So what is crowd funding? Wikipedia defines it as “Crowdfunding is the collection of finance to sustain an initiative from a large pool of backers—the “crowd”—usually made online by means of a web platform”.
It has been used very successfully by not-for-profits and for artists but it is a growing form of funding for business also.
There are numerous platforms on the web which will help you pitch your idea to willing backers who can either donate, loan or invest equity in your business, idea or project.
The advent of technology and in particular social media has facilitated these transactions as it allows the entrepreneur to connect with sufficient like minded people from around the globe who believe in what they are doing. This is why artists have had significant success with this model. They are able to build a loyal network globally who are passionate about their creations and these fans can be passionate enough to donate funds to allow the artist to keep on creating. No loans, no equity, just people supporting people because they believe in what they are doing and want to help that creation continue. An example of this would be a young artist trying to raise funds to attend a specific art program via a platform like www.ipledg.com.
The not-for-profit sector has had success for the same reasons. The organisation www.kiva.org, have a motto of “Empower people around the world with a $25 loan”.
Their model is simple, crowdsource small loans (microfinance) to assist budding businesses in the poorest of countries. Individuals loan the money, the resources are pooled, loans are made to a mechanic in El Salvador or a second hand clothes merchant in Georgia or farmers in Uganda. The loans are paid off by the business owners over time and the funds are returned to the lender who is then free to lend to another business and so on. Kiva has a great deal of success in helping entrepreneurs in the poorest of countries and have now extended to offer similar loans at no or low interest to disadvantaged people in the USA and Kenya.
The model can also be applied to gain debt and equity finance on a larger more commercial scale. The Australian Small Scale Offerings Board (www.assob.com.au) is a crowd funding facility for small business in Australia used to raise equity finance. It is different from the ASX (Australian Stock Exchange) as the equities are not actively traded, the amount allowed to be raised is limited to less than $5million and also the costs and compliance requirements are much less. Since it began over $138million has been raised for small business ventures. Basically it matches potential high growth ventures with investors willing to take the risk on a potential high reward.
That is crowd sourcing. So no matter who or where you are these platforms present a significant opportunity to help change the world for the better, to grow or start a business or to invest in the next big thing.