What do Barack Obama, Scottish Opera, a Chicago product engineer and a widow from Edinburgh have in common?
They have all successfully crowdfunded a campaign.
- Barack Obama crowdfunded $47m in $25 donations for his election campaign.
- Scottish Opera raised £44k to fund a production by offering donors the chance to sponsor a star and join the backstage party.
- Scott Wilson from Chicago needed $15k to prototype a watch strap for the iPod Nano – he actually raised $942k by “pre-selling” his product on a US crowdfunding platform.
- And just last month, Elke Barber raised 50% above her crowdfunding target after her heart-rending story touched the hearts of hundreds of people worldwide. She can now publish her book for pre-school children who have lost a parent.
But the actual concept of crowdfunding, gathering money from friends, family and the wider community to support ventures, has been around for centuries. Remember the Darien Scheme in the1690s, when a quarter of all the money circulating in Scotland was pooled to establish a trading colony in Panama called New Caledonia. The venture failed, but that was crowdfunding in the early days.
The recent explosive rise in the use of social networking sites has brought crowdfunding to the fore. The ability to reach out and engage a wider audience than ever before means that someone with an idea can ask for backers to help them – and those backers could be on the other side of the world.
There are around 400 crowdfunding platforms out there, many are niche, some are equity-based (where you sell shares or more often parts of shares in your business) the majority are reward-based (where you offer treats or perks in return for donations, often pre-selling the product or service you’re raising the money to produce) but only a few are well known – Kickstarter and Indiegogo in America (both reward models), Seedrs and CrowdCube in the UK (equity) and Bloom VC in Scotland.
Bloom VC (Venture Catalyst) is the first crowdfunding platform of its kind in the UK, enabling anyone with an idea, anywhere in the world, to reach out and receive donations from across the globe, using their social networks.
What makes Bloom unique on a global scale is that it offers the same opportunity to community projects, third sector organisations and social enterprises.
The Bloom reward model enables individuals or startups to create an online elevator pitch for their idea, detailing what it is, why it’s important, how much money is needed and for what. Using video and images to create a compelling story and offering exciting and attractive treats in return for donations, the pitch is uploaded onto the crowdfunding platform, where the project owners share it with their social networks both online, using Twitter, Facebook and LinkedIn, and offline among friends, family, neighbours and colleagues.
But it’s all or nothing; if project owners don’t reach their target by the deadline (30,45 or 60 days) they don’t get a penny, and the donors don’t pay.
A great idea needs nurturing. It needs cultivating and supporting, it needs loving care and attention. A great idea needs to flourish. But great ideas often get left wilting in the shade because there’s no money to support the nurturing and growing process, and limited support for growth.
Crowdfunding allows great ideas to bloom. It’s an inclusive way for anyone with an idea to reach out for financial support without having to give up equity or control of his or her business. It’s not a loan, so it doesn’t need to be paid back, and it’s not an investment so you’re not selling shares.
Crowdfunding is revolutionizing how we raise money, and will ultimately change the funding landscape permanently.
In our next blog, we’ll tell you how to create a killer crowdfunding campaign.
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