Crowdfunding

Crowdfunding

Crowdfunding is the process of funding your projects by a multitude of people contributing a small amount in order to attain a certain monetary goal. Goals may be for donations or for equity in a project. The USA is in the process of making rules to control the crowdfunding.  Supporter of regulation claimed that crowdfunding would open up the flood gates for fraud, called it the “wild west” of fundraising, and compared it to the 1980s days of penny stock “cold-call cowboys.” The process allows for up to 1 million dollars to be raised without a lot of the regulations being involved. Companies under the then-current proposal would have a lot of exemptions available and be able to raise capital from a larger pool of persons which can include a lot lower thresholds for investor criteria whereas the old rules required that the person be an “accredited” investor. These people are often recruited from social networks, where the funds can be acquired from an equity purchase, loan, donation, or pre-ordering. The amounts collected have become quite high, with requests that are over a million dollars for software like Trampoline Systems, which used it to finance the commercialization of their new software.

A well-known crowdfunding website is Kickstarter, a website for funding creative projects. It has raised over $100 million, despite its all-or-nothing model which requires one to reach the proposed monetary goal in order to acquire the money. Crowdrise brings together volunteers to fundraise in an online environment. In a related project, Offbeatr was launched in 2012 to crowdfund pornography.  Citizinvestor is a US crowdfunding platform specifically focused on raising money for public projects and community infrastructure.

iStockPhoto provides a platform for people to upload photos and purchase them for low prices. Clients can purchase photos through credits, giving photographers a small profit. Again, the photo collection is determined by the crowd’s decisions made for very low prices.

In February 2012, a stock picking game called Ticker Picker Pro was launched, using crowdsourcing to create a hedge fund that would buy and sell stocks based on the ideas coming out of the game. It was hoped that these crowdsourced ideas, coming from so many people, could help one pick the best stocks based on this idea that collective ideas are better than individual ones.