One of my friends is an actor. Earlier in his career, he primarily appeared in plays and the occasional TV commercial. However recently he is very busy starring in movies. How did this happen? Was he finally discovered by Hollywood? No, the answer is that he discovered one of the latest trends in U.S. business, crowdfunding. Using a crowdfunding website, he has been able to raise money from friends and family to shoot movies. He started with a short one — length of only 2 minutes — and now is working on longer ones. Seeing how much he is enjoying himself, I have to think that this new way to fund projects is a good thing.
Kickstarter and Indiegogo are the two most prominent crowdfunding sites. The way that they work is that someone with an idea for a project posts it on the site, and asks for donations. Generally a variety of donation levels is offered. A basic donation may get you one of the things being created by the product — for example, my actor friend gives donors DVDs of the movie. Higher donations can get you special thanks or special privileges.
Some projects that are launched using crowdfunding are creative ones, like the movies that my actor friend is creating. Many however are commercial. I’ve been hearing of many examples of how video game fans are contributing money to fund the production of games on particular themes of interest to them. In some cases, and inventor will use crowdfunding as a way of obtaining funds to begin production of their product. In such cases, the people who contribute to the funding get a promise to receive one of the products. This means that crowdfunding in a sense is a way of proving that there is a market for the product, and making the first sales.
Crowdfunding can also be good for publicity. Because many people scan the crowdfunding sites looking for interesting things, just posting a project there can be a great (and free) way to get good publicity. For example, last year I saw a newspaper article that mentioned a Kickstarter project to fund the production of a foldable kayak. An avid kayaker without space to store a kayak, I immediately went to the site and made a contribution. I am now receiving email updates about the production status, and expect to receive my kayak this fall.
Crowdfunding has its pitfalls, and cautionary tales about of Kickstarter projects that went awry, saddling the creators with obligations that they cannot fulfil. If one misestimates the cost of production or how much money is really needed, it can be easy to get stuck. But overall crowdfunding is a way to raise funds for projects that is more efficient and exciting than the alternatives that previously existed.
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