What is Crowdfunding?

Life can be expensive; add in major costs like student loans, medical bills, and pursuing your dreams and it can all seem overwhelming. Fortunately, you don’t have to go it alone.  Many people across the country, and around the world, are getting the financial assistance they need—not through awkward money conversations with family and friends, but through crowdfunding. 

Crowdfunding is a money raising effort where a community of donors and/or investors contribute (usually money, but sometimes time or knowledge) to an individual’s goal—be it making a record, financing a startup or paying for a wedding. 

Thanks to the growing popularity and success of crowdfunding (it’s expected that more than $5.1 billion will be raised worldwide through crowdfunding by the close of 2013), there are websites dedicated to raising money for almost every area of life expenses.  Continue reading below to learn about some of the most popular crowdfunding websites and things to consider when starting your own project or supporting a project of interest. 

 

Popular Crowdfunding Websites 

While there are numerous sites out there that can help you harness the power of crowdfunding, here are a few of the favorites, each with it’s own unique focus.

Kickstarter:  One of the most well known crowdfunding websites, Kickstarter has helped creatives raise over $890 million since it’s launch in 2009 (with notable projects like the Veronica Mars movie, which raised over $5 million in 30 days).  The only major drawback that comes from working with Kickstarter: it operates on an all-or-nothing system. 100% of a project must be funded for the creator to receive any of the money raised.  

GiveForward: A top online medical fundraising site, GiveForward makes it easy for family and friends to raise money for a loved one’s medical bills. Knowing this type of service can help relieve worries and stresses during a time of difficulty, GiveForward provides users with fundraising coaches, who can give guidance on fundraising ideas and how to successfully raise money online.  

Zerobound: Today’s college graduates are starting their lives with a mountain of debt. They are also considered to be the age bracket that volunteers the least for community service. Zerobound, which is currently preparing to launch it’s beta site, is hoping to rectify both these issues by helping students and alumni reduce their student debt through sponsored volunteerism.  Users pledge to volunteer their time, donors sponsor students for each completed volunteer hour, and once the hours are completed, money is sent directly to the user’s student loan company. 

AngelList: Focused on tech start-ups, AngelList offers opportunities for investors, startups, syndicates and job seekers. Their website is clean and straightforward, and their opportunities are plentiful. 

GoFundMe: If you can’t find a website dedicated to the issue you want to raise money for, GoFundMe can help users raise funds for a variety of personal causes like celebrations & special events; sports, teams,  clubs and travel.  

 

Key considerations for fundraisers

Craft an elevator pitch - You should be able to explain your project in three sentences or fewer.  People have a short attention span on the Internet; give them the information and inspiration they need to contribute to your cause as quickly as possible. 

Details, details, details - Sell your story quick, but back it up with important details. As noted above, you want people to be able to get a full understanding of you and your project, where the money will be going, what your qualifications are and how dedicated you are to the project.  Include photos, videos, schedules, credentials, licenses… think carefully about the supporting information that can help tell your story and convert readers into supporters. 

Become a marketing guru (or even consider hiring one) - Your project might be great, but no one can support it if they don’t know about it.  Share your project via social media, e-mail marketing, blog posts, etc.  Get your friends and family to share your project as well. And don’t forget traditional forms of print marketing like promotional flyers at a local coffee shop. 

 

Key considerations for investors

Get to know the project and creator - You want to invest in someone you trust and something you believe in.  Make sure you fully understand where your money will be going and how it will be used.  Do a quick Google or Facebook search on the project creator to learn more about them, their credentials and what others are saying about them.  Do they have the talent and drive needed to bring their project to completion?  Because investing is risky no matter what you invest in, be sure to do your due diligence on the project you are interested in supporting--just as you would for any other asset in which you are considering to allocate hard-earned capital. 

Understand the terms of the website - Each crowdfunding website has its own set of rules, terms and fees.  Make sure you understand what you are agreeing to before using their service.