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.