What is Crowd-Funding?

Friends = money. Put bluntly, crowd-funding is about sourcing financial support for projects from your peers and, in the modern day of Facebook and Twitter, any friend or follower and anyone with mutual interests is a resource. This method of sourcing financial support has been tried and tested and is proving a powerful lever for organisations and individuals to bring about change in their lives.

The principles of crowd-funding in the Kapipalist Manifesto are to make friends, make friends make more friends, make all friends trust in you, make money. Instinctively, this seems exploitative, especially true when it is written like this. However, this manifesto is about harnessing the potential that social networking has in order to direct, guide and fulfill projects that might otherwise be impossible. Such projects could be anything from a personal dream, a cultural experience or a paying for your mother’s medical bill, to the opening of a bakery (entrepreneur.com), publishing a comic book online, or fighting poverty. Sometimes these things can be supported by a local community, as with the bakery, because people will genuinely contribute to their neighborhood. Other times we address a niche audience, comic book fans and artists in order to raise funds for something like the digitization of a comic series. Then there are humanitarian calls from charities, they call on everyone’s moral sensibility and, because we live in the culprit societies they ask, ‘would you be so kind to try and make things better?’

Trying to explain crowd-funding is fairly straight forward, it is about raising funds through the people whom you know and who you can get in touch with. With the internet this task is very simple.

There are a lot of success stories surrounding crowd-funding but one must consider the trajectory of their projects. Things that need money once are probably better than projects that need a longer life of funding. If you do have a longer project planned, then ideally the project would be led to financial independence. A good example of this is catwalk genius, a fashion photography blog that promoted and subsidized fashion editorials that it would then publish online. The project lasted for 11 months before it could no longer be supported.

If you are looking to fund your own project you can very easily do so. Most websites present projects on profiles, this means that the projects are all found together and people looking to fund projects can easily move between them. Alternatively, generic crowd-funding tools (widgets) are offered by ChipIn that can be embedded into your personal website. An evolving list of crowd-funding websites is available that contains links to a wide range of websites covering anything you might want to crowd-fund for.

A large array projects can be seen, sampled, promoted, supported online now. These projects are often American but the European scene is also growing. My initial exposure began with this video below from Kickstarter, this project has proven very popular.

Many arts and crafts projects can be found on hosts such as Sponsume and Rockethub and these tend to focus on one off productions, theatrical performances, films, or recording sessions for music albums. But the scale of the project needn’t be so small or even artistic, other groups are seeking funding in order to establish record studios and to try save oysters from acidification. What ever the project, the presentation of what you are doing is very important. Giving the right impression, communicating the right feeling, will affect greatly how much trust people are willing to put in you and your project. For example this proposal is ambitious and I am doubtful, then I watched the promo video (below) and I was excited, maybe it is possible. Of course the possibility then lies in me. Do I fund and help this?

Many websites offer advice and support, further still many people now dedicate their twitter feeds to the subject; see crowdfunding. Fundable is a free crowd-funding website that presents people with a range of simple options to begin their projects. These websites are all valuable tools to help find support and they all advocate working simply, offering a service, working hard, producing good quality services, and reaching out to people through social networks. Profounder was a early crowd-funding website that has since ceased activity. However they offered these words of advice:

One of the questions we ask every entrepreneur who completes a raise is: “If you could give one piece of advice to an entrepreneur/business who is starting the crowd-funding process, what would it be?”

The overarching theme of the answers can be summed up in two words: preparation and follow-up.

Here is our list of the Top Ten Crowdfunding Tips:

1. Offer an opportunity, don’t ask for a hand out

Be very confident about the investment opportunity that you are offering – if you believe that it will be a big success, others will believe as well. If you can’t be confident, it’s not a good time to raise funding.

2. Tell your personal story; be real

You are inviting people who you know to invest and they want to hear your authentic, personal voice shine through and feel your passion. Remember, your companies biggest asset is you! Keep that in mind as you tell the story of business and how it will grow.

3. Include a video

Videos are compelling! People want to see your shining, familiar face speaking to them directly. These days, it doesn’t take much equipment to record a high-quality video of you and your team telling your story. (Remember Tip #1 & #2, think opportunity and authentic for the video as well!)

4. Have all of the co-founders/ officers of your business get involved

If you have multiple co-founders or Board members, create accounts for each of them tied to your ProFounder raise and ask them each to invite their networks to invest as well.

5. Send invitations to investors on the first day that you publish your raise

With the proper pre-planning if should be easy to start sending invitations to investors as soon as you publish your raise. Raises are 30 days long and this allows you to maximize your time fundraising. To the extent you can, convince your biggest supporters to invest early (see #7). Again, a big theme is preparation, which leads us to…

6. Plan who you’ll invite (and start a dialogue with them about the opportunity!) before publishing your raise

Before you publish your raise, reach out to potential investors to make sure that they are up to date with you and your business and give them a heads-up that an invitation to get involved is coming.

By planning who you will invite, you can gain confidence about your raise amount, set a well-reasoned minimum invest, and be aware of how many investors you can have per state.

7. Leverage early success

Having some of your closest community members teed up to invest in the first week of your raise will create momentum and encourage others to get involved. Ask your early investors to share testimonials about you and business and distribute these testimonials in follow-up emails to other potential investors.

8. Set a realistic minimum

You want to set a minimum that is high enough to reach your fundraising goal with the number of investors that you reasonably believe you can attract. Investors are also motivated by being able to contribute a meaningful percentage of the goal. You can adjust your goal amount mid-raise, but it’s a much smoother process if you can get it right the first time.

9. Consistent Follow- up

Follow-up, follow-up, follow-up! After sending out an invitation to invest, continue to stay in touch with investors with updates throughout the 30 days of your raise.

10. Don’t get discouraged!

We all get told “No” sometimes – the most successful entrepreneurs are those who are not discouraged by a no and just keep on trucking. Think of other ways that people can contribute to the success of your business – advice, spreading the word or writing a testimonial.


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