Crowd Funding is a rapidly emerging form of e-commerce, leveraging off the growth of the internet and social media. According to Gartner Research, $1.2 billion was raised by Crowd funding sites in 2009, and is expected to grow to over $6 billion by 2013. In these tough economic times, Crowd Funding continues to buck the trend as it fills a very real and relevant need for raising money for initiatives that (in many cases) would just not get up if it weren’t for platforms such as iPledg.
But despite this, in Australia, Crowd Funding remains a relatively unknown term. When asked by people “what do you do”, our answer “we run a Crowd Funding platform” is met with a puzzled look as if we had answered in a foreign tongue. In fact, our biggest challenge at this point in time is to educate an unaware yet very receptive market as to the existence of this wonderful form of e-commerce. The most rewarding part of our role is watching peoples’ faces light up as the penny drops and they start to imagine the applications for which this new vehicle can work for them. Everyone has a project, or knows of someone who has a project, but most commonly these initiatives are not actioned because of a lack of funds. Crowd Funding now allows for project creators to unlock the possibilities and get support from those in their social and extended networks.
According to Wikipedia, “Crowd Funding describes the collective cooperation, attention and trust by people who network and pool their money together, usually via the Internet, in order to support efforts initiated by other people or organizations.”
Crowd Funding is receiving renewed attention from both commercial and social entrepreneurs, charities and community groups, and those in the artistic and creative space now that social media, online communities and micropayment technology make it straightforward to engage and secure pledges from a group of potentially interested supporters at very low cost and low risk.
One of the pioneers of Crowd Funding in the music industry has been the British rock group Marillion. In 1997 American fans underwrote an entire US tour to the tune of $60,000, with donations following an internet campaign – an idea conceived and managed by the fans before any involvement by the band. Marillion has later used Crowd Funding with great success as a method to fund the recording and marketing of several albums.
iPledg is a crowd funding model using a PLEDGE funding model. A pledge is not an investment, so is not bound or encumbered by traditional legislation around funding and investments. A pledge on iPledg is simply a pledge of financial support for a project.
Essentially a project creator creates a project online and indicates how much funding is required to complete the project and in what timeframe they wish to raise those funds (usually 30 – 120 days). Anyone posting a project invites friends, family, fans, and broader networks to offer support. Visitors to the website may then pledge money to projects they like via an automated online payments process, and for which they are offered a reward.
Only when projects meet their funding target within the specified time frame will the monies be passed onto the project creator. When posting a project, project creators may offer rewards (which may not be paid for out of funds raised). The project supporters then receive rewards from the project creators once funding targets are realised in the funding timeframe. Should the minimum funding target not be reached in the specified timeframe, the project supporters do not part with their money and the project creator then has the opportunity to review their pitch and start again. This is what is meant by “all or nothing” funding.
Apart from a wonderful way for project creators to raise the capital they require for their initiatives, a successfully run fund raising campaign often provides social proof for a project creator’s concept, showing that more than just the project creator believes the initiative to be a good idea . It allows project creators to raise funds without going into debt or giving up equity, whilst presenting the idea to (potentially) a worldwide audience.
We welcome you to the exciting world of Crowd Funding with iPledg.