Crowdfunding - What's your experience / view?

Discussion in 'Growing and Managing a Business' started by MarkTaylor, Aug 26, 2013.

  1. MarkTaylor

    MarkTaylor
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    Hi Everyone,

    I'm reading quite a lot about crowdfunding at the minute and it seems to offer tremendous potential for the right businesses and investors - I am aware that there are different models (eg equity, loan, payments in kind and pure donations) all of which seem appealing on different levels.

    Does anyone have experience as an investor or fundraiser that they'd be willing to share? Equally, I'd be glad to hear general points of view on this subject.

    Best wishes,

    Mark.
     
  2. AmbitiousStudent

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    Regarding the donations, the reason why some company's find it easy to receive donations is because they are offering something unique or better for the passionate target audience. For example there is a new console in development called the Playjam and most of the money the company used to put this idea into practice came from passionate/enthusiastic gamers. This console offers the average developer to put their game on the market at a very reasonable rate unlike the current consoles which costs hundreds, sometimes, thousands of dollars.

    The icing on the cake (the reason why I think many donations were made) was the fact that they said this new console will allow you to play games from all platforms such as the PC, 360, PS3 and from Apples app store. Gamers have been asking for a universal platform for years and now the idea has finally arrived they will do anything to see it on the shelves.

    The simple thing to do is search around forums of your interests and find what people are complaining about or want fixed. You can then go back to these forums and advertise your idea to receive some donations.

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    I'd also like to add that once Playjam proved there was a real interest in the product they then started asking for small sums of 10 to 20 thousand dollars from investors.
     
  3. Business Attorney

    Business Attorney
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    While Kickstarter and a few similar sites have been around for a while, crowd funding in the US has pretty much been limited to donations or advance purchases of products due to restrictive securities laws. Those have prohibited investments in securities, so most people are putting up only very small amounts. You really had to have an interesting product or service since you couldn't position the funding as an investment on which the person would get a return. People invest in boring businesses all the time if they think that they will earn a decent return on their investment (think of public utilities, for example). But no one is going to donate money to a public utility.

    Those laws have changed recently and the environment is changing to attract small investments rather than gifts and advance purchases. However, with that change will come more emphasis on the expected monetary value of the investment.

    It is still too early to tell, but I see the crowd-funding as looking more like a typical prospectus for an initial public offering of stock, replete with warnings and extensive discussions of the risks of the investment. That is a lot more work than just saying "I've invented a new game, I don't know how I am going to market it and have done no budgeting, but give me some money and climb aboard before this train leaves the station!"
     
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  4. Fergal

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    http://www.fundit.ie is a popular crowd funding site in Ireland. I invested in one music project there, which basically involved the band financing the production of a CD by pre-selling that CD. In addition to raising funding for a project, crowd funding can also be used as a helpful way to gauge whether or not there is a market for a product or service, before that product or service is actually launched.
     

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