The new way to donate money via CrowdFunding

By now most of you have heard of crowdsourcing, the ability to get masses of people to do work for you, oftentimes menial tasks for low pay. An extension of this concept is crowdfunding, whereby masses of people fund your project. Think of virtual microlending combined with Internet philanthropy.

There are more than a dozen Web sites that facilitate crowdfunding that range from art projects to new entrepreneurial ventures (look at growvc.com) to magazines and more. They all operate more or less the same way: the sites contain lists of projects that you pick to fund. In some cases, the sites have professionals who vet the projects and make sure that they are legit and not just someone looking for a scam.

The project owner can post a short video, some text and pictures, and links to other work that they have done. Some of the videos are quite earnest, some are funny, and some are boring.

Once you select your favorite project, you decide how much you want to give. In some cases, such as with United States Artists, your donation is tax deductable. With some projects, you get a premium for your donation; such as that tote bag that you might if you gave money to your local NPR or PBS station. Some projects have very involved premium structures to convince you to up your ante.

Once you have picked the amount, you are taken to a payments processing page where your credit card information is recorded. The sites use Amazon Payments or Paypal to make things easier, so if you already have accounts on either service you don’t have much more work to do.

With some of the sites, there is a minimum funding level that must be reached by a certain time period. If this threshold isn’t reached, the project is cancelled and no money changes hands. With others, there is no minimum; just a suggested funding level, and the project owner gets to keep all donations. There are processing fees involved with most of the sites, and in some cases these fees can reach close to ten percent of the take.

Crowdfunding isn’t really new, but it has certainly taken off in the past few months. For more than two years, I have been a supporter of Kiva.org, which funds third-world new micro-business owners. Over the course of 16 loans for $25 or $50, I have been paid back on 11 of them in full, with two delinquents and three loans that are still in the pay back process. That is a pretty good record, and you can read my comments on Kiva here.

What is significant is how quickly the concept of crowdfunding has caught on, and you can find a list of numerous crowdfunding sites here:
• Greg Scott is a Vancouver developer who has a blog devoted to the topic and has invested in several crowd funding operations at crowdfunder.org.
• Christine Egger’s open source collaboration technology design firm Social Actions has a list of primarily donation-related sites here.
Paul Anthony, an Irish Web developer, reviews nine sites back in July 2010.

One project on Kickstarter.com raised more than $600k for a simple plastic watch band for iPod Nanos with more than 9,500 funders. They started out to raise $15,000, so they have succeeded beyond their wildest imagination.

Certainly, crowdfunding is going to play a more important role as a source of capital in the coming years. I would be interested in your own experiences, feel free to post here.

One thought on “The new way to donate money via CrowdFunding

  1. One of my readers writes:

    Thought you might like another Crowdfunded project (one of my friends from PW, Josh Bernhard and his colleagues): Pioneer One. An almost entirely bittorrent distributed TV series initially funded with a $6000 kickstarter campaign to film the pilot and another $30,000+ of donations from people who have watched the pilot who wanted to see how season 1 develops. Not a bad conversion on an estimated 2MM downloads. Episode 2 premiers next week at a local hangout and starts being distributed online the same day.

    http://www.pioneerone.tv/
    http://vodo.net/pioneerone

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