Crowdfunding seen as a tool for equity investors

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The Toronto Star | By: Published on Tue May 28 2013

the star personal finance

A crowdfunding campaign that raised $200,000 to buy a video in Toronto raised awareness of its potential to help companies fund their operations.

The U.S. website Gawker recently concluded a successful 10-day campaign to raise $200,000 to purchase a video that appears to show Toronto Mayor Rob Ford smoking crack cocaine.

The campaign, which used a crowdfunding site called Indiegogo, wound up Monday with $201,254 in donations from 8,388 people.

I spoke to a Toronto man named Peter, who pledged $50 to the campaign. He preferred not to use his full name, since he may do business with the city in the future.

“This was my second crowdfunding involvement,” he said. “My first was to help publish a book of photos of people interacting with those fake rooms at an Ikea store. I got a copy of the book, which turned out very well.”

He’s referring to U.S. photographer Amy Lombard, who raised $6,451 through the Kickstarter crowdfunding site, to publish a book, Happy Inside. U.S. supporters got a copy for a $25 donation, while those in Canada had to donate $35.

Peter helped fund the book because he had a soft spot for struggling artists. He had a different motive for giving $50 to the Rob Ford video campaign.

“Gawker went to the trouble of doing this and I appreciated the effort. It was worth it to me to be part of the action,” he says.

Crowdfunding websites are designed to attract grassroots donations for creative projects. They can’t promise investors a chance to make money, though they may offer a personal reward.

A $5 to $25 pledge to the Indiegogo campaign entitled donors to a copy of The Little Book of Rob Ford, a compendium of quotes from Anansi Press. Those who gave $75 could get a public thank you on Twitter.

Last year, Toronto cartoonist Ryan North raised $580,905 on Kickstarter from 15,532 backers for a book retelling Shakespeare’s Hamlet: To Be or Not to Be as a choosable path adventure.

Starting with a modest goal of $20,000, North became known as Kickstarter’s most successful publishing project. He had to promise donors more goodies along the way.

Tara Reed, a Toronto woman, had less success when she used Indiegogo to finance her own choosable path book, Coulda, Woulda, Shoulda: A Novel Approach to Dating. She raised only $9,054 of her $40,000 goal.

“Because I failed, my 124 contributors lost their money and I can’t fulfill their perks,” she said. “I’ve launched a second campaign for $6,500 and I hope to be able to honour the original perks.”

Crowdfunding is still new, but securities regulators see it as a potential tool for companies to raise money from investors.

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