn’t a new idea, although the term is fairly new and has grown incredibly trendy. The process of asking people for help became significantly easier with the development of the internet and the ability to quickly reach a large number of people at once. Crowdfunding is the answer to resources, particularly financial resources. Crowdfunding allows you to raise capital for your venture or cause through large or small donations from people all over the world. Or just your friends and family who used to be some of the main users of online crowdfunding platforms.

WHAT:

THE BREAKDOWN OF CROWDFUNDING

In crowdfunding there are lots of people involved. From the crowd to the creator to the platform there can be a team or organization or

company or just an individual. It all depends on the project, but more on that later.

The first successful, recorded crowdfunding campaign was for a British rock band in 1997, but online crowdfunding as we know it

now didn’t really exist until 2009. Crowdfunding has consistently been growing ever since.

Crowdfunding is just the process of getting donations or investors so there are plenty of organizations and companies

out there doing this everyday with no help from the internet. However, the internet has become such a powerful resource in gaining resources that it generally all takes place online. Online refers to the platform as much as it refers to the networking that happens. Social media is an enormous player in successful

WHO:

WHEN:

WHERE:

This may be the most important question and also the most difficult to answer. Why is crowdfunding important? Why should we be paying attention? What can we learn about our economy or about the ways businesses can grow? Why are consumers interested in crowdfunding?

WHY:

LET’S TALK SUCCESS STORIES

Let’s talk about Humans of New York, a photo blog which founder, Brandon Stanton describes as a storytelling blog. There’s a great back story: Brandon lost his job a few years ago and had just picked up photography as a hobby. He began walking the streets of New York City photographing people and asking them a few questions about their lives and experiences.This has resulted in over 12 million likes on Facebook alone, where he posts his photos and their quoted story captions. And depending on the photo and the

story, there’s some amount of shareability built in. Right now, scrolling through the HONY Facebook page, the last ten photos have totaled over 67,000 shares. That doesn’t count the number of likes or comments that will pull the photo into friend’s Facebook feeds. Crazy numbers.

On January 19th of this year, a HONY post went up which was just a photo of a kid, Vidal, on the street in a sweatshirt. Vidal told Brandon the person that had influenced him the most in his life was Ms. Lopez, his principal at Mott Hall Bridges Academy in Brooklyn. That post received over 1 million likes, 20,000 comments and 146,000 shares. Brandon posts that much of that happened within hours and

days. That post was the beginning of a beautiful story and a very successful crowdfunding campaign. The next post was about Ms. Lopez and what she wanted to do for her students. Many had never left the rough neighborhood they grew up in. Ms. Lopez asked Brandon to help her bring her students to visit Harvard so they had something to aspire to. And it turned into so much more.

How do you repeat success like that?

There’s no magic formula for success in crowdfunding campaigns. Sometimes it seems like magic but it really is a lot of work. Prior to choosing your platform there’s a lot of groundwork that must be laid. It’s easy to throw some text and images together to post to your crowdfunding platform, however successful campaigns take much more

into consideration before they launch their campaigns.Online resources offer lists and lists of questions to consider prior to launching a crowdfunding campaign which should all be considered, but there are major questions that should be answered to gauge the value of your campaign prior to launching a campaign.

Understand how you want to crowdfund

Donation-based crowdfunding is the original fundraiser model. Funders may be motivated to donate by the promise of products or rewards. Campaigns set price points that donors match to receive a wide range of perks. Smaller donations may equate to thank you notes or shout outs, while larger donations may receive the product they are funding or meet and greet opportunities. Some platforms even work on a prize system, where you receive your perks and are also entered for prizes with every $5 you donate. With investment crowdfunding, funders become owners or shareholders in a business seeking capital. Unlike the donation model, these investments have potential for financial return. However, investment crowdfunding has yet to work itself out in the US.

Donation-Based Crowdfunding V. Investment Crowdfunding

The Platforms (well, some of them)

As mentioned before, there are over 500 crowdfunding platforms available online and each provides different sets of tools for the users. When you’re selecting a plat-form for a campaign the most important thing is research, research, research. Under-stand your project as well as the projects before yours to help aid in your platform selection.While there are hundreds of platforms, three rise to the top for a lot of reasons, but particularly because they have developed communitities around their platforms. So let’s breakdown the common platforms.

LET’S TIE IT ALL TOGETHERLaunching a campaign is difficult and growing a successful campaign is even more difficult. But let’s come out of the details and look at the big picture. Crowdfunding has developed into a billion dollar marketplace that shows signs of continued growth. While we’ve seen evidence of success, the beginnings of products, brands and businesses, we have yet to see it be fully taken advantage of. Pebble Time is the best example of a brand growing their image via crowdfunding however, there are so many benefits for both

the consumer and the entrepreneur in crowdfunding that haven’t appeared as vividly yet.The EntrepreneurCrowdfunding campaigns offer an entrepreneur a huge amount of flexibility that you don’t typically see in traditional start up techniques. All of the platforms available make great test sites for entrepreneur’s products. While the actual product isn’t being tested, the idea is. Launching a campaign provides immediate feedback about the product, whether that comes in comments or in a

lack of donations, places like Kickstarter let you introduce a product to a large group of people quickly and instantly lets you know how much value it has.It’s also a great place to practice and test your marketing and promotional skills. A component that we haven’t touched on much is networking and social media. The size of your current network, whether that’s online or not, could directly influence the success of your idea. If your network is not that expansive, this is a time to build connections with people that can help you take your idea further. Kickstarter reported that campaigns that receive donations within the first three days are more likely to meet their fundraising goal.

This can be real test of both the product value as well as the strength of your connections which is important as an entrepreneur.The benefit every crowdfunding campaign hopes to obtain is viralness or shareability. If you develop a narrative that is compelling enough for people to share it, that’s your golden ticket. Earned PR opportunities are huge for both the campaign and building a name for the business. This can tie back to your network strength, whether or not you already have a large audience listening to you. However, there are cases that have exploded just because the story was too good to pass up.

The ConsumerA big question posed in

crowdfunding is simply, why? Why do consumers want to participate

or donate money to people they may not know? One common driver is the reward aspect. In a donation-based crowdfunding model sometimes the rewards are enough motivation. They could donate $5 because they support the campaigner but an extra $10 could get them an HD download of the film, so they may donate $15 simply because they receive a benefit of value to them. Supporters often pay some extra amount for an added benefit that they may not get for weeks or even months. This is one of the big differences

between donors and typical consumers. Rarely are consumers making purchases they won’t receive for such extended periods of time, which says a lot about the value of the product or idea.Consumers are also motivated to simply help. Human nature is to give or help those around you. Whether that means your family and friends are donating to fund your film or strangers are donating to help an underfunded school, consumer’s willingness to give plays a huge role in the emotional portion of your product or causes’ narrative. Donors are also motivated when they see the effort you put into your campaign. A study explained that donors were motivated to help reach

a goal when the goal has almost been reached. When you only have $500 before the goal is reached, donors often feel that their $100 donation makes more of an impact. Some of this also plays into promotion. When consumers are unable to donate something of monetary value, they are often willing to share a campaign in hopes that someone in their network will be able to donate. This is the other side of shareability.One other huge motivations for donors is the community aspect. Becoming a part of something bigger is easily achieved in crowdfunding. If we use Pebble Time as an example, those

donors have the opportunity to own a product they ‘helped build.’ Although they aren’t affecting the product in any way, they feel as though they’ve contributed and they are more attached to the campaign. Seeing other people getting involved on the campaign page, a ‘number of donors’ or an updating list of names also motivates consumers to become a part of that community.

CONCLUSION:

In the same ways that crowdsourcing and the internet grew businesses, crowdfunding is changing the way people gain access to resources from their own consumers. A billion dollar industry that is still very young has yet to be pushed to its full potential. There are enormous opportunities for big brands in this space, whether they’re supporting the products of others (Jawbone and Evernote’s partnerships with Pebble) or they’re picking up products from these sites. Brands could support causes or fund personal endeavors, creating great PR opportunities for both the brand and the campaign they’re supporting. The crowdfunding space has so much potential that may develop even further in the upcoming years.

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Jen Cornwell Spring 2015