Here's a short and sweet explanation of Crowdfunding from Daily CrowdSource:
Crowdfunding is asking a crowd of people to donate a defined amount of money for a specific cause, project in exchange for various rewards.
There are three general categories crowdfunding can fall under: Equity, Donation, and Debt.
Equity-based crowdfunding is asking a crowd to donate to your business or project in exchange for equity.
Donation-based crowdfunding is asking a crowd to donate to your project in exchange for tangible, non-monetary, rewards such as an ecard, t-shirt, pre-released CD, or the finished product.
Debt-based crowdfunding is asking a crowd to donate to your business or business project in exchange for financial return and/or interest at a future date.
- Crowdfunding is useful for a variety of opportunities, whether fundraising for disaster-relief, creative projects, creating a saleable product, or creating a start-up.
- Crowdfunding platforms allow you to market your project, generate interest, and receive funds.
- Crowdfunding backers can provide useful feedback about your project.
- Once you get a solid base of support, there is no limit to the amount of projects you can fund.
- Crowdfunding your project exposes your ideas to potential copycats.
- Crowdfunding platforms may limit the amount of funds you can recieve.
- Crowdfunding regulations and taxation can be difficult to work with.
- Crowdfunding is not limited to certain kind of project, there is no discrimination! Only great ideas!
- Crowdfunding can be fast, efficient, and effective if done right..
- There can be little risk involved compared to other business ventures
- The more creativity and fun you have, the more likely you'll get funded.
In Canada, there are two major platforms for crowdfunding that Local Organic Food Co-ops have used successfully:
IndieGoGo is is attracting more and more entrepreneurs for its rate structure, which charges only 4 percent for successful campaigns, while rival Kickstarter charges 5 percent. And unlike Kickstarter, users get to keep most of the money raised even if they don't reach the goal (with a 9 percent charge for unsuccessful campaigns). N.B.: Kickstarter is currently unavailable to Canadians unless you have an Amazon
Some tips for good use of IndieGogo from How to Use IndieGogo to Fund Your Innovation include:
1. Be Strategic: Pick the appropriate length of time and monetary goal for your project
2. Make a Good Video Pitch: The best videos are personal, tell a story, and explain why the money is needed and what you plan to do with the funds
3. Choose Good Perks: Try to pick something you couldn't find elsewhere, and be careful not to give perks that eat into your money raised
4. Spread the Word: share on social media, and be aware that the key to building momentum is to start by raising money from your inner circle
5. Stay in Touch: Thanks your supporters, keep them engaged as a community by providing regular updates about your project and they'll be more likely to spread the word
RocketHub is another platform for creative projects. Their ‘All & More’ funding system allows you to choose how you’d like to structure payment. RocketHub charges 4% on the money you raise if you reach your goal and 8% if you do not reach your goal. Your Local Market, a worker co-op in Stratford, used RocketHub to crowdfund for a bike to deliver their food. Check out their campaign here.
The founder of RocketHub, Brian Meece, says there are three things a successful crowd-funded venture needs:
Interest: Something that captivates emotion, something that gets people excited and tells a story, led by a real person with passion and authenticity. Every successful campaign that has come through our doors has that.
Community: Some sort of community that can validate it. Often projects are initiated within their own communities and they find new communities online but they’re really validated and they get that first traction within their own community or core audience. No matter what the vertical or category, you have to have that community to initiate a campaign.
Cool perks: Successful campaigns have fun stuff that you get back in exchange for funding. We’ve seen a variety of different things. We’ve seen folks offer singing lessons, a lot of the artists are good at giving the audience the ability to participate in what they’re doing, whether it be with an offline event or the chance to have their face on the cover of an album.
MORE CROWD-FUNDING OPTIONS:
nk.com (end of April)
- http://www.touscoprod.com (French)
- http://www.ulule.com (French and English)
- http://www.haricot.ca (French and English)