Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Fintech Opinions
New Rules for Crowdfunding: Respect Your Audience to Maximize Your Results
Huffington Post - Small Business | Ciara Pressler
I am literally leaving the country after I hit publish on this piece. Seriously -- if you need me I'll be scarcer than Snowden. I'm about to ruffle some feathers. But the more I talk to friends and colleagues, the more I hear frustration with the free-money mentality brought on by the phenomenon that is crowdfunding.
Free money -- who wouldn't want a grab at that?! But we can all agree that nothing is free. Contributed funds, and even the appeal for them, are not without strings attached. Most dangerously, a sloppy fundraising campaign runs a high risk of alienating your audience -- the people you'll need when it comes time to market and sell that thing you're raising funds to create.
Now, I'm not against crowdfunding as a concept -- I've moderated fundraising panels, consulted producers, and had long conversations with some of the key players behind the biggest platforms in the game. In fact, I love any gamechanging, disruptive concept that democratizes opportunities for ideas to come to fruition. It's my crack. Improving the success of good ideas is the reason my company exists and why I write these articles.
But as a marketer and consultant for new business and creative projects, I see every rule in the book being broken in crowdfunding campaigns. In some cases, these campaigns are even hurting the future of the project, from alienating your audience to scooping your press story.
It's high time we create some best practices for crowdfunding. Here's what I propose, based on my experience working with new businesses and projects later in the game -- when it's time to find and grow their audience and turn that investment into profit.
Segment your audience.
This is by far the most important rule in all communications, from fundraising to marketing to media outreach. Not everyone should receive the exact same message. Please repeat that with me out loud: Not everyone should receive the exact same message. When you look at your entire audience, some people may be funders. But most people are not, and should not be treated as such. Save your communications for when you need them to buy your product, purchase a ticket, or even help spread the word that your project has launched.
Understand what kind of money you are seeking.
Is it a gift, prepayment, or investment? A gift or donation is money without anything in return besides that warm fuzzy feeling that the donor is part of something bigger -- this includes contributions that promise perks like a signed poster or name in the credits. A prepayment promises the product once it's made, riskier because what happens if something delays or stops the production? An investment proposes a financial return upon a certain success threshold and gives the contributor far more skin in the game.
I believe that all three financial requests should be made delivering the same level of project information as meeting with any investor: a full run down of the business model, key players, budget breakdown, timeline, and strategic plan for success and survival.
Understand the terms of your particular platform.
Do you get all the money even if you don't hit your goal, or do you have to reach a threshold in order to cash out? How soon do you get the cash? What happens if you don't reach your goal? Do your funders get their money back? Is the project you promised delayed? Is there a way to follow up with your new audience to report on your project's progress? What are all the best practices associated with that particular platform? Who is competing for the same money in that space?
Every form of external communication falls under marketing.
Fundraising usually happens at the very beginning of a project, and you never get a second chance to make a first impression. You may not have developed a compelling, complete visual brand and marketing voice, but giving attention to your communication consistency and clarity before you start outreach is vital for beginning to hold a favorable place in the minds of your audience.
Be realistic about whether it's appropriate to ask for a donation for your project.
The vast majority of funding requests I receive are for projects that will further someone's career or element of their for-profit business. This, to me, is as ludicrous as me hitting you up for $250 so I can sit here and write this article instead of selling a consulting hour. It's one thing to launch a foundation that will serve an underprivileged community that truly needs our help; it's quite another to produce a film in which you'll star so you can build your credits and industry clout. Are you supposed to know how each person in your network feels about funding charitable projects versus artistic endeavors versus businesses? Yes, actually. That's old-school fundraising: done with respect, creating a conversation, and relationship building. Anything less runs the risk of alienating your audience, permanently.
Tread lightly with social media.
Every marketer compares social media to a cocktail party, encouraging those with something to promote to never come just with a sales message, but lead a dialogue that creates a multidimensional experience with the brand, person, or project. Imagine how quickly you'd peace out of a party if some lunatic unplugged the DJ and started screaming, "I only have 24 hours to get $5,000, everyone drop and give me $20!" Someone call the Facebook police! Once again, this is about segmenting your audience -- your uncle may want to contribute, but your classmate from college with whom you haven't conversed in ten years probably isn't an appropriate person to solicit.
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One failed crackstarter campaign does not demonstrate general failure of crowdfunding
Seeding Factory | Heri Rakotomalala Posted on June 19, 2013
Back on Techvibes, a Canadian technology blog, an article tries to conclude about crowdfunding, a few weeks after the crackstarter campaign finished.
It’s wise and relevant to point out the limits of crowdfunding. Raising funds to get the video of a politician smoking cocaine was most probably the worst crowdfunding campaign in the past months. Generally, the crowd would do due diligence and make sure there are no false claims, and also checking if the entrepreneur behind the project has done any substantial work. In this case however, the campaign was bound for success. Backed by large gossip website Gawker, with millions of readers, the campaign buzzed and made headlines.
Crackstarter campaigns like Rob Ford’s will happen and succeed again. As crowdfunding becomes more and more popular, a blogger or a highly visible figure will leverage their social reach to start crazy campaigns. Campaigns with products failing to ship will also be plenty.
Is this a good reason to claim that crowdfunding is a “general failure”? It’s an all-too hasty conclusion.
Let’s consider the case of VC or angel funding. There are no numbers on entrepreneurs pitching Venture Capitalist vs those who actually secure VC funding, but it’s much below crowdfunding’s 44% success rate. Even if you go pitch a VC with a solid business plan, with a great team and solid traction, your success rate won’t be 44%. It’s most likely they would ask you to come back in 3 weeks or more with more. Fast forward 6 months later, chances are you won’t get it, even after multiple meetings. Maybe it’s because it didn’t click between the main partner and the startup’s CEO. Or maybe the VC’s wife didn’t like the logo and colors of the product (oh yeah, it happens). Or simply, the terms negotiations failed. Same goes if you are talking to angel investors or bankers. I trust the crowd’s due diligence and wisdom more.
What about failures then? Did TechVibes run a feature on how VC funding is failing after Color.com got $41million and yet failed to deliver? What about all the startups folding in Vancouver, Toronto, Montreal, California? There are countless startups who are joining incubators / accelerators and who fail to launch publicly or go out of beta. There are well-known VC-funded startups that make headlines on the Globe or Techcrunch, to finally send out silently a newsletter on the service closing, pointing out alternatives. Where is the editorial showing that there’s a general failure in startup funding?
I am happy that crowdfunding is now a viable alternative source of funding for entrepreneurs. For early-stage teams who are risking ventures in un-proven markets, and who can’t demonstrate traction, crowdfunding is now a very serious option, along with friends & family. Venture Capitalists and Angel investors should consider how to work with crowdfunding as well. It’s obvious that a project crowd-backed by 1,000 fans or more has higher chances of market success than an entrepreneur who pitches well, but who can’t demonstrate that there’s actually someone ready to give their credit card number. Raising $50k or so on kickstarter or another platform proves that you have the social reach, intelligence, PR power, and have the potential to seize more minds.
Without crowdfunding, we wouldn’t have the Statue of Liberty. Montreal-based filmmaker Ariel Nasr wouldn’t be able to make his Academy Award nominated movie “Buzkashi Boys” (meet Ariel Nasr in Montreal here). The Tesla museum, a serious and laudable project, wouldn’t be possible. Notman House, the core of Montreal’s startup community, wouldn’t be possible and go to the next level.
Now for the sake of crowdfunding, it would be advisable for Indiegogo to select projects and raise the bar. However, that’s how they differentiate themselves from Kickstarter. If they want to allow more risky and wild projects, that’s a policy I can respect. After all, there are more than 700 crowdfunding platforms and it’s important to offer diversity.
100% chance of success doesn’t exist with early stage projects. Go to amazon.com or a brick&mortar store if you want 100% value-back on your $20 bill. For those who dream, for those who still believe in progress and building a better future, for those who are builders, or help build great projects, there’s crowdfunding.
NCFA Note: The Crowdfunding industry is very much alive and well and continuing to transform the dynamics of the funding landscape industry-by-industry, project-by-project. People should be allowed to donate their money to causes and projects of their choice. Having said that, it can be argued that portals should be motivated to disallow certain projects that are deemed unfit for the communities they support or are in complete bad taste. It is up to the portal to differentiate themselves from a business perspective from other competing portals. People who donate or lend funds to Crowdfunding projects are advised to conduct their own due diligence and understand the risks involved before committing funds and participating in a campaign that they are keen to support.
Source: here
Crowdfunding websites trying to cash in on crowded field
CBC News | By Dianne Buckner | Jun 18, 2013 3:36 PM ET
Trying to lay your hands on some cash? Daryl Hatton wants to help you.
Hatton is the founder and CEO of Fundrazr, Canada’s most established crowd-funding website. “I’m an entrepreneur,” he says. “I love the idea of helping entrepreneurs.”
Hatton wants to raise the profile of his site — but good luck with that. The crowd-funding scene is exploding at the moment. The most famous ones, Kickstarter and Indiegogo, have been in the news for both good reasons and bad.
Indiegogo is the home of the so-called “Crackstarter” campaign to raise the money to buy the infamous Rob Ford video, while Kickstarter spawned the most successful crowd-funding effort ever, a total of over $10 million, for Canadian Eric Migicovsky’s Pebble Watch.
Meanwhile, a British crowd-funding site called Crowd Cube has just launched in Canada. If you’re looking to raise money for your business, they want to hear from you.
Hatton is a relaxed-looking guy from Vancouver, who loves to talk about how Fundrazr has raised 25 million dollars for various causes and businesses in its three years of operation. That’s a far cry from the mega-bucks generated by Kickstarter and Indiegogo, but it’s a respectable number.
“We’re just coming out of start-up land,” says Hatton. “We expect our revenue to grow 10 times what it is now over the next year and a half.”
Strangely, almost all of Fundrazr’s campaigns so far have been for projects in the U.K. and the U.S. (“We’ve done what we’re told we’re supposed to do: export,” says Hatton.) His favorite example right now is a campaign that raised $90,000 for a little Australian girl to travel to Switzerland for surgery to restore her voice.
But he wants to generate more activity here in Canada. And he’d like to do more with entrepreneurs — while also reminding them that this type of financing does come with strings attached.
“People think crowd-funding is this great thing that you plug into the sky that gives you money,” says Fundrazr’s Hatton. “But there’s always an obligation to deliver something to the funders.”
He points out that there are four different models of crowd-funding:
- Donations This is typically used for disaster relief, election campaigns, or to help people with big medical expenses. Recipients of the funding are obliged to report back on how the money was used to complete the project.
- Rewards People give money in exchange for a something tangible – a copy of the CD or DVD that’s being produced, a sample of the product (such as the Pebble Watch), or perhaps a discount on the final product.
- Debt Microfinance websites such a Kiva are an example of this, where funders are actually lending money to entrepreneurs and others. (in May Google invested in a site called Lending Club).
- Investment Funders receive an equity stake in the company. This is legal in the UK, Australia, and Germany, among others. Last year, Obama’s Jobs Act cleared the way for American entrepreneurs to raise up to $1 million of early stage financing. Canada is getting on the investment bandwagon too. The Ontario Securities Commission is in the midst of reviewing the rules around actually buying stock in companies via crowd-funding websites.
There’s no question that crowd-funding can go a long way to solving the long-standing problem for start-ups: limited access to capital. But Fundrazr’s Hatton isn’t sold on selling shares over the internet. “We may not go that way,” he says “Equity is one of the hardest ways to do this.”
He’s on the CAPS Council (Crowdfunding Accreditation for Platform Standards), an international group that’s been involved in the implementation of the Jobs Act initiative in the U.S., and says the process is bogging down.
Brokerages have become involved, (how NOT surprising), and the whole process is getting more complicated than originally envisioned. Hatton thinks Fundrazr may stick with the rewards and donations models.
In any case, crowdfunding just keeps getting hotter and hotter. “The traction has been phenomenal,” says Craig Asano of the new National Crowdfunding Association of Canada, which launched last October.
“We’ve had a steady stream of questions and interest.” Daryl Hatton is likewise enthused about all the action in the space, and the many new ways to utilize this access to Internet crowds. He points to a site called Pic a Tic.
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4 recommendations for expanding debt crowdfunding
Corporate Knights | By contributor Tom Du | Jun 11, 2013
Purpose matters. And we too often forget the purpose of finance. One of finance's central goals is to help people allocate, save and raise money over time. Fundamentally, finance is a tool "to help people." Finance scales ideas that create shared economic, social and environmental value - and, in turn, is used to help entrepreneurs and people alike. Finance serves people; people should not be slaves to financial markets. Finance is not about the sole accumulation of ever-increasing amounts of money, for the sake of accumulating money. Nor is finance about endlessly spending borrowed money one cannot repay. Financial markets, risk management and investments are not ends; they are merely tools, economic constructs and vehicles to help people.
Once we appreciate the underlying purpose of finance, we need to ask: “how can we improve financial tools, regulations, and models to better help people?” Impact investing, socially responsible investing, and social finance have emerged as responses to this very question. These approaches reconcile the original purpose of finance and the limitations of single-bottom-line thinking – all within existing economic, social, and environmental realities.
A crowd response to financing
Crowdfunding (CF) is geared towards pooling individual contributions together to finance ideas, projects, entrepreneurs, and organizations. CF is partially a reaction to the consolidated financial power of “Wall Street” and “Bay Street”. A commonly stated raison d’être for CF is to “democratize finance” – that is, to return more financial influence and decision-making to everyday people. CF is also a strategic game-changer with huge capital potential – especially given the well-documented dearth of financing for small organizations and social entrepreneurs.
Historically, the crowd has been a powerful source of answers, ideas, and financing. The crowd has greatly expanded Wikipedia, digitalized old books through reCAPTCHAs, and shared assets such as cars, vacation homes, and expertise. CF takes this trend even further, by allowing everyday people to more directly support initiatives that resonate with their values while investing in initiatives that deliver financial value.
Expanding and solidifying CF as a financing model
My focus is on debt crowdfunding (also known as P2P-lending), as opposed to equity, donation, or reward CF. According to the latest report by research firm Massolution, debt-CF volume grew 111% to US$1.2 billion between 2011 and 2012. For 2013, the CF sector is expected to double – again – in volume. The popularity has also spurred the creation of specialized crowdfunding platforms (CFPs) for diverse sectors such as community solar projects in the US (e.g. Solar Mosaic); businesses in the UK (e.g. Zopa); and even local musicians in Paris (e.g. MyMajor).
The following recommendations are focused on debt-CF but some also apply to equity-CF. In order expand and solidify debt-CF as a “mainstream” financing model, the CF sector needs to take steps to improve fraud prevention, crowd wisdom, financial liquidity and the balance between capital demand and supply.
Fraud – Separating the good and the bad
The CF sector needs to address concerns over potential issuer fraud before it can become a widespread financing model. Thus far, CF has had an excellent record of facilitating good quality investments. According to Invest Crowdfund Canada, Australia has not experienced any successful cases of fraud in 7 years. In addition, a recent Ontario Securities’ Commission (OSC) paper reports a low 2% rate of fraud for existing non-equity CF. These low fraud rates must be maintained as the sector expands.
The CF process can be designed to minimize the probability – and severity – of issuer fraud. CFP websites can let investors comment and scrutinise issuers’ business plans in a transparent forum. Investor feedback creates reputational effects, influences the success of future campaigns by the same issuer, and increases the disincentive for fraud. In addition, CFPs can – and, in many cases, should – include an All-or-Nothing (AoN) feature. With AoN, issuers only receive CF proceeds if investment targets are met or exceeded. When coupled with community scrutiny and crowd wisdom, AoN reduces the probability of successful issuer fraud.
To minimize potential fraud, CFPs can implement sensible application processes, including fraud, background, and credit checks for potential issuers. A delicate trade-off exists between stringent application hurdles and access to finance for smaller issuers. As a potential solution, MyMicroInvest markets itself as a CFP that allows CF investors to invest on the same terms as a professional co-investor. This leverages the due diligence capabilities of professional investors and reduces potential fraud. In addition, annual investment maximums reduce potential investor losses due to issuer fraud.
CF investors are also concerned about investment losses due to bankruptcy or fraud at the CFP level. According to Bloomberg New Energy Finance, insurance and credit risk products already exist for investor protection. The business opportunity for insurance providers is to adapt such products to the growing CF sector. CFPs can further allay these concerns by holding CF proceeds in separate, designated accounts. As intermediaries, CFPs would be prudent to include such differentiating features to gain more credibility – and, in turn, attract investors and issuers.
Herd Mentality – Sparking crowd wisdom and protecting investors
According to a recent Crowdfund Insider article, CF can be subject to both crowd wisdom and herd mentality. A well known HBR article goes further and suggests “crowds are stupid” in equity-CF models. Indeed, the internet and social media can quickly feed good – as well as bad – investments. The “hype” of a project may prove appealing to the crowd but, ultimately, should not drive investment decisions.
Investor education is necessary as a first defence against herd mentality and systematically irrational risk-taking. The CF sector needs to promote greater financial literacy amongst both investors and issuers, frame CF investment risk in accessible terms – not legalese; and clearly communicate that not all projects will be financed, and that even “good” projects may not realise (exceptional) financial returns. CF projects have risk, and investors should not expect to get rich with CF projects.
On the regulatory side, investment maximums can be implemented for the CF sector. The US JOBS Act allows investors to invest a maximum amount depending on their annual income in any given 12-month period (e.g. up to US$2,000 or 5% of annual income for investors earning less than US$100,000 once SEC rules are finalized). The regulation is intended to limit an investor’s exposure beyond his/her means to withstand financial loss. Such regulation effectively amounts to financial paternalism – but may nonetheless be warranted as best practices are learned.
Investment maximums can be designed as a hard cap on the maximum issuers are allowed to raise, and/or the maximum investors are allowed to contribute (per investment or per period). Option one may reduce access to sufficient capital and stymie entrepreneurship. From a regulator perspective, option two may require investors self-certify that they have not exceeded the maximum, and would inevitably lead to compliance headaches.
Finally, we must recognize that herd mentality is not unique to CF. Financial markets are ripe with examples of systematically irrational risk taking by unaccredited as well as more “sophisticated” investors. In response, the OSC is considering 2 day cooling-off periods that allow CF investors to reflect on investment decisions. Taken together, investor education, transparent comments, investment maximums, and cooling-off periods help reduce the potential for – and losses from – herd mentality in the CF sector.
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Why Isn’t Crowdfunding Working for Toronto’s Food Industry?
Torontoist | By Jess Davidson |
Crowdfunding campaigns have bankrolled movies, books, and other products, but Toronto restaurateurs are having a hard time tapping in.
Ashley Jacot De Boinod did everything right when she was trying to get her doughnut business off the ground. She kept costs low by renting a shared commercial kitchen space. She gained an almost rabid following for her handmade gourmet pastries, cheekily called Glory Hole Doughnuts. She sold her doughnuts wholesale in coffee shops and local businesses across the city, and met customers in the early morning to drop off custom orders. Once she could see that her business would be viable, she embarked on the expensive and onerous process of setting up a store. That’s when things started to go wrong.
“Our budget collapsed when we were so close to finishing up, so I had to figure out something to keep going,” she says.
It wasn’t until the store was near completion that contractor issues arouse. As Jacot De Boinod describes it, she got “screwed over.” At a point when it was too late to back out, she needed a plan to secure some extra funding in order to get the store ready for opening. She settled on an untraditional course of action: a campaign on the popular crowdfunding site Indiegogo.
“I didn’t want to [turn to crowdfunding] at all,” Jacot De Boinod says. “You think you have everything planned, and everything budgeted, so it feels like, ‘Where did you go wrong?’”
While today Jacot De Boinod’s business is up and running—booming, actually, with lineups out the door each weekend for her unique creations (think meat and alcohol ingredients, along with more traditional options) that sell for up to $4 a pop—she was unable to meet her Indiegogo campaign goal of $15,000 when trying to set up shop. Having raised less than half, she ended up borrowing from family to finish the job.
“It’s difficult for many Toronto businesses to meet their goals,” she concedes.
Crowdfunding is an emerging way for startups to raise funds through small contributions from the general public. This is mostly done online, using sites such as Kickstarter and Indiegogo (recently made famous in Toronto thanks to Gawker‘s Rob Ford Crackstarter). Entrepreneurs can use social media to boost interest in their campaigns. Contributers are usually rewarded with different “perks,” which can range from mere shows of gratitude to actual, physical products.
Overall, it seems to be working. Globally, crowdfunding platforms raised $2.7 billion and successfully funded more than 1 million campaigns in 2012, according to an industry report released in April of this year.
But is crowdfunding right for Toronto’s food and beverage industry? Let’s review a few examples:
Company: Market 707
Goal: $14,500 to build an outdoor patio and portable stage for outdoor events.
Funds raised: $6,500Company: The Real Jerk
Goal: $2,450 to create a photographic mural at its new location, 625 Queen Street East.
Funds raised: $876Company: The Gravy Train
Goal: $20,000 towards building a restaurant from scratch, buying equipment, and covering rental costs.
Funds raised: $3,525
Judging by those results, the answer seems to be “no.” But why?
According to Brock Murray, a board member of the National Crowdfunding Association of Canada, the problem may be with the structure of the system. Currently, “equity-based” crowdfunding is not legally allowed in Canada. This means that while projects can raise money in exchange for an ownership stake from accredited investors, anyone who isn’t accredited (meaning, most crowdfunding contributors) can’t invest in return for equity. Someone who solicits funds can only offer products or services in return.
“Projects on Kickstarter.com, for example, had early success because a lot of projects were creative projects,” Murray says. He explains that reward-based crowdfunding allowed artists to fund their projects in return for a finished copy of the product. A director could ask contributers to chip in $25 and in return provide a DVD of the movie after it was finished.
“Because the art community was an early adopter of crowdfunding, they had excellent marketing pitches in the form of videos,” says Brock. “Some would give a trailer to the movie they wanted to make, [and] you and I both know video can be very compelling when done well.”
According to Murray—who is also the CEO of JOI Media, the creator of some crowdfunding software called Katipult—the projects that tend to do best are passion projects, such as documentaries or independent films, or projects that have been initiated by groups or individuals with solid project plans. It doesn’t seem to work as well for food and beverage companies.
Taking Glory Hole as an example, Murray says it would make a lot of sense for equity-based crowdfunding, but on a rewards-based platform, the incentives of food and beverage don’t work quite as well. People can get doughnuts already; there’s no reason for them to give money to an operator who can’t immediately provide them with a pastry in return.
“I’d rather go to Groupon or another similar site and get instant gratification,” he says.
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Rob Ford Crackstarter Campaign A ‘Reputational Risk’ To Fledgling Crowdfunding Industry
Huff Post | Sunny Freeman | Last Updated: 05/24/2013 11:45 am EDT
In Canada, regulators are further behind, though crowdfunding has grown rapidly – from 17 portals to more than 50 in less than a year. The industry is so new that many Canadians are unclear about its legitimacy, said Craig Asano, executive director of the National Crowdfunding Association of Canada, an industry group started last October.
“People call us all the time,” he said, “and their first question is: Is it legal?”
Gerard Adderley donated $25 to an online campaign that aims to raise $200,000 for enterprising drug dealers because he believes the public deserves to see a video of Toronto Mayor Rob Ford allegedly smoking crack cocaine.
His contribution is only a fraction of what has been raised, but, along with 6,000 others, the Torontonian is contributing to a groundbreaking exercise in democratic capitalism that could have very public ramifications for the nascent crowdfunding industry.
“There are pros and cons, but at the end of the day what I think makes a fantastic story is that ultimately if this video comes to light it will not have been a news organization, per se, that paid for it, it will be the people,” the 41-year-old art director said.
Adderley believes that the video, which Ford has dismissed as “ridiculous,” should be released so the public can hold the elected official to account.
“A lot of people feel this is tantamount to bullying, and my reply to that is: Actually, no, it’s not. This is the school yard coming together to put the bully in his place.”
He hopes the video owners will use the money to leave the city and build better lives. But he also knows that there is a chance they are extorting the mayor, deceiving the public and might never produce the alleged footage.
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Crowdfunding Goes Mainstream: Why Donald Trump and Google Are Supporting Grassroots Financing
Entrepreneur | BY Catherine Clifford | Posted May 15, 2013
A mélange of high-profile brands and personalities are trying to ride the coattails of the recent explosion in the popularity of crowdfunding.
A few short years ago, crowdfunding, or raising large sums of money by soliciting many small donations, was an off-the-beaten-path grassroots movement largely relegated to artists. Not anymore. Crowdfunding has captured the attention of cable TV producers at CNBC and A&E, real-estate mogul Donald Trump and tech behemoth Google. Here's a look at some of their recently announced high-profile projects:
• New CNBC prime-time reality TV show Crowd Rules, where small-business owners compete for $50,000 and the audience votes on which owner to fund, premieres tonight.
• A&E, home of the wildly popular show Duck Dynasty about an entrepreneurial family in Louisiana, partnered with crowdfunding platform RocketHub last month to share the stories of entrepreneurs raising money.
• Tech giant Google said last week that it led a deal to buy a $125 million stake in the online, peer-to-peer lending platform Lending Club, valuing the crowd-financing site at more than $1.5 billion.
• Billionaire real estate mogul Donald Trump co-founded a crowdfunding website, FundAnything.com, where anybody can raise money for any reason.
Crowdfunding is becoming big business. When Brian Meece founded crowdfunding platform RocketHub in 2009, he says the model was still on the "fringe." But given crowdfunding's increasing popularity, Meece predicts that within the next five to 10 years, 90 percent of all seed-stage funding could be crowdfunded -- including projects, organizations and new business ventures.
Meece decided to partner with A&E because it solves the two biggest problems for campaign-leaders on RocketHub: it provides additional money and helps get the word out to a wider audience. Selected entrepreneurs looking to raise money on RocketHub are featured by A&E either through on-air promotions or on the website of the program, called Project Startup.
While crowdfunding is gaining steam, it needs the megaphone of a larger media company like A&E to bring the eyeballs and the dollars, Meece says. In addition to giving exposure to the featured entrepreneurs, the partnership has also inspired entrepreneurship. RocketHub has seen a 300 percent increase in the number of entrepreneurs who have launched projects on the platform since the A&E partnership was announced last month.
For purists, turning crowdfunding into entertainment is a thinly veiled attempt to piggyback on a hot trend. "True crowdfunding is not a competition or a contest in the way that Donald Trump or reality TV is suggesting," Brad Damphousse, CEO of crowdfunding platform GoFundMe, says in an email. "Rather, these creative spinoffs are attempts to capitalize on the massive growth the crowdfunding space is currently experiencing."
One factor contributing to the popularity of crowdfunding is that it inherently appeals to the masses, says Kevin Berg Kartaszewicz-Grell, the director of research at crowdfunding industry-research firm massolution. People are "intrigued by empowerment," says Kartaszewicz-Grell. "Everybody likes to have their hands on the green button." Not only does it empower individuals to raise money, it's also attractive to supporters who want to be a part of something larger than themselves, he says.
Links:
Get the latest Global Crowdfunding Industry Report
