Crowdfunding Culture

As many may know, through our sponsor company, ANDesignLab, a full-serviced industrial design agency, we’ve analyzed innumerable crowd funded campaigns in order to curate some of our own.

So, then, who provides the very best platform for the fundamental features of crowdfunding? Personally, if you are looking for a simple, easy to use solution to raise money for your cause, GoFundMe is the way to go.

They have a great track record of helping folks raise money from a basic medical emergency to a world-shaking event.

It’s that easy; but let’s make it clear–marketing is a science and marketing any product is easier said than done.

Although many impressive sites offer solutions for personal and charity events. Other popular sites include : GoGetFunding, GiveForward, CrowdRise and Tilt.

We believe that none of the ease of use, sharing features and consistent website visitors match up with our top pick.

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However, for business purposes–Kickstarter and Indiegogo are your best bets.

Projects that are asking for funds can vary from things such as some guy that wants to make a potato salad, which makes a huge statement to everyone across the nation and the world. All the way to people very sincerely and genuinely asking for funds to help them pay for a life-saving surgery, which touches the hearts of thousands and rallies them together for a good cause.

While much of crowdfunding isn’t done in hostility, there are plenty of people using crowdfunding as means to make as much money as possible in a way that’s not genuine at all, the potato salad guy and the person asking for help with a hospital bill are essentially on complete opposite ends of the spectrum… That just exploits the system and the people giving them their hard own-earned money, brought to my attention a while ago in an article from Complex.

Those people are giving crowdfunding a bad reputation.

A large group of the people abusing the platform want to be “DIY” and don’t want loaner-restrictions.

Crowdfunding is a potential tool for cultural funding through shared experience. Thus, crowdfunding sites work to open fields of cultural knowledge to newcomers, but also to extend an existing elite class.

In 2013, the crowdfunding industry raised over $5.1 billion worldwide, according to PRNewswire.

The highest reported funding by a crowdfunded project to date is Star Citizen, an online space trading and combat video game being developed, which—as of April 7, 2016—claimed to have raised over USD$111,600,000, beating the previous record of $10,266,844 set by Pebble Watch.

The term ‘crowdsourcing’ was coined by journalist Jeff Howe in the June 2006 issue of Wired.  The term crowdsourcingcalls forth dark comparisons to outsourcing, but crowdsourcing is also optimistically portrayed as a way of harnessing creativity of the masses for free, or for a moderate fee.

Crowdfunding derives from the phenomenon of crowdsourcing. However, crowdfunding is quite different in its own respect.

It works through an open call for funding for particular projects.  Funding is solicited online, usually in relatively small amounts, from individual donors or investors, and goes towards particular projects: personal loans for small businesses, the production of design t-shirts, or the production of movies or music.  In this sense, crowdfunding defies the traditional model of private investment.

Crowdfunding is associated with a range of hopes and ideals, as well as with a number of problems.

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Some of the most significant hopes associated with crowdfunding are: that it could mobilize the small-scale funds necessary to provide more opportunities to more people; that it might thereby further more widespread grassroots production amongst those who might not otherwise have access to the necessary start-up capital to fund their creative projects; and that it might foster greater levels of engagement.

Alongside these hopes are the fears that crowdfunding, like crowdsourcing, may create only loose connections between funders and project leaders, weakening or replacing the stronger ties between creators and more traditional funders that provided fuller and more stable financial and professional support.

“Kickstarter helps artists, musicians, filmmakers, designers, and other creators find the resources and support they need to make their ideas a reality. To date, tens of thousands of creative projects — big and small — have come to life with the support of the Kickstarter community.” – KickStarter Mission Statement

Crowdsourcing has a long history offline.  Cultural products have long been crowdsourced in various ways — the most popular being through open competitions.  There are many examples: a jingle-writing contest.

Turns out in 1713, Alexander Pope “crowdfunded” a project set out to translate 15,693 lines of ancient Greek poetry into English.

The idea of crowdfunding isn’t entirely new. Books have been crowdfunded for centuries: authors and publishers would advertise book projects in pre-numeration or subscription schemes. The subscription business model is not exactly crowdfunding since the actual flow of money will only begin with the arrival of the product.

The list of subscribers, on the other hand, has the power to create the necessary confidence among investors that is needed to risk the publication. 

Television shows like America’s Funniest Home Videos also crowdsource their material, reaping huge financial savings; whereas a half-hour comedy show can cost close to $1 million, a cheap crowdsourced television production can cost a fraction of that, according to Howe.

 

Evidently, crowdfunding is an age-old concept and NOT solely for the internet.

Even the bottom pedestal for the Statue of Liberty was funded in 1884 by Joseph Pulitzer through an open call to the American people and funded through micro-donations. A gift  from the French in the late 1800’s, it almost didn’t make it across the ocean due to The American Committee’s inability to raise enough money.

Governments, political parties, and the public sector have also experimented with crowdfunding.  Barack Obama relied on small donations solicited online during his presidential campaign in 2008.  Many government parties fundraise online, as do a wide variety of other initiatives and projects.

Crowdfunding, more so than crowdsourcing, can present an alternative way to fund cultural productions.  There are four basic models of crowdfunding: donation-based, reward-based, lending-based, and equity-based.  Donation-based crowdfunding platforms are those where funders donate to a project without any expected compensation.  Reward-based crowdfunding initiatives offer non-financial rewards to funders, such as t-shirts or the opportunity to see a band backstage.  Lending-based initiatives are those, like Kiva, where funders expect repayment of the funding they contribute to a project, perhaps with interest; and equity-based projects are those where funders receive equity, revenue, or a share of the profits in a project.

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A 2012 study shows that just 15% of crowdfunded projects in 2011 were equity-based, while 43% were reward-based, 28% were donation-based, and 14% were lending-based.  The equity-based category could grow based on the recent regulatory changes in the United States.

Crowdfunding issuers Title III of the JOBS Act amends Section 4 of the Securities Act  is a new exemption for offerings of “crowdfunded” securities restrictions on million dollar projects.

At the same time, this “social revolution” has a darker side.  Crowdsourcing and crowdfunding also create opportunities for exploitation; crowdfunding could similarly operate as a simple extension of existing forms of misuse by disconnecting creators from more stable and predictable pools of funding and professional resources.

“As that sounds well and fine, they’re starting a crowdfunding project and asking for an absurd or unnecessary amount of money, while offering completely ridiculous rewards, which is unjustifiable.”Pop Culture Lab

Crowdsourcing produces many of the same problems as other forms of unpredictable employment: it provides no benefits and no job security to workers, who often work on a piecework basis for little or no payment.  This business model has put some cultural producers out of work.

Freelance photographers now compete with amateur photographers in the stock photo business; iStockphoto (now owned by Getty Images) crowdsources stock photos from amateur photographers for $1, whereas  professional stock photos can go for anywhere from $200-$300 or more.

Some organizations, as a result, have risen up against crowdsourcing.  Designers have formed an organization called NO!SPEC to advocate against design contests, where designers submit designs to contests on spec, without guarantee of payment. Some organizations, as a result, have risen up against crowdsourcing.  Designers have formed an organization called NO!SPEC to advocate against design contests, where designers submit designs to contests on spec, without guarantee of payment.

Spec work and spec-based design contests have a detrimental impact on the quality of design. With legitimate design opportunities increasingly turning into calls for spec work, our purpose is to give designers the information and resources they need to take a stand against this trend. We also aim to provide businesses with details on why spec work harms the design profession as well as the outcome of design projects.”

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Crowdfunding can also create opportunities for exploitation. Like some types of crowdsourcing (such as competitions), encourage huge wins for a few, while requiring others to create on spec, ultimately gaining nothing for their efforts.

Some crowdfunding programs fund projects before they begin, but others require upfront work, only paying out when (and if) the project is complete.  This has been termed ‘ex poste’ crowdfunding.  Ex poste funding offers little help to artists who don’t have the required upfront capital to produce a project.

Although the Internet provides unlimited opportunities for the free distribution of creativity, some artists lack the up-front capital required to move to the next level of professional-grade productions and therefore to take advantage of digital distribution tools on a professional basis.  Small entrepreneurs without access to venture capital have traditionally relied on the 3Fs (friends, family, and fools) or bootstrap financing, the use of personal finances as opposed to loans or venture capital.

Crowdfunding provides alternatives.

Ex ante crowdfunding, unlike ex poste funding, makes funding available upfront.

Some of the hurdles to ex ante crowdfunding in the United States were removed in 2012, allowing a maximum of $1 million to be raised by companies via crowdfunding.

Artists will use all means available (claw, scratch, bite) and kick their way into the industry any way they can. Ex ante crowdfunding ensures that they can and are making projects with value to others along the way.

For that reason, there should be less regulatory hurdles to crowdfunding.  American gambling and securities regulations restrict the legal possibilities for ex ante crowdfunding, which can be viewed by regulators as gambling, where funders place “bets” on the success of productions. Some crowdfunding platforms, draw on both crowdfunded and public funds, arguing that their model presents a “third way” between laissez-faire and state-dominated top-down funding models that leave out direct citizen involvement.

To Howard Rheingold, online distributed collaboration is a positive alternative to centralized control.

Rheingold has contrasted the ‘collectivism’ of public funding, which involves centralized control and a degree of coercion, the practice or principle of giving a group priority over each individual in it. With ‘collective action’ involving self-selection, freely chosen involvement, and distributed coordination.

Does crowdfunding offer a more democratic way of funding cultural production?

People don’t want to consume passively; they’d rather participate in the development and creation of products meaningful to them.  Crowdsourcing is just one manifestation of a larger trend toward greater democratization in commerce.

On the other hand, expert/elite selection still may have a prominent role to play in crowdfunding platforms.  Sellabanda crowdfunding platform for musicians, attributed some of its initial failures, leading to its bankruptcy in 2010, to inadequate curation.

Making crowdfunding widely available to creators with various levels of experience and sophistication can depend on a certain amount of hand-holding and guidance.

An artist whose work reaches the point of being fully funded on Sellaband is contacted with further direction by Sellaband. Slicethepie crowdsources for talent scouts who provide feedback on submitted music; highly rated talent scouts are paid for their reviews.  ArtistShare provides its artists with professional advice on how to build and maintain relationships with their fans.

Crowdfunding sites such as these work to open fields of cultural knowledge for newcomers, while extending an existing elite class.

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Crowdfunding platforms, like crowdsourcing platforms, network anonymous creators with anonymous funders. Simple, right ?! However, a key factor in making crowdfunding work is the extent to which it can overcome the weakness of its ties – its ability to peel back the layers of anonymity with the site community itself.

Crowdfunding can provide opportunities for experimentation with a variety of democratic models of cultural funding, creating opportunities for democracy.  Crowdfunding platforms can produce new forms of gate keeping that arbitrate opportunities, public taste, public interest, and public concern in a variety of ways that can either replicate existing modes of production, or that can challenge traditional productive practices.

In many cases, copyright in the works produced, are retained either by the creators or by some other entity.

This raises the question: What should be the copyright parameters of crowdsource-funded productions?  The argument has been made that publicly-funded productions should be licensed under open licensing, so that the public is not required to pay for a production twice.  Crowdfunding platforms – especially those that draw on public funding – could adopt a similar principle.

Venture capitalists will tell you that a lackluster IPO market and struggling tech stocks mean that they are being more cautious, but the data suggests otherwise. Apart from last year, which saw $13.7 billion invested in the first quarter, PricewaterhouseCoopers and the National Venture Capital Association data shows that the $12.1 billion invested at the beginning of 2016 was the best start to a year since the dot-com boom in 2001.

That’s a whole lot of money…

Investment dropped in the first quarter amid a cooling in the tech industry, but lets be real, the tech industry doesn’t settle.

First-time investments fell from an average $6.9 million in the last three months of 2015 to $5.7 million in the first quarter of 2016. Tim Ciccoella, a partner with PricewaterhouseCoopers says the investments suggest the venture capitalists are shifting to more late-stage financing and funding more mature startups, instead of shelling out money to brand-new companies.

A number of startups have laid off staff, shut down, or sold at firesale prices because of a tougher funding environment.

Through online systems like Kickstarter and Indiegogo, celebrities are campaigning and asking fans to make donations toward their personal creative projects via the Internet.

C’mon, even legendary rap group De La Soul voices their opinion on crowdfunding via Kickstarter’s “about us“.

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Better yet, video game Shaq-Fu was created in 1994 (when O’neal didn’t need to crowdfund) and widely considered to be one of the worst video games of all time…Shaquille O’neal reentered the gaming sector in May of 2014, crowdfunding plans to unveil a sequel to his original, called Shaq Fu: A Legend Reborn. The campaign reached its goal of $450,000.

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Emmy-winning TV writer Ken Levine, who has worked on shows such as “Frasier” and “The Simpsons,” wrote in a viral blog post that the evolution of crowdfunding can be compared to the Sundance Film Festival, which originally started off as a haven for low-budget films starring unknown actors.

LeVar Burton’s Reading Rainbow revamp has raised nearly $5 million on Kickstarter while Don Cheadle is well on his way to reaching the Indiegogo goal for his Miles Davis biopic. The guys join the ranks of other celebrities who have turned to such platforms, including James Franco and Kristen Bell, who raked in a record-breaking $5.7 million for her Kickstarter campaign for the Veronica Mars movie. Zach Braff has also followed suit, crediting Kristen’s success for his decision to utilize the site for his latest film project, Wish I Was Here.

The celebrity crowdfunding efforts also raise a question about the internet’s supposedly democratic reach and level playing field for would-be entrepreneurs. Some industry insiders remain skeptical. “House of Cards” producer Dana Brunetti expressed enthusiasm for crowdfunding. Yet in a talk headlined by former Facebook executive Randi Zuckerberg, Brunetti questioned whether big names––like Spike Lee and Zach Braff––should cash in on their celebrity appeal by taking advantage of these platforms.

James Franco wants you to know that his Indiegogo campaign is not like the Kickstarter campaign of his “Oz the Great and Powerful” co-star Zach Braff. One big difference? While Braff used his fans for his own profit, Franco’s raising money to help filmmakers and charity.

“I’m not doing this for my own project,” Franco said in a recent interview with UK site Back to the Movies.

When asked how crowdfunding campaigns are changing the film industry, Franco responded: “This is really to give a chance to talented people that deserve it but maybe wouldn’t have the opportunity to otherwise.” Any profits from the movie, he stressed, go to “raise money for a charity that I care about a lot.”

Celebrity status does not guarantee a successful crowdfunding campaign. Remember how I said it’s important to remember that marketing anything is tough…

Take the 2013 Kickstarter campaign of actress Zosia Mamet, a star of Lena Dunham’s hit HBO series “Girls.” With her sister Clara, Mamet makes up the other half of the band The Cabin Sisters. The ask? $32,000 to record the band’s first music video. While fans and supporters pledged $2,783, Kickstarter operates on an all-or-nothing funding model, so the Mamet sisters came up empty-handed.

While researching, the best slogan I came across : Invest before you request. Build your network.

 

 

Everyone is using crowdfunding as an alternative form of finance.  Major corporations are taking notice; there are shows devoted to depicting the startup culture (i.e. Silicon Valley, How to Make it in America, etc.), and now, every major TV network has some kind of “Shark Tank”- iteration.

Still don’t believe how effective crowd funding may be…Parents turn to crowd funding to afford maternity leave.

Like crowdsourcing, crowdfunding can lead to the greater democratization of cultural funding by removing a layer of elite control and replacing it with distributed decision-making. Crowdfunding platforms have a variety of methods of arbitrating public taste, public interest, and public concern.

Patrick Hussey, put into perspective : “Is it possible that crowdfunding is telling us something rather profound – that the most important and popular form of creativity at this point in history is not ‘useless’ art, but digital invention?

 

Crowdfunding as the new business model is only going to grow even more.

 

Why aren’t you crowdfunding? Needless to say, feel free to contact us. 

 

 

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