Crowd Funding – The Solution To The Broadening Gap At The Bottom of The Funding Ladder

In recent years, the gap at the bottom of the funding ladder has continued to grow. Small businesses, start-ups, charities, and those with creative aspirations have been unable to reach the higher rungs of traditionally available funding. Stock exchanges, venture capitalists, banks and other more recognised funders do not support early stage initiatives or what amounts to little more than a great idea. They require evidence of traction, proof, surety, and a number of boxes to be ticked. And, of late, the gap has continued to get lager, opening the door (quite widely) for crowd funding to come in and answer the funding need.

Many are calling for venture capitalists to be renamed as “development capitalists” as they seem to have stalled in their propensity to venture. Over the last 10 years, global venture capital funds have decreased by 90%, as sources of this method of funding have become less bullish, preferring to put their money into development of proven ideas rather than “taking a punt” to back early stage, new to world concepts.

Right through to the most relied upon and secure backer of projects, the government, the finance sector is stretched. Bank lending to governments (in Australia) has been on a steady incline, with current numbers representing a figure triple that of 10 years ago. Just recently, federal government grants to start-ups and their grant schemes in general were “paused” while the government regroups and reassesses their ability to fund initiative. Governments, like many households, are under pressure to balance the books, and funding new initiatives is one of the first things to face review. Governments can’t sustain the pressure, and the gap at the bottom of the funding ladder creaks and groans as it continues to grow.

But crowd funding has filled the gap, and continues to establish itself as to the solution to the funding required at grass roots levels and at the bottom of the funding ladder.

Despite many thoughts to the contrary, there is money out there. Not in big packets and not in the vaults of the traditional lenders. It is in the pockets of the people – people who are willing to pledge to people they like, to a cause they believe in, to a project that will deliver them funky rewards or social kudos. The proof of the pudding is in the eating, and the evidence is there. Some individual sites are now receiving well over $100mil in pledges a year. In the USA, one crowd funding site alone funnels more money into the arts sector than the National Endowment for The Arts – the federal body that governs and supports the sector. And the crowd funding industry continues to evolve and grow at a staggering 91% globally – something unheard of by most other sectors in the post GFC world.

 

Crowd Funding – Helping The Project Creator

Some project creators have the time and energy to put together a great project with all the ingredients to really make it sing, but do not have the have the time (the few minutes each day), the confidence, or the know-how to get their message to the crowd. iPledg has now developed the solution that will hopefully become the norm amongst those who run crowd funding platforms – The Campaign Assistance Packages (CAPs) Program offers project creators support, direction, and some impetus to their campaign.

 

In response to market needs, iPledg created the CAPs program. Some project creators said they had time to put their project together but no time to promote it, or to do so consistently. Others needed someone to provide them the initial (first month’s) direction and momentum, so iPledg created a service by which they could have their social media engagement done on their behalf, as well as database marketing, and internet research for like minded groups. People can then determine if they want to list a project for free on iPledg and do the work themselves (as is currently the case with most crowd funding platforms), or if they want to pay a small fee and have some of this work done for them.

 

Matching the voice and tone of communication is key to the success of this social media service. By really getting to know the project creator, and their underlying objectives as well as the manner in which they have gained the support of their crowd to date, the essence of their voice is captured, and communication is effectively executed on their behalf. Although the operators of the platform run the process, the project creator must engage and approve the outgoing communications to ensure that the communications indeed reflect their voice and tone.

 

The CAPs program is not intended as a long term service to any project creator. It is their passion and their crowd, so the CAPs program exists to help projects get traction in their early days. It provides impetus, as well as giving the project creator the direction and the confidence to remove the training wheels and hopefully ride successfully to the finish line and achieve a successfully funded campaign.

Posted on September 2, 2012 By iPledg With 0 comments

Crowd Funding – Fad or Phenomenon

Seldom do you get an industry that grows at the rate of 91% per annum. Rarely do you see a sector achieving global growth that is not restricted to one continent or another. And never do you see such exponential growth surviving beyond the “fad” phase. But in the case of crowd funding, we see a wonderful new form of e-commerce defying conventional thinking and achieving all of this and so much more.

Perhaps it can be argued that the growth curve may flatten out a little. Whilst that may be true, the naysayers who dismiss crowd funding as merely a fad fail to recognise the deeper significance of this form of e-commerce, its timeliness given the state of the world economy, and the stage it represents in the evolution of social networking.

Venture capitalists are no longer venturing. Over the last 10 years, the amount of venture capital worldwide has dried up by 90%. The conservative nature of this source of funding has left start ups and new concepts without venture capital as a reliable form of funding, as venture capitalists require a proven track record and a degree of market traction to have been established before they consider their financial intervention. Indeed, it can be argued that the term “venture capital” should be recoined “development capital” as it has shifted to being just that – funding for the development of verified products, theories and business concepts.

Venture capital as a source of funding is not on its own in retracting its cavalier approach to the markets, especially since the GFC three years ago. Punch drunk banks and traditional funders as a whole have been beaten by regulator and market scrutiny post the losses of the global economic meltdown. The amount of available capital has dried up, and those seeking funds have realised that the bar has been considerably raised, leaving a gaping hole at the bottom of the funding ladder. Those with great ideas and inspiring innovations have found it nigh on impossible to access the lowest rungs of available funding. It is this vacuum in the capital markets that has created fertile ground on which crowd funding could succeed at the grass roots level.

The economic conditions of the world, coupled with the emergence of microfinance (the ability to transfer small amounts of money quickly and easily) and the rapid rise of social media created the perfect storm in which the planets aligned, with crowd funding being the solution of not only best fit, but of perfect fit.

And with the power of social media, the concept of crowd funding was build on a rock solid and sustainable platform. Many recognise crowd funding as the next evolution of social media, where people not only say they “like” you and what you are doing, but are prepared to put their hand in their pocket to show it.

With the world in post GFC mode and traditional lenders being more conservative with loaning money, this is a fast and flexible form of accessing capital, and allows “tribes” to support their own. It is true governance by the people, for the people, where the real judges of what “gets up” and what does not is determined by the most democratic of ways – by the crowd.

Posted on August 27, 2012 By iPledg With 0 comments

Crowd Funding – Providing Strategic Linkages

Some projects just lend themselves beautifully to crowd funding campaigns. The local gym that needs equipment can easily offer memberships, personal training sessions and yoga classes in their efforts to raise funds from their “crowd” for the equipment they require. But some projects struggle to find the rewards to motivate the crowd into action and to get them supporting with their wallets. However, this gives rise to the opportunity for good strategic linkages if a little thought is exercised, benefitting not just the funding campaign but the project it is aimed to support.

With campaigns aimed to fund projects of a more technical nature, getting creative with rewards can be difficult, but some great ideas can be found when the project creator starts to think outside the square. Recently an inventor of piece of equipment for a commercial kitchen asked us at iPledg “what rewards could I possibly offer?” With a bit of thought, we explored the markets and motivators around the product on which their campaign was centred. We progressed from commercial kitchen, to cooking, to the popularity of cooking shows, and bang! We came up with signed cookbooks from some of the famous chefs from our top ranking cooking shows, a chance to attend a dinner catered for by a top chef, and so on. Now we had some rewards related to the project, and a way forward was forged.

But this is so much more than just rewards for the life of the campaign. This is where strategic alliances really come to the fore, and provide a longer term and more far reaching benefit. It is great that the campaign now had a suite of rewards to motivate the masses, but getting the message out to the crowd became the next challenge. Having engaged the famous chefs, we now had incredible reach to a wide audience. Not only had we secured widely sought after, really cool rewards, but we had a channel to market to let even more people know about the project than the project creator ever could have reached on their own.

So the campaign was well positioned for establishing a good relationship with a large crowd. We had the sweetener by way of great rewards. In securing the rewards, we forged a relationship with people that agreed to give us far greater reach than could have ever been reached by the project creator on their own. If you think this is pretty good, the best was yet to come.

The support from the famous chefs was then topped off with an offer of an ongoing alliance. The offer of a few signed cookbooks was great. The offer to let their audience know of the campaign was a great leg up in the chances of achieving the funding goal. But the support from the strategic linkages formed with the famous chefs really came to the fore when the campaign was due to finish, with the chefs offering to maintain contact, and open doors for the project creator to get the product (the output of their project) into some great applications. They didn’t just provide a few cookbooks as rewards, but an association was formed that bore results right through to a commercial return, which was the project creator’s ultimate goal.

Not everyone knows a famous chef, a well renowned sportsman, or an Oscar winning actor. You don’t need to. The local cake shop can help with rewards and help with spreading the word to the dozens of customers that walk in and out of their doors. Businesses are hungry to engage with their community, to offer their rewards to help project creators (their philanthropic gesture) while building awareness of their own business through a few give-aways (their commercial gesture). Most are willing to engage with and assist the community by promoting the local campaigns to their customer base, even if it is through putting a small sign up in their shop (every little bit helps). All it takes is a bit of creative thinking that not only delivers wonderful rewards, but far greater and ongoing benefits to the project creators, their campaign and the ultimate goal they are trying to achieve.

Posted on August 20, 2012 By iPledg With 0 comments

Crowd Funding – Setting a Realistic Target

Setting realistic expectations and creating a plan that is based on logic right from the start gives a project creator the best possible chance of success. Ambitious plans are quickly exposed, early in a funding campaign, creating a disincentive to continue, and almost a resentment of a non supportive crowd. The project creator quite often disconnects from their fan base, achieving the exact opposite of what a funding campaign is supposed to deliver. But we now have some industry intelligence that sets down the basis on which to set your campaign targets.

There is a great rule of thumb formula on which you can base your funding target. Add up all of your networks. That is, all of your Friends of Facebook, your Followers on Twitter, everyone with whom you have a connection on any form of social media, and every person in your email address book. Once you have amassed the grand total, remove any duplication, and you will end up with your total network reach, or the total number of people with whom you can directly communicate. Whilst you may be buoyed to see the number of people with whom you can connect exceeding your expectations, now comes the grounding piece of news – in setting a target, you should base your forecasts on only 10% of these people pledging their support. So if you have 1,000 people in your total network reach, you should base your forecasts on just 100 people making a pledge. With the average pledge being $50, your target should be around 100 (people) x $50 = $5,000. This then becomes your conservative, realistic, base target.

Ok, so the Pebble guys didn’t have 2 million people in their total network reach (do the maths based on them having achieved $10mil in funding). They did, however, bring into play the next great component in achieving an amazing total. They offered really well sought after rewards. Their inducements evoked a feeling of “I’ve just got to have it” in the hearts and minds of prospective project supporters. T-shirts and coffee mugs just don’t inspire the same emotions, so you really have to give some thought to the rewards you offer and be realistic about the impact these will have in driving the campaign to achieving a greater total. If you take your base target of $5,000 in the example above, and offer a really attractive reward that people really desire, you can comfortably set your target considerably higher. Without such rewards, you are best to stay closer to your base target.

Once the campaign is underway, you have a greater deal of control over their campaign than you would believe. A campaign is work – teamwork! During a funding campaign, you must spend a few minutes each day, engaging the ”team” through social media, email blasts, winning over the media to get them to offer coverage – anything you can to get the word out there. Not just once, but repeatedly. If you are not committed to doing this, then in setting your target you should be far more conservative with your base target. How can people be expected to support a project about which they know nothing or haven’t even heard of? Many would argue that if the project creator is not prepared to really drive their campaign, they should reconsider whether crowd funding is actually for them.

But what does “driving it” actually mean? There are five golden rules for promoting a funding campaign:-

  1. Find other groups on the internet and let them know about the campaign, tapping into your shared passion.
  2. Ask people to not only support the campaign, but to spread the word.
  3. Don’t beg. It is not always about the money. Inform the crowd about the campaign and its intended outcome, and they will engage.
  4. Saying thank you publically and singling out project supporters in social media delivers great kudos, creating a flow on effect in their efforts to provide their ongoing support
  5. Persistence, Persistence, Persistence – keep promoting, even when the campaign hits its target, continue to spread the word and engage the audience

Exploring your immediate crowd and using a simple formula based on global data will help you define your base target. Take into account your preparedness to drive and promote your project – the greater your intentions, the more you should consider increasing your base target (as long as you actually do live up to your intentions! Or as long as you use services like that offered on iPledg whereby they do your social media and database work on your behalf). And don’t forget to consider how you will use the five golden rules for communicating your message.

With the information at hand, and a good hard look at what you really can achieve, you should be able to set realistic targets which, when pursued with unrelenting drive, deliver wonderful results to your crowd funding campaign.

Posted on August 13, 2012 By iPledg With 0 comments

The Essence of Crowd Funding – Getting The Crowd To Follow

Crowd funding is seen by many to be the next development of social media, achieving a deeper of level of engagement whereby the crowd not only says they LIKE you, but they are willing to put their money behind you to assist in “making it happen”. Getting the crowd to support you is the essence of achieving success, and achieving this is built around a simple formula. 21% of crowd funding campaigns receive no funding at all (not a single cent) due to project creators not planning and then not “working” their project. Realise that this is about the activity you undertake in planning and execution, and you are already ahead of many in the pack.

Project supporters are motivated to pledge their support because they like you, they share the passion for your project or the outcome, and they want either one of the cool rewards on offer or the kudos they get from being seen to pledge. Recognise this as the key motivators, and you can start to plan a successful campaign.

When it comes to rewards, many project creators leap before they think. Put some thought behind the rewards, using the teachings of the global industry. Campaigns with a $25 reward raise 30% more in funds than those without a reward for this amount. Keep the tiers of rewards simple and concise. It is best to perhaps have an entry level ($2) reward, a $25 reward, a $50 reward (this is the most commonly pledged amount), and a $100 reward – in most cases that’s plenty.

Make sure that you clearly define your project in your project description. Many projects that are initially submitted to iPledg have some great wording, but don’t actually say what it is they plan to do with the money they raise, thus failing to engage the crowd as they just “don’t get it”.

With authenticity being key to a successful campaign, your chances of success will be greatly boosted by having a video in your project description. Shoot a quick video (it doesn’t have to be a full scale Hollywood production – a 60 second clip shot on your iPhone is fine). Campaigns with a video raise 122% more in funds than projects that do not have a video. Have people in it (not just shots of your product or plan). The crowd wants to see (and fund) your passion and that of your team and closest supporters. If you can include a couple of endorsements in your video from potential customers or beneficiaries from your project, then that will add to its effectiveness.

The most common misconception about crowd funding is that you just need to post your campaign on a platform and the money will magically come. To be successful you, as the project creator, need to spread the word and reach your network. That us, you should be aiming to get your message in front of every single person you have had contact with in recent times.

You need to reach 25% of your funding target (typically) before strangers start to take note and start supporting your campaign. To achieve this, prime your closest networks first, even before your launch, getting them ready for you to start your campaign. Effectively this will give you a rolling start and you won’t be held up while you build your initial momentum. In preparation for your campaign, build your Facebook network as figures show that it is the top referrer to crowd funding platforms.

Also in the preparation phase, make sure to build your team of advocates. Have a team that will push the message to their networks as well, effectively giving you more angles from which the crowd will be approached, and more networks to whom your message can be sent. And if you or anyone in your team knows a celebrity, ask them to make a few shout outs on your behalf.

Once your funding campaign is underway, don’t just ask for blatantly ask for money, but continue to inform people of what you are doing. It doesn’t always have to be about the money. Make sure you don’t beg, but maintain the interest of the crowd and continue the attraction (build it, let them know, and they will come). Another great topic about which you can make shout outs regularly during your campaign is thanking people and letting them what their support means. Single people out and give them that social kudos that means so much.

Be sure to also make updates through the site on which your campaign is being run. Regular, on-site updates allow you to double your money according to the stats. Tell the crowd what you are up to, both with the funding campaign as well as project itself.

Celebrate milestones as you meet them. Let people know when you hit the half way mark or the first $1,000 raised. Who could go past Amanda Palmer’s celebration of her crowd funding campaign hitting $1mil by appearing in social media pages, bare chested and with the words “One F*&#ing Million” painted on her semi naked body. No, perhaps you don’t have to go to such extremes, but the message is the same – celebrate loud and proud, and the crowd will share (and spread) your joy.

Make sure you do the big count down towards the end of the campaign. Even if you have already met your target, counting down to the end of the campaign will further engage the audience to conform to the urgency and pledge within the remaining time.

Afterwards, once the dust has settled, be sure to follow up everyone and welcome them into your “family” and into a long term relationship created through this wonderful form of e-commerce and the new, deeper social media engagement tool that is crowd funding.

Posted on August 6, 2012 By iPledg With 0 comments

They’re Marshalling Behind The Blocks, Ready For The Great Crowd Funding Race

They’re marshalling behind the starting blocks, awaiting the sound of the gun that indicates the start of this long distance race. Amongst the field there are the contenders and there are the pretenders, those that will succeed and those that will quickly be left behind by the pace and experience of the pack.

No, we are not referring to the Olympics, but the positioning prior to the race that begins on January 1, 2013, to become one of the challengers in the race that will be Investment Crowd Funding in the hub of the crowd funding world, the USA.

To win gold, competitors must be au fait with the rules of competition. They need to develop skills. They need their supporters, and need to be recognisable on the track. This is the jockeying that is currently going on “pre-race”.

The rule makers are now engrossed in writing the rules of the game. What is “in” and what is “out”. What can competitors do, and what does the field or track really look like. They are anticipating and defining where are the ruts and dips in the track, what parts will be uphill struggles, and how do we protect players from themselves, and from other competitors. Most importantly, how do we protect the crowd and supporters?

How do we attract players of all levels and abilities, and how do we structure a competition made up of different divisions suited to differing levels of player ability and levels to which they are prepared to commit?

As with the success of any sport, the initial event has to generate interest (and that is already gaining momentum). But the game play must be fair, inviting, intriguing, and not just great for those who observe, but be such that people want to become involved in one way or another

It will not be until the officials have set the track, worked out the rules of the game, and understood how all players and supporters will be protected, that the competitors will actually be able to start the race. Any attempt to jump the gun will be met with disqualification from competing, or worse. All competitors keep must remain behind the starting line and continue to hone their skills and build their supporter base, ready for the official’s gun to start the great race on Jan 1, 2013.

Posted on July 30, 2012 By iPledg With 0 comments

Crowd Funding – If At First You Don’t Succeed….

The stats are clear. Globally, on average, 45% of crowd funding campaigns reach their target. That means that about half fall short, often receiving no funding at all. But how does a project creator use the lessons learned and go back for a second bite at the cherry to achieve their desired outcomes. Experience is a wonderful teacher and, used correctly, can lead to successful funding campaigns.

Whilst it may seem at the end of an unsuccessful campaign that you are left with an incomplete puzzle, these pieces (when used correctly) can form the basis of a bigger, more attractive master piece.

Firstly, there are those that have pledged support to your initial campaign. You have a database of people who you now know will support you, and believe in you and your project. These become your first port of call when you relist your campaign, as asking them to do it once again gives you a rolling start. All the energy you spent getting them on board can be quickly repaid by telling them that you now know where you went wrong initially, and how this new campaign represents a better approach to achieving your funding target.

To deliver on this promise, you need to revisit your initial campaign, repeating what worked, fixing what didn’t, and addressing areas you must improve on.

The first area to visit is the project itself. Ask people if they understood what it is you were aiming to fund (often we see pitches that don’t actually state what they are hoping to do with the funds raised). Ask people around you and those who have pledged if the project seems logical, achievable and sensible. You may even wish to put out a quick poll on social media to find this out (even asking if people would put their money towards such a campaign – those that say yes should also be amongst those that you initially target when your project goes live once again).

Then you need to visit the areas that drive people to pledge. Support will come if people understand the benefits that your project will deliver – have you explained these and really spelled out what these benefits are? Also, your rewards are a key inducement for people to pledge their support. What worked first time ‘round, and what rewards were largely ignored? Re-use the popular ones, and perhaps replace the ones that no one really wanted. Ideally, you should have 4 tiers of rewards, so make sure that you don’t have too many or too few. Don’t be shy to cater for those who want to “pledge big” (we see so many people who only offer rewards for low dollars amounts). Ensure you set the first tier as an entry level pledge, and then cater for the steps in between.

Improved media (photos and videos) always enhance your chances of success. Many who have not used a simple video (and simple will suffice) find that moving pictures help tell a story far better than text or a few photos. It allows you to show your personality and engage empathy from the crowd to not only your project, but to you as the project creator.

External links to your project more than double your chances of reaching your funding target. If you have 4 or more links on other sites or blogs, linking people back to your project page, you have a 104% greater chance to raise your funds. Find sites, blogs, and discussions on the topics best related to your project, and post your links there.

And make even more noise than your first attempt. Look at the level of activity you undertook to promote your previous campaign, and see what you could beef up given a second attempt. Could you perhaps make social media announcements more often (twice a day rather than twice a month)? Could you achieve greater reach by Googling topics related to your project, its outcome, or your audience, and post comments and send messages about your project? Could you start a blog, or tap into other blogs and post your comments there? Are there media opportunities in the local press or on local radio that you could pursue?

Crowd funding is one of the fastest growing forms of e-commerce on the planet today. Too many view it as a one-off activity, but it should be seen as a tool for you to use for regular funding of initiatives or stages of an ongoing program. Make crowd funding part of your regular funding activities – fund one part of a project, and then another. Engage your “crowd” and keep incentivising them to continue their involvement in your growth and success, as well as funding your aspirations.

When it comes to crowd funding, the old adage rings true – “if at first you don’t succeed, try, try again”.

Posted on July 24, 2012 By iPledg With 0 comments

Filling the Gap at the Bottom of the Funding Ladder by Crowd Funding with iPledg

What are your options if you are involved in a start-up and you need early stage seed capital? Most would say the choices for funding are banks, grants, or perhaps even getting sympathetic friends or relatives to “kick the can”. The same applies to small business, with there being seemingly less than a handful of options for a small parcel of funds for those with little than more than a great idea and a ton of passion. That was, at least, until the advent of crowd funding.

For ever (perhaps even longer) there has been the stock exchange at the top of the funding ladder. The cost and effort to list is well out of reach of most small business and start-ups, making an IPO a non-option for smaller enterprises.

Venture capitalists say they fund start ups, but statistics show that the amount of capital offered by this source of cash has dried up by almost 90% globally over the past 10 years. That said, the reduced pool of available funding from venture capitalists is seldom granted to early stage business. Perhaps “venture capitalists” should be redefined as “development capitalists”, due to their propensity to only fund once an enterprise has a proven track record and achieved significant milestones.

Traditional sources of finance such banks, loans and debt used to be the unpalatable but necessary evil for start-ups. The GFC turned off the music when it came to dancing with the devil, as banks became more conservative in their policies around lending. So small business that already found it tough to get finance, or had to offer up all of their assets as security, now find the well dry, and little or no joy when seeking funding from traditional financiers.

More sophisticated suppliers of capital, such as trade finance or factoring, again are more aligned with businesses with some form of existing cashflow, turnover of a certain volume, and momentum. Whilst each has their merits, they do not represent viable options to start-ups or small business.

Governments in many countries offer grant programs to support initiative and innovation. Especially in areas of community enrichment, environmental benefit, and new-to-world technologies, ruling administration on local, state and federal levels often assist by offering financial grants to assist early stage concepts to germinate and take flight. Qualification for such grants is often competitive, with applicants needing to meet or exceed the assessment criteria. Unfortunately many early stage initiatives can’t meet the requirements, especially for grants that require matched funding or a co-contribution from the grant recipient, making them another non-option. Furthermore, as other funding options dry up, there is increased competitiveness for grant funding, giving each applicant less chance to receive a grant and for the total pool to be divided amongst the increased number of recipients.

The height to which start-ups and small business are required to jump when going in search of funding is getting ever higher, to a position that is nigh on unachievable for new businesses. Until recently, there was a yawning gap at the bottom of the funding ladder, leaving the most accessible rungs of funding out of reach of small business despite their best efforts to leap and grab a hold.

 

However, we now have a relatively new, highly accessible, and extremely flexible form of finance known as crowd funding. This exciting and dynamic form of e-commerce fills the void at the bottom of the funding ladder, giving opportunity for great ideas and initiative to be judged by “the crowd” rather than stony faced men in grey suits with boards to please and KPIs to meet. Innovators can now articulate their projects, and engage the crowd to support the campaign based on shared passion or their desire to get their hands on the sought after inducements that may be on offer.

According to Wikipedia, “Crowd Funding describes the collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the internet, to support efforts initiated by other people or organizations.”

In addition to raising the funds required for their venture, project creators can also gain invaluable social proof, validating that there is a market for the concept or a broader appeal for the idea. This then paves the way for more traditional sources of greater funding to now venture in and further fund the project (assuming that further capital is still required after a successful funding campaign!).

The new renaissance has begun! The birth of crowd funding has given rise to a whole new world of opportunity for creative, commercial, charitable and community projects. By simply posting a project on sites like iPledg, there now exists an avenue of finance that gives the power back to the people, and allows the crowd to determine the beginning of initiatives that will shape our world.

Posted on July 15, 2012 By iPledg With 0 comments

Crowd Funding – Where is it today?

Crowd funding has taken a number of different forms as it emerges as the fastest growing form of ecommerce on the planet. In some countries, crowd funding sites have set up to facilitate investment in the heavily regulated area of equities. Other sites have established themselves to run crowd funding for loan purposes, primarily for developing communities who require short term microfinance. Then there is the “big daddy” of them all – the pledge model of crowd funding, where the project supporters do not receive equity in return for their contribution, nor do they receive any financial reward for their support. Their pledges are made purely to support the project creator, to share in the passion of the cause, or to receive one of the rewards on offer to project supporters.

The pledge model of crowd funding has been used to great effect in the creative space,  that is to support the creative endeavours of musicians, artists, designers, film makers and the like. It has also been used to assist charitable and community initiatives to leverage off limited resources and add to their voice and reach. Commercial projects have now also recognised that crowd funding fills the vacant bottom rungs of the funding ladder, supporting ideas not assisted by banks and venture capitalists who prefer to back more advanced ventures. iPledg, which prides itself on being the broadest based crowd funding site currently available, caters for all of these genres, aiming to generate traffic from all areas.

Today, in this pledge-type crowd funding arena, there are over 150 sites based in the USA, with over 100 in Western Europe, and dozens more on the rest of the continent. There are 21 crowd funding sites of this type in Brazil alone, and there is a growing presence in South Africa and Asia.

The scope and breadth of such crowd funding sites tends to suit projects seeking funding in the $3,000 -$30,000 range, but much larger projects have been funded. In the USA, a funding campaign successfully raised $942,00 in 30 days, far surpassing their initial target of $15,000 which they hoped to raise to see the idea of a watchband for the iPod nano come to life. Added to this was the social proof that came with the over 13,000 people that pledged their support to the project. And it is this social proof, even more so than the total funds raised, that really makes the banks and potential partners and investors stand up and take note.

It was not long until the million dollar glass ceiling for crowd funding was broken through. Just last month Elevation Dock became the first project to hit this mark, but it did not maintain the mantle for too long, as just a couple of weeks later Double Fine Adventure, a well thought out video game, exceeded their ambitious $400,000 funding goal. Currently, with 8 days to go with their campaign, their funds raised now exceed $2.3mil from over 69,000 backers. Even more impressive is the fact that the first $1mil came within 24 hours.

Governments, universities, and industry bodies are all supportive of the broader scale adoption of this type of crowd funding. And is it any wonder? In the USA alone, there is one site that is on track to funnel $150mil to the Arts, more than the total support offered by the National Endowment for the Arts, the national body responsible for the sector. With Gartner research declaring that the global crowd funding industry is set to grow by 500% between 2011 and 2013, and with President Obama incorporating fundamentals of crowd funding in his jobs act to drive employment, the inevitable growth of crowd funding will continue to become more accepted as a key driver to global economic stimulus.

Posted on June 5, 2012 By iPledg With 0 comments

Funding The Birth of Creativity

As it stands today, one crowd funding site in the US is on track to funnel more money to the arts in the year than the National Endowment of the Arts (that’s the national body responsible for the Arts sector in the US). In effect, funding for this sector has more than doubled since the birth of crowd funding, and the same is now possible in many other sectors and in countries all around the world.

Creativity in the fields of film, fashion, music, and artistic endeavours has for too long been under-funded by governments whose budgets seem unable to provide for the necessities, let alone for the ‘niceties’. Now, through the emergence of crowd funding, those with creative projects are able to take control of their destiny, and engage their social and broader networks to raise the necessary funding in a very timely and effective manner.

Creative projects are primarily driven by either a passion for a cause or a desire to explore creativity for creativity’s sake. Given that the passion is shared with “the crowd”, engaging the masses seems well suited and a natural progression into crowd funding for creative and artistic projects. Engaging family, friends, fans and followers to support and fund creative projects seems to go hand in hand with the work done after in getting the word out about the project itself. Getting “buy-in” just becomes part of the process.

Most creative projects fall well within the ‘Sweet Spot’ for crowd funding, being between $3,000 and $30,000, but larger amounts have been raised. To improve the chances of raising funds for those with larger creative projects, many successfully funded campaigns are those that have been broken down into smaller, bite sized pieces which all become integral parts of a larger project.

Crowd funding offers a low-risk option to project creators in their pursuit of funding to initiate or complete their projects. And because crowd funding does not represent an investment in the project, the exposure for project supporters is mitigated as they receive no financial gain from their gesture of support. Project supporters do so to support a project creator, because they feel passionate about the project or the cause being supported, or for some of the small enticements on offer in recognition of their pledge.

Whilst crowd funding is ideal for creative projects, it is also an ideal platform for those in commercial pursuits, or those with community and charitable projects to raise the funds they need. Crowd Funding has been receiving a lot of interest and support from governments, universities, and industry groups, all of whom have an interest in securing funds for the projects of the people they represent.

Inventors and start up businesses are recognising crowd funding as a very relevant source of funding as monies raised in this way do not have to be repaid, and do not involve surrendering of equity in the idea or venture. Governments, as a result, are increasingly interested in crowd funding as they see it as a catalyst for innovation, business liquidity, and job creation at grass roots level.

It is rewarding for those involved in the world of crowd funding to have found a vehicle to allow creativity to flourish, and to give those with a concept that has no other substance other than being a really good idea, an opportunity to not be judged by traditional, conservative lenders, but to be supported by an enthusiastic and engaged crowd.

Posted on April 23, 2012 By iPledg

Pledging Support To A Funding Campaign

Whilst project creators are the initiators of a funding campaign, success is based on receiving support from “the crowd”. But many potential project supporters still have many questions around crowd funding, the process, and about the concept in general.

The science of why people pledge their support to a project is proven. They do so out of a desire to support or be involved with the project creator or their team, out of a passion to support the “greater good” brought by their project being successfully achieved or implemented, as well as for cool or great value rewards on offer.

It should be clearly understood that currently we are unable to offer crowd funding for investment or financial gain. It is a heavily regulated area, but recent changes in the USA may pave the way for more globally adopted change allowing (in the future) for crowd funding to be used for investment purposes. But for now, we run crowd funding only on a pledge basis.

Unless a prospective funder receives an invitation from a project creator to have a look at their particular project, the first step for a supporter is to find an initiative that they may be interesting in supporting, and this can be done in a number of ways:

  • They are able to search for projects by category (Creative, Commercial, Charitable, Community etc.) by simply going to the bottom of our Home Page and clicking on your choice of category;
  • It is possible to look through all current campaigns on iPledg by clicking on Browse All Projects at the top right corner of our Home Page, and then reading through each project. Alternatively, the Browse All Projects page contains quick links to campaigns that are Successful, Most Popular, or Ending Soon;
  • By typing in search terms in the search bar in the top right corner of our Home Page.

Once the potential backer finds a project that they wish to support, they should do some work to check out the project creator. In its instructions on how to post a project, iPledg recommends for project creators to include in their project description links to any articles about them or their project to give possible supporters an idea of whom they are supporting. Potential backers need to satisfy themselves as to the identity or bona fides of the project creator, the project’s feasibility, the project creator’s capacity to carry out the project or provide any reward offered. Social media sites (such as Facebook) and searches on the internet are a great starting point for such research. At the end of the day, iPledg does not warrant the projects or project creators, and potential backers really need to rely on their own investigations.

Once a project supporter has found the project that they wish to support and made all of their independent enquiries about the project creator and the project, they can start the process to pledge support by simply clicking on the “Make a Pledge” button on the right side of the project page. They will be asked to sign up (and enter some details about themselves at that point), or requested to sign in if they have already signed up previously. Then the process is quick and easy – from the list of rewards,  they choose the reward they wish to claim should the funding campaign be successful, enter in the dollar amount of their pledge of support, and enter their PayPal details.

It should be remembered that this is an “all or nothing” funding platform, so backers will only be charged at the end of the funding period, and only if the funding target is achieved. If the funding target is not reached by the funding deadline, project supporters will not be charged, and the project creator gets nothing. The funding campaign must reach its funding target as a minimum for any money to change hands. Also, the project supporters are never charged any fees for supporting a project.

During the funding campaign, supporters should feel free to liaise directly with the project creator, by posting comments under the Comments tab on the relevant project. This facility can also be useful in the research phase as anyone is able to post comments here during the funding campaign, and any comments posted here may give indications as to the bona fides of the project or project creator. Backers can continue to do this even after the funding campaign has ended to keep an eye on the progress of the project and the delivery of rewards. Also, project creators are encouraged to post comments under the Updates tab on their campaign page to let funders and the world in general know all about milestones reached and progress made.

Posted on March 25, 2012 By iPledg With 0 comments

Rewards – An Essential Ingredient For Success

The key motivators to get people to support a funding campaign are the person or organisation who runs a project, the passion evoked by the project or the result that it will achieve, or the highly sought after rewards that are on offer.

So before we focus on just what makes a great reward, let’s get the “bad cop” part out of the way and clarify what can’t be offered, and that will set a clear slate on which to build the possible reward offerings.

Legally, with the “pledge” model of crowd funding, a project creator cannot offer financial incentives such as ownership, financial returns (e.g. profit share), cash and cash equivalents or pledge repayment (e.g. loans) as project rewards.  It is also prohibited to offer coupons, discounts, and gift certificates as rewards.

In Australia Registered Charities or Deductable Gift Recipients (DGRs) must comply with laws governing what they can and cannot offer as tangible rewards for monies received. They can offer incidental rewards such as certificates or a token recognition like a pen, etc. Also, supporters always value being recognised, so offering to put their name on an honour role is a nice way to say thank you. Most people who support charities are driven by the passion of the cause and not rewards, so the calibre of rewards for such projects are not so important

So, now for what you can do….

Some products and industries lend themselves to giving rewards, and these ones are simple to cater for. The writer who is wanting to fund the publishing of a book can offer a signed copy for their first tier of reward, acknowledgement in the foreword as the next tier, and rewards stepping up to actually naming a character after someone who offers significant contribution to the funding campaign.

If you can, try to make rewards one of a kind. People always like to get their hands on something unique and on “one-offs”. Rewards don’t need to be “tangible” – they can be fun experiences.  Involvement in events or invitations to a product launch, a dinner with an interesting group of people (the project team or other supporters of the project), or a special visit from someone or invitations to somewhere exciting can be as valuable as an actual physical reward.

People love to see their name in lights, or see their name etched into history. Naming rights are something that project supporters love. A restaurant can offer to name their signature apple pie after a project supporter (“Pie a la Jones”), or the manufacturer of fishing lures could give their flagship product the name of their best contributor (“the Smith never-fail Lure).

For some commercial projects, at first glance, it might prove difficult to come up with creative and exciting rewards. How do you give rewards that are great value when your product is not a consumer product? This is where creativity comes in. Remember that rewards do not need to be the actual product of the project. With projects where the product has little appeal to the retail consumer, like projects with a technical bent, the rewards can be something loosely related to the project – as long as the actual rewards remain exciting and good value. For example, the manufacturer of commercial kitchen equipment might give a signed cookbook by a well known chef as their reward, or offer an invitation to a dinner prepared by a famous chef using the piece of equipment for which the project is run. Again, it is all about creativity and offering something that people would want and for which they would be prepared to pledge support.

Businesses can use their product or service as the reward, not unlike the coupon sites. All or nothing crowd funding has sometimes been paralleled to group buying, but has the added benefit of supporting the creation of a project, funding development and employment. Businesses with good margins in their product can offer rewards with exceptional value to entice people to pledge support for their project. And the business only needs to “make good” with their offer if the funding target is hit by the end of the funding campaign.

Creating rewards can be challenging, but can be a crucial ingredient to success. Well thought out rewards can set the tone for the entire funding campaign, add some fun and life to the process, and really motivate people to pledge their support. The key is to offer rewards that are exceptional value or keenly sought after by prospective project supporters

For those that are really struggling to come up ideas, the team at iPledg is here to help. Simply contact us here

Posted on March 19, 2012 By iPledg With 0 comments