Throwback Thursday: What is Crowdfunding?

Have you ever had a brilliant idea that could help a lot of people? Maybe you should try raising money through the crowd, not the cloud, the crowd.

When was the last time you cleaned your ears?

For most of us, ear care is an afterthought. But for hundreds of millions of poor people living in rural India, hearing loss or impairment runs rampant. One company is on a mission to tackle this problem. The solution: the Oto-Tip by Clear Ear. The 2 month long crowdfunding campaign had a target of $30,000 but more than doubled it this summer by raising $78,000. They are on pace to start saving the world’s ears in 2015.

Here’s how it works

Not Just Ear Care

Crowdfunding has hit its stride raising $5.1 billion dollars for non-profits last year. But where does all the money come from?

The answer is quite simple really, EVERYONE!

Crowdfunding is an internet phenomenon where money for a project is raised through a large amount of people who make pledges. This way, ideas can get off the ground by raising money before the project is completed, everything from fan requested movies to giant 6-legged robots. You can help people pay their medical bills or support new medical technology.

It’s a Game Changer

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Blockbuster movies spend millions on special effects, actors and marketing to get a cut of the $10 we pay at the theatre. But imagine if the movie was crowdfunded and moviegoers donated $10 to see that the movie gets made in the first place.

And that’s why crowdfunding is so powerful. Ideas get funded based on merit, instead of their profit potential.

Crowdfunding sites like kickstarter and indiegogo, are helping brilliant ideas become reality by fostering a place to raise money and awareness from strangers.

But It’s Not All Charity

Crowdfunders might get free admission to the movie’s advanced screening. Other options exist depending on the size of the donation. While most donations are for less than 100$, large pledges could be met with a special thank you in the credits or signed memorabilia.

The crowd works because of a few human desires. One of them is that people like feeling at least partly responsible for the success of others. Which is why pro sports teams are so popular. But humans also strive to be a part of a bigger picture. An example of this is the modern green movement toward sustainability.

Aside from just raising money, crowdfunding a project can have lots of other benefits as well. The massive amount of people who are investing will probably also buy the product and talk about it with their friends. Inevitably their ideas spread to social media and in rare cases go viral. When investors see that a project has garnered a lot of attention – and money, it gains legitimacy.

The Ultimate Test

With the advent of crowdfunding comes a new source of capital. Big time investors sink large sums of money in new companies but prefer established projects. With crowdfunding, riskier ventures are able to get off the ground. Projects don’t always reach their fundraising target, and sometimes they can be significantly over or under. This can be seen as a litmus test for success or failure, because when people believe in your idea, they vote with their wallets. Effective crowdfunding campaigns don’t just raise money, they get people talking, and this exposure helps launch their startup even higher. After all, you can trust the wisdom of the crowd.

Did you pledge money to any startups? Let us know in the comments. If you haven’t, what are you waiting for. It has never been easier to change the world.

 

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