Crowdfunding - How Does It Work?
In its simplest form, crowdsourcing is simply generating ideas or work through the power of a crowd – usually enabled by the Internet. Wikipedia, for example, is one of the largest crowdsourced works in the English language, comprised of over 4.5 million articles submitted from all over the world. (See the image below for a visual representation of Wikipedia's size in printed books).
The latest evolution of crowdsourcing is crowdfunding; collecting (often small) donations from a massive number of people. Charities, naturally, have benefitted from this type of funding scheme. However, quite a few for-profit projects have gotten off the ground this way too.
Kickstarter and Indiegogo, two of the most well-known crowdfunding sites, take a small percentage fee off successful campaigns. Unsuccessful campaigns (those that do not hit their initial fundraising goal met by a deadline) have all money returned to donors. Usually campaigns also have “reach” goals – additions to the project that are dependent on how far past their fundraising goal they can go.
Here’s some fascinating examples of crowdfunding projects that worked:
Bring Reading Rainbow Back:
After being cancelled after a 23 year run on PBS, host LeVar Burton brought children’s show Reading Rainbow to tablet devices as an educational app. In order to make the show available on the web, as well as creating an app for classroom use, Burton created a Kickstarter with an initial goal of one million dollars.
The Kickstarter blew through this goal in less than 12 hours, prompting Burton to set a new stretch goal to fund apps for mobile phones, video game consoles, and to provide the app for free to disadvantaged students. The campaign raised enough for this goal too – at its close, the Kickstarter had brought in $5,408,916.00. Additionally, Seth MacFarlane (creator of Family Guy) made a matching donation of one million dollars, bringing to total to over six million.
Let's Build a Tesla Museum!:
After falling into disrepair, and even being used as a hazardous waste site for a time, the former laboratory of scientist Nikola Tesla went on the market for nearly 1.6 million dollars.
Fearing a new developer might raze the building in favor of apartments or condos, a local librarian started reaching out to Tesla fans about the property. After web comic artist Matthew Inman (known as “The Oatmeal”) posted this plea to his website, donations started pouring in to an Indiegogo campaign to purchase the land. After 6 days, the campaign raised over $850,000 – enough to receive a matching grant from the state of New York to buy the property
Tesla Motors founder Elon Musk recently made a one million dollar donation to help fund the restoration and construction of a museum on the site.
Canary Home Security:
Lacking the funding for production costs, tech start-up Canary proposed their idea for a standalone home security unit on Indiegogo. The unit they envisioned was about the size of a soda can, and contained heat, movement, noise, and humidity sensors, as well as a camera, microphone and accelerometer. Anything triggering the unit would prompt a text message to the user’s phone, allowing them to ignore it, access the camera feed, or set off an alarm.
Canary asked users to preorder the unit for $200, allowing them to raise $100,000 for production. The campaign ended up raising nearly two million dollars, and the first commercial units will be shipped later this summer. That’s a lot of purchases for a product that hadn’t even been made yet.
I’m Making Potato Salad:
This one is a bit of a mystery. With a campaign goal set at $10 on Kickstarter, the description reads: “Basically I'm just making potato salad. I haven't decided what kind yet.”
At the moment, over 4,500 people have donated a total of nearly $70,000. And the campaign is still going. If you’d like your name carved into a potato to be used in the salad, it’ll only cost you a $20 donation.
Know of any cool campaigns that could use some backers? Let us know in the comments!