Saturday, 13 April 2013


Crowd funding or crowdfunding (alternately crowd financing, equity crowdfunding, or hyper funding) describes the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations. Crowdfunding is used in support of a wide variety of activities, including disaster relief, citizen journalism, support of artists by fans, political campaigns, startup company funding, motion picture promotion,  free software development, inventions development, scientific research, and civic projects.

Crowdfunding can also refer to the funding of a company by selling small amounts of equity to many investors.

Crowdfunding has its origins in the concept of crowdsourcing, which is the broader concept of an individual reaching a goal by receiving and leveraging small contributions from many parties.

Crowdfunding is the application of this concept to the collection of funds through small contributions from many parties in order to finance a particular project or venture.

Crowdfunding models involve a variety of participants. They include the people or organizations that propose the ideas and/or projects to be funded, and the crowd of people who support the proposals. Crowdfunding is then supported by an organization (the "platform") which brings together the project initiator and the crowd.


An early precursor form of the crowdfunding model was the Subscription business model which was used in the 17th century to finance book prints. Similar to crowdfunding an additional benefit to donors was offered like the mentioning on the title page.

In 1884, the American Committee for the Statue of Liberty ran out of funds for the Statue’s pedestal. Newspaper publisher Joseph Pulitzer urged the American public to donate money toward the pedestal in his newspaper New York World. Pulitzer raised over $100,000 in six months. Roughly 125,000 people contributed to the cause with most donations being $1 or less.

In 1997, fans underwrote an entire U.S. tour for the British rock group Marillion, raising $60,000 in donations by means of a fan-based Internet campaign. The idea was conceived and managed by fans without any involvement by the band, although Marillion has since used this method with great success as a way to fund the recording and marketing of its albums from 2001 to the present.

Electric Eel Shock, a Japanese rock band who has toured the world, became one of the first bands without a previous significant recording deal to fully embrace crowdfunding. In 2004 as an unsigned band they raised £10,000 from 100 fans (the Samurai 100) by offering them guestlist for life. Two years later they became the fastest band to raise a $50,000 budget through SellaBand. They licensed the album internationally including to Universal in their native Japan.

In the film industry, independent writer/director Mark Tapio Kines designed a website for his then-unfinished first feature Foreign Correspondents in 1997. By early 1999, he had raised more than $125,000 over the Internet from at least 25 fans, providing him with the funds to complete his film.

Franny Armstrong later created a donation system for her feature film Age of Stupid. Over five years from June 2004 to June 2009 (release date) she raised £1,500,000.

In December 2004, French entrepreneurs and producers Benjamin Pommeraud and Guillaume Colboc launched a public Internet donation campaign to fund their short science fiction film, Demain la Veille (Waiting for Yesterday). Within 3 weeks, they managed to raise $50,000, allowing them to shoot their film.

Morton Valence is an early example of a relatively obscure band to independently enter into crowdfunding without using a third party website such as Sellaband.

Crowdfunding's earliest known citation was by Michael Sullivan in fundavlog on August 12, 2006.

Related definitions

There are questions about the legality of taking money from "investors" without offering any of the security demanded by conventional investment schemes. Sites such as SellaBand have a failsafe.

They hold funds in an escrow account. If the nominated target isn't reached, all funds are returned to contributors. While sites such as ArtistShare allow projects to keep all the funds raised.

Investors are given something for their money - so in a legal sense, they have paid for and received something. Rewards range from having your name in the credits, an initial shot at the product itself and in some cases even revenue returns.

Micropatronage is a system in which the public directly supports the work of others by making donations through the Internet. In use as early as 2001, the term was popularized in 2005 by blogger Jason Kottke when he quit his day job as a web designer and spent a year blogging full-time, living off the voluntary donations of his readership. Micropatronage differs from traditional patronage systems by allowing many "patrons" to donate small amounts, rather than a small number of patrons making larger contributions.

Role of the crowd

The inputs of the individuals in the crowd trigger to crowdfunding process and influence the ultimate value of the offerings or outcomes of the process. Each individual acts as an agent of the offering, selecting and promoting the projects in which they believe. They will sometimes play a donor role oriented towards providing help on social projects. In some cases they will become shareholders and contribute to the development and growth of the offering. Each individual disseminates information about projects they support in their online communities, generating further support (promoters).

Motivation for consumer participation stems from the feeling of being at least partly responsible for the success of others’ initiatives (desire for patronage), striving to be a part of a communal social initiative (desire for social participation), and seeking a payoff from monetary contributions (desire for investment).

An individual who takes part in crowdfunding initiatives tends to reveal several distinct traits: innovative orientation, which stimulates the desire to try new modes of interacting with firms and other consumers; social identification with the content, cause or project selected for funding, which sparks the desire to be a part of the initiative; (monetary) exploitation, which motivates the individual to participate by expecting a payoff.

Crowdfunding platforms

There are over 450 crowdfunding platforms. Project creators need to do their own due diligence in order to understand which platform is the best to use depending on the type of project that they want to launch. There are fundamental differences in the services provided by many crowdfunding platforms.

For instance, CrowdCube and Seedrs are both Internet platforms which enable small companies to issue shares over the Internet and receive small investments from registered users in return. While CrowdCube is meant for users to invest small amounts and acquire shares directly in start-up companies, Seedrs on the other hand pools the funds to invest in new businesses, as a nominated agent.

Crowdfunding platforms serve as a “network orchestrators”. They create the necessary organizational systems and conditions for resource integration among other players to take place.

Relational mediators act as an intermediary between supply and demand (i.e. SellaBand, Kickstarter, Uinvest). They substitute a traditional intermediary (traditional record companies, venture capitalist). These platforms link new artists, designers, project initiators with committed supporters who believe in the persons behind the projects strongly enough to provide monetary support.

Social gatekeepers assist people to raise fund by exploiting their social network connections (i.e. Kapipal). They add an intermediary role that was previously absent. These platforms intermediate consumer-to-consumer funding.

Growth engines focus on the strong inclusion of investors (i.e. Trampoline Systems). They disintermediate by eliminating the activity of a service provider previously involved in the network. These platforms that use crowdfunding to seek stakes from a community of high net worth private investors and match them directly with project initiators.

Crowdfunding applications

Crowdfunding is being experimented with as a funding mechanism for creative work such as blogging and journalism, music, and independent film, for funding a startup company, and even for funding public projects. Community music labels are usually for-profit organizations where "fans assume the traditional financier role of a record label for artists they believe in by funding the recording process".

Since pioneering crowdfunding in the film industry Spanner films have published a useful ‘how to’ guide. Innovative new platforms, such as RocketHub, have emerged that combine traditional funding for creative work with branded crowdsourcing - helping artists and entrepreneurs unite with brands "without the need for a middle man."

Crowd lending from non-banks is gaining momentum globally as banks have increased interest rates or pulled back from lending to consumers and small businesses; however, as of early 2012, the non-bank sector of crowd lending is yet to be considered a threat to the big consumer lending businesses of the largest global banks.

Top Ten Green Crowdfunding Projects

Blue and Green Tomorrow's 10 best projects currently on the lookout for democratic finance.

Ideas are usually pitched online through crowdfunding websites, and depending on the project, individuals are able to make either small contributions, invest for a potential future return on investment (ROI) or prepay for a service or product.

Top 10 crowdfunding projects for April:

1. Ecovillage field study
The ecovillage movement (EVM) attempts to formulate an answer on how to alleviate humans’ ecological footprint on the earth. Focusing on movements such as self-sufficiency, localisation and scaling-down, EVM aims to reduce the overriding pressure on ecological services to maintain a sustainable and ecological balance.

2. Cut Television Production’s Carbon Footprint
This project is seeking £3,500 to build resources that help reduce carbon emissions from television production by giving employers easy access to local services closer to their filming locations. Local businesses will receive support from this project.

3. The Peoples Farm project
The Peoples Farm UK is seeking £125,000 to develop 1,000 green patches on a plot of land near London. The project aims to offer a chance to those that don’t have access to green spaces to benefit from growing their own crops alongside promoting ecological farming, sustainability and land development.

4. Please will you stop dropping litter project: this three-month project aims to reduce the amount of litter lying around on UK roadsides, countryside and public places, whilst attempting to help local councils recruit more litter pickers.

5. The Bee Shed: Mick Parker is seeking £500 to renovate a large shed into a classroom to educate school children on the ecological importance of honey bees.

6. Promotion campaign of Totnes homeless shelter: filmmaker Beccy Strong aims to make a promotional campaign for a homeless shelter in Totnes that is currently applying for a new planning status to provide night shelter in severe weather.

7. Grounded – An urban environmental art project for young people: James Beckett, MA in digital media art, is seeking £200 to fund a series of workshops to make a large sculpture from a number of recycled shopping trollies.

8. Eco-friendly and Ethical Yarn Shop: Sofie Kay, an experienced yarn worker with a strong ethical and eco ethos, is asking for individuals to crowdfund £1,000 to help with the initial setup of an online eco-friendly and ethical yearn shop.

9. Newcastle Community Green Festival 2013: the voluntary-led Newcastle Community Green Festival promotes solutions to environmental problems whilst raising awareness of green and ethical issues,

10. Peace in Mali Music video: Support peace and freedom of expression in Mali: Mulele is asking for £2,500 to help pay for the filming and editing of a music video for 20 London-based musicians, for a song that promotes peace in Mali.

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