Crowdfunding, A New Frontier in Public Finance
Enter: Friends and Benefactors
1. Friend: a person whom one knows and with whom one has a bond of mutual affection, typically exclusive of sexual or family relations.
2. Benefactor: a person who gives money or other help to a person or cause.
3. A Friend/Benefactor combined can make the difference in a successful program
This article will acquaint you with, and help define, a sweeping societal change which has addressed some fundamental issues relative to living the “American Dream.”
The crowdfunding concept, founded on the premise that desire, hard work and the right idea can equal a success story, has faced serious challenges for reasons discussed below.
Crowdfunding represents a fundamental change, a revolution in fact, in the way products, technologies and entrepreneurs are supported, evaluated and gauged.
All of us are keenly aware that a very small number of savvy and wealthy persons, entities and corporations have held the “purse strings” to the capital required to enter the market place.
Market regulations make it prohibitive for a small firm to raise money in the equity markets.
A recent survey indicated that up to 80% of small businesses find themselves turned away from banks and credit unions, even though they are credit worthy, that because the majority of banks.
Throughout the years angel backers, benefactors and donors have helped fund artistic activity. Only 10 years ago, online crowdfunding finance was a fledgling concept used primarily by artists looking to bankroll their creative endeavors.
However, creative inventors, entrepreneurs and start ups recognized the possibilities inherent in the crowdfunding approach and leapt at the chance to circumvent traditional investor options and go directly to customers. They discovered that a lot of folks are willing to pitch in with a few bucks to bring great ideas to life, and a new industry was born.
Although Crowdfunding websites appeared for the 1st time a decade ago, the practice goes back more than a century.
In Y 1884, Joseph Pulitzer used his newspaper, the New York World, to attract 125,000 donors and raise a total of $100,000 to complete the construction of the Statue of Liberty base.
The Chicago Tribune credits the first web-based crowdfunding to fans of the British rock band Marillion; in Y 1997, they underwrote their band’s entire $60,000 US tour. The 1st formal crowdfunding site, ArtistShare, went live in Y 2003, raising money for musicians, filmmakers, and other artists.
Several other sites followed, including music site SellaBand, the internationally based Indiegogo, and the medical fundraising site GiveFoward.
With this method, just about any promising new project or business can be launched. Let’s take a deeper look at what Crowdfunding means, and how it works.
The Big Q: What is Crowdfunding?
It is simply the process of asking the general public for donations that provide startup capital for new ventures. By using this method, entrepreneurs and small business owners can bypass Venture Capitalists and Angel Investors entirely and pitch ideas straight to interested everyday internet users who then provide the necessary financial backing.
This innovative concept has spawned a giant new industry – one with an unlimited upside for those with the vision and drive to capitalize on it. Crowdfunding is a financial institution in transition, and it is a certainty that it will play an ever-increasing role in the global financial scene.
Enter the creative genius of Smash Fund.
This program is an online social platform geared toward entrepreneurs that provides members with various tools to connect with one another, raise awareness about their passions, raise funds for their projects, and to contribute to the projects of others.
Smash Fund allows members the opportunity to connect to other members in a group they refer to as a Network. The Smash Fund Network focuses on creating maximum exposure for that Member’s Profile, Project and Passions.
Crowdfunding finance is applicable to just about all types of projects or ides. New businesses utilizing the approach have raised everything from several hundred to millions of dollars.
Note: a Crowdfunding project does not have to be a large, successful business to tap into its power. In fact, it is directed primarily toward startups. With this method one can launch most any kind of business.
Crowdfunding finance requires a project which has a theme, scope and content which interests a lot of people strongly enough to motivate them to part with their hard-earned money.
Crowdfunding may be the most American of business ventures. It is certainly the most Democratic. Investors ask questions. The crowd asks, “How can we help?”
Crowdfunding opens doors long closed to small businesses which usually have no viable way to raise capital. Here backers play the role of philanthropists, investors and customers to support creative endeavors in exchange for certain perks.
It provides a viable alternative to starting a company the traditional way, and it activates a user base that you know will be interested in the project.
Crowdfunding finance does not follow the logic of the free market, it follows the logic of the gift or generously helping your fellow man. It creates a sense of participation and provides something increasingly rare in today’s society, a platform for an essentially non-economic transaction, the kind that builds friendship and communities, aka Friends and Benefactors.
Crowdfunding allows for the early cementing of strong relationships with committed customers, who become the product’s number one fans, advocates and supporters upon release.
Crowdfunding can serve as a laboratory that allows for testing/gauging the general consumer interest in the validity of new concepts. It provides a direct link to consumers, including those who are willing early financial supporters and the likeliest folks to spend more on updates and future releases.
Also, more and more, even established companies use it to launch new products, not because it is the most efficient way to raise money but rather because it is the best way to reach people. The crowd is more important than the funding.
What’s more, Crowdfunding provides a better way to generate interest in projects and pre-orders up front. Because customers become more emotionally invested in the development process, they are also more emotionally invested in the end result.
This is a big change for the better, and remember the right mechanism at the right time with the right idea starts a movement.
And, rest assured, this finance movement is not a fad.
The global crowdfunding economy is growing exponentially. The World Bank (WB) estimates that crowdfunding finance in China alone will surpass $50-B by Y 2025. Indigogo reports 8,000 companies a month are using its services.
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