Over recent years, crowdfunding has become a popular choice amongst fledgling companies. The practice sees members of the public making financial contributions towards business ventures and projects via websites such as Kickstarter and Crowdfunder. In 2013, it is estimated that the crowdfunding industry grew to more than $5.1 billion worldwide, and is frequently being used to launch albums, films and new technology. The argument is that crowdfunding allows some brilliant ideas come to fruition where funds are not enough available by other means. However, ventures by celebrities, have come under criticism due to the idea that they already have funds readily available. Here we look at some of high profile cases of crowdfunding and
In 2013, Zach Braff revealed that the follow-up to his 2004 film Garden State, would not be able to go ahead due to lack of funding, a factor which pushed him towards using Kickstarter to raise money. The backing of his fans helped Braff secure $2.6 million on the funding site to produce Wish I Was Here. The multi-millionaire came under fire for procuring funds this way, with many seeing his as ‘hijacking’ the process and taking money away from the ordinary man, partly due to the additional funding he received from traditional film financiers which took his budget up to a staggering $10 million. A fault with this method is that contributions to the project are donations, rather than investments, therefore the regular person who contributes will see no return, other than the film being made.
Singer Amanda Palmer announced in 2012 that she would use crowdfunding to fund an album, book and tour. Palmer successfully raised more than $1 million from 24,883 fans who invested anything from $1, which would get them a download of the album, to $10,000 which got the investor dinner and an ‘art-sitting’ with the singer. However, not content with that, Palmer went on to ask local musicians to play in her band for free, a move that many thought was a step too far, and soon Palmer was offering payment for their services. The album, ‘Theatre is Evil’, sold 24,000 copies in its first week in the US. Palmer took the experience to show that her business model worked and could be used to keep costs down.
Developers of the game Star Citizen hold the record for the most money raised through crowdsourcing when their campaign raised in excess of $53 million from more than 500,000 backers. Of the ten most funded projects on Kickstarter, five have been video games related, including games as well as technology, such as Oculus Rift. This could be seen as a reflection of how people spend their disposable income in everyday life.
Earlier this month, it was announced that crowdsourcing would be used in an attempt to buy the West Sussex home of world famous writer William Blake. The home of the poet was put on the market last year, the first time since 1928, and the campaign lead by the Blake Society aims to raise the £520,000 needed to buy it. If successful, the cottage, known to have been home to Blake between 1800 and 1803, is intended to become a place that celebrates Blake’s legacy, the man who penned one of England’s most famous hymns, Jerusalem.
In 2009, Cancer Research UK was the first charity to build its own crowdfunding platform, ‘MyProjects’. The initiative allows the public to donate to projects they feel are worthy of their funding. The site currently has almost 70 projects looking for funding to combat all types of cancer through research and clinical trials.
A Cornish ketchup company won the first Crowdfunder Live event, which saw companies compete to get financial backing from the crowd and online. The Cornish Ketchup Co. received backing from 162 individuals raising more than double their £500 target.
It is fair to say that crowdfunding has become a popular source of financial backing for a vast array of business ventures and for entrepreneurs at all levels. This method of funding steers away from the conventional methods and can certainly have its pitfalls, but by and large the outcome for most is positive. In many cases, the investors themselves reap the rewards of donating to projects and get to see their money combine with hard work to make exciting ventures come to fruition.
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