The Evolution of Crowdfunding II
- Apr 3, 2016
- 2 min read
Crowdfunding gained traction in US when Brian Camelio, launched ArtistShare in 2003. It started as a website where musicians could seek donations from their fans to produce digital recordings and has evolved into a fundraising platform for music, film and photography projects.
ArtistShare’s first crowdfunding project was Maria Schneider’s jazz album “Concert in a Garden.” Schneider offered a tiered system of rewards. Thanks to ArtistShare’s success, more rewards-based crowdfunding platforms were launched, like Indiegogo in 2008 and Kickstarter in 2009. In addition to the arts these platforms host funding campaigns for social causes, entrepreneurs and small businesses.
Kickstarter hosted more than 265,000 funding campaigns, of which 36% percent were successful. Kickstarter charges a fee of 5% of the funds collected in a fully funded campaign. In an all-or-nothing funding model, the majority walk away with nothing. Indiegogo allows both all-or-nothing and keep-it-all campaigns. In the latter, the project may keep all the funds it raises even if the goal is not reached.
One of the most successful and famous, Kickstarter campaigns was the Pebble smart watch. They sought $100,000 and the campaign raised a whopping $10,266,845 from 68,929 backers.Another very successful crowdfunding campaign has been the Coolest Cooler, which raised $13,285,000 from 62,000 backers on Kickstarter in 2014. The company’s funding goal was $50,000.
Backers assume risks. Even when projects are fully funded, there is no guarantee that the entrepreneurs will fulfill their promises to backers, or do so on time. Two prominent studies found that at least 70% of projects miss their delivery deadlines. Kickstarter does not mediate or intervene when funded companies fail to keep their promises.
You might expect that giving hundreds of thousands of dollars to a bunch of startups in exchange for promises of products that haven’t yet been marketed would result in a high occurrence of fraud. The fraud rate appears to be quite low so far, however. Ethan Mollick, assistant professor of management at the Wharton School, University of Pennsylvania, concluded in a 2013 study of 48,500 Kickstarter projects that “less than 1 % of the funds in crowdfunding projects in technology and product design go to projects that seem to have little intention of delivering their results.”
At Crowd4funds, we help you reach your crowdfunding goals with our comprehensive support via crowdfunding consulting and crowdfunding campaign promotion. To date, we have helped many of our clients achieve and even exceed their funding goals.
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