The New Angels:Crowd Sourcing

Alturnative financing for entrepreneurs

In the past, budding entrepreneurs and artists struggled to find financing. Too small for angel investors, they often turned to family, friends, and credit cards to make the dream reality. When the financial crisis hit and it seemed that all that creativity would go dormant, a group of developers came to the rescue with Kickstarter: a crowd sourcing web site that in four short years has connected small project owners with investors backing them with small amounts of money.

Projects have to be in one of the Kickstarter categories and have defined goal , timelines, outcomes, and a reward system for investors. The web site provides a step by step approach for creating the project page – from defining the project to the details on investor reward fulfillment.

Started as a micro-finance endeavor, most projects seek funding of $10,000 or less, but larger amounts have been raised either through greater than expected responses or larger project requirements. Over 40% of the projects have been successfully funded with $412 million. Kickstarter stats show that 81% of projects that reach the 20% funding level are successful.

A local project that was successfully funded wanted money to expand the downtown roof-top apiary with five new hives. Investors rewards included honey, chocolate and a special ‘bee dinner’. Fifty one backers supported this project and gave the project owner 15% more than the project requested.

Another project in the Food category seeks to expand a local craft brewery that will make deliveries with rickshaws. Funding will buy equipment and upgrades for a bar. Over 200 people have pledged nearly $19,000 – over half the needed investment. Eight days remain to raise the full amount – will the community appreciate this endeavor?

Not all projects are successful. A project to create and market street wear message T-shirts will likely not make its goal by the deadline. This project owner will have to decide what to do with the money that was raised – options include refunds and an accounting of how the funds were used - will have to be worked out with the investors.

The website abounds with creative projects listed by city or funding status. With an average investment of $70 the power of crowd sourcing has given life to small businesses and artists.


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