Crowdfunding - a new and innovative way to fund your startups

Well my friend, it is simple.  If we take a good look at the success of Wikipedia (An online encyclopedia maintained and created by online volunteers), one cannot help but wonder what else can be accomplished by small donations of time, effort and money by large number of individuals.

Success of the “crowdsourcing” platforms like Wikipedia on the internet land made many smart people think – “Why can’t I fund my startup by taking small donations from a large number of people?”

There were various  answers to that questions including that it is illegal to solicit investments from the general public and was frowned upon by regulatory authorities all over the globe such as  - Securities and Exchange Commission of US, Financial Services Authority of UK or the french  Autorité des marchés financiers  .

Being smart, these people finally got around these problems and created online platforms where you can post your need and get funded by people like you.

That is how crowd funding came to be and, that is what it is all about. 

A perfectly valid question!

Apart from the fact that you might be awesome and that people are just blinded by your natural magnetic personality, there are various reasons why people (mostly a non professional financier) chooses to pledge money towards a project.

• The Entrepreneur, seeking funding from a crowd sourcing platform (to raise seed funding for example) may promise a direct material return once the product is launched. Example - TikTok and LunaTik on Kickstarter.
• The website or other real estates of the entrepreneur might provide a display of sponsorship for the financial pledge. Example- The Million Dollar Homepage.
• The financial help can be a loan. Example – Micro finance sites like Kiva
• The money pledged might be some sort of investment. Example – Grow VC

Most platforms have other regulatory checks to ensure the viability of the projects in place. One of the most common examples being that in most cases a time limit and a goal is being set. If the goal is not reached, no funds are collected.

Nope, it is not. But it has found some new found vigor in the age of Web 2.0

Crowdfunding has long history in the world of charity and nonprofit organizations since the toddler phase of the internet.

In the entertainment industry, back in 1997, the British rock group Marillion raised over $60,000 in donations from a internet campaign and a lot more later on to promote and record their albums.

Why? Of course

(This is a list in perpetual progress – which means that it will never be complete, and I will update this list from time to time.)

Kickstarter:

Kickstarter lets donors fund art shows, movies, short films, dance, graphic novels and theatre productions.

One of the most recent and dazzling successes of Kickstarter has been that of a social networking startup “Diaspora” that raised over $200,000 seed money .

About half of the projects that are submitted to Kickstarter are accepted and about half of those accepted receives funding.

RocketHub:

A Kickstarter competitor and very similar to Kickstarter, except it accepts all the projects that are submitted and removes the ones that are of bad taste.

Invested.in

According to themselves:

Invested.in is an interactive platform enabling users to leverage their social capital to raise financial capital. In simpler words, it is a platform built to help anyone raise money for anything, utilizing their existing social network presence. Invested.in is heavily connected to every aspect of your online social life, utilizing Facebook, Twitter, MySpace, etc… to help you reach your fundraising goals. Our grassroots approach to P2P lending allows our users to return goods, services, or anything in between for their investments. We are truly putting the future of the community into the hands of the community, and out of the hands of the traditional banking and credit card sector.

Seedrs:

Seedrs is a forthcoming platform that will allow direct, on-line investment in the equity of startups.

PledgeMusic:

PledgeMusic is an online fan-funded music platform that is solely focused on raising fund for the musicians.

Sellaband:

Sellaband is very similar to PledgeMusic and lets bands to raise money from their fans and the sellaband community.

Venture Bonsai:

It is a crowdfunding service for European start-ups looking for funding (direct investments) less than 1 M€.

Grow VC:

According to TechCrunch:

Grow VC is a new community funding model for technology startups. Here’s how it works: Grow VC will pool 75 per cent of membership fees into a community fund that gets invested back into ‘promising startups’ which are members of the platform. The fund is managed by Grow VC but all the investment decisions are left to members who determine how to invest their portion of the fund into other startup companies that they feel have the most potential. The most successful decision makers get financially rewarded when the community fund begins earning a return on investment. So, if you promote the best companies you make moola.

Sprouter:

A service very similar to GrowVC