What is Crowdfunding & Can It Help You Fund Your Side Project?
Like many designers, you may have a side project. You may even be sure that your idea is a really good one.
The trouble is, it will take money to really pursue your idea. That’s the end of your really good idea and your side project. Or is it?
There are many funding options for business startups including the bank, investors, and begging for money from friends and family. Thanks to the internet, there’s now another source of funding for business startups.
Crowdfunding made big news recently when open source developer, Ubuntu, got into the crowdfunding arena with their planned entry into the already crowded smartphone market. You’ll find the Ubuntu Edge on the popular crowdfunding site, Indiegogo.
Is crowdfunding a great way for designers (and others) with big ideas to get their ideas to market? Or is it just another fad?
In this post, I’ll examine crowdfunding in more detail. I’ll also list a dozen crowdfunding sites. If you liked this post, you may also like How to Evaluate a Business Idea and What to Do Next.
What Is Crowdfunding?
Crowdfunding allows a large number of people to contribute small amounts to fund the project of their choice. Typically, those interested in funding projects go to a crowdfunding website where they browse through a variety of projects. If a project creator raises enough money, they will launch their project.
Almost anyone with a credit card can participate in a crowdfunding campaign. In return for their contribution, funders may receive a product prototype. They sometimes get promotional items such as a tee shirt as well.
A growing number of crowdfunding sites also offer equity shares in the startup, a practice that was made easier after the U.S. Securities and Exchange Commission (SEC) recently lifted the ban on private companies soliciting investors. (See the post titled Crowdfunding Boosted by New SEC Rules from Adi Gaskell and published on Social Media Today for a more detailed explanation.) In the United States, equity investors must currently be accredited.
It’s important to note that crowdfunding is not just for startups. There are crowdfunding sites for charities, unexpected expenses, and really just about any financial need you can think of. Even Little League teams use crowdfunding to raise funds.
How to Get Crowdfunding for Your Project
While the concept of crowdfunding may seem simple, don’t expect to just post your project on a crowdfunding site and watch the dollars roll in. As with any other business venture, you have to do your homework.
If you’re interested in obtaining crowdfunding for your side project, here are some steps you should follow:
- Write a clear description of your project. If you have photographs of a product prototype, include those. Videos explaining your concept also help.
- Decide what, if anything, you will give to your contributors in return for their contributions.
- Set the goal for how much money you need to raise before you can launch your project.
- Decide on a deadline for raising the money. Remember that it could take months to raise funds.
- Research and choose the appropriate crowdfunding site for your need. (You can start by reviewing the list of sites we provide below.)
- Get the word out about your funding campaign.
- Post regular updates on your progress.
You can find even more tips for obtaining crowdfunding in this post from Catherine Clifford on Entrepreneur,
Raising Money Through Crowdfunding? Consider These Best Practices for Success.
It’s important to remember that not all crowdfunding campaigns succeed. Also, you should know that many sites charge a percentage on funds raised or require a fee for starting a fundraising campaign.
Crowdfunding is relatively new, so if you have any legal or accounting questions about how this method of funding will affect your business be sure to contact the appropriate professional. I’m not a financial advisor or a legal professional and this post is not intended to provide financial or legal advice.
12 Crowdfunding Sites
- appbackr. This site was designed specifically for developers of apps. The Marketplace portion of the site is where developers can obtain crowdfunding. The site also includes an app wholesale feature known as Xchange.
- Crowdfunder. Crowdfunder adds a social element to crowdfunding. It has also sponsored a number of popular live pitch events. This company has also been an active crowdfunding advocate to the U.S. Congress.
- FanBlaze. This site is geared directly to creatives who need funding. In fact, supporters are called Fans. This is a global crowdfunding site. With a January 2013 launch, this site is a relatively new player.
- Fundable. Fundable is designed for companies. Each startup must create a company page with an overview. Most overviews include a video pitch of the idea. There is also space for a business plan and updates.
- Gambitious. This site is an example of crowdfunding focused on a single niche. Here is a crowdfunding site geared specifically to game developers and publishers. The platform is open to European as well U.S. participants. They are currently reorganizing and plan a summer 2013 relaunch.
- GoFundMe. GoFundMe is the opposite of a niched crowdfunding site. Here you’ll find everything from organizations needing disaster relief to sports teams raising funds for trips. There is even a section for non-profits and charities.
- Indiegogo. This is one of the more established crowdfunding sites. It dates back to 2007. Indiegogo hosts a large number of fundraising campaigns, including some for charitable causes. The site features a good search tool.
- Kickstarter. Kickstarter is another well-known crowdfunding site for participants in the U.S. and U.K. The site has very specific guidelines for projects. For example, they do not allow participants to raise money for causes.
- Pitch In. This is simple tool allows you to add a donations widget to your own site. The donations are collected through PayPal. The widget tracks and displays your progress towards your goal. This could be a good option for small projects or causes.
- Razoo. While many crowdfunding platforms allow fundraising for charitable causes, this crowdfunding site is specifically for charities. The site has links to over a million registered non-profits and over 68,000 fundraising pages.
- RocketHub. In an unusual move, RocketHub has partnered with the A&E channel to give startups the opportunity to get more exposure. This is an international crowdfunding platform that hosts a wide variety of project types.
- Rock the Post. This crowdfunding platform specializes in investment crowdfunding. One of the unique features that the site offers is an analytics dashboard for startups.
Will crowdfunding work for your side project? You’ll have to form your own opinion, but for some designers it may be an option.
What do you think of crowdfunding? Have you already crowdfunded a project? How did it go?
Share your thoughts and experiences in the comments.