Does Crowdfunding Work?

Barence writes "Is it really practical to fund a business from hundreds of small donations harvested over the internet? With Kickstarter grabbing the headlines with some high-profile projects, it's all too easy to assume crowdfunding is great, the obvious solution for a business that needs investment. But just how feasible is it for most businesses? This article looks at several lower-profile examples and investigates the positives and negatives of this new way to raise money."

Re:No. This is how it goes...

[wjsteele]

And then said "Famous douchebag" posts your message as an A/C on Slashdot.

Man, I just wish I had mod points.

Bill

Re:No. This is how it goes...

[Kjella]

Obviously there are a lot of people who won't get any kind of funding and that's perfectly normal, it'd be a pretty strange world if everyone got the money they asked for. That doesn't say much about the relative merits of crowdfunding versus investor funding.

No.

[thePowerOfGrayskull]

No, for most people and businesses it does not work. You have only to look at the other 99.9% of projects on kickstarter to see that.

Side note: anything that links to pc pro is probably *not* something we should consider news for nerds.

wrong question

[DevilM]

I don't think the question should be can you raise money for your business (or idea) with crowd funding. I think the question should be, is crowd funding intelligent enough to pick winners and losers? Most popularity contests are won by the superficial as opposed to substance.

Re:Kickstarter replaces IPO

[jfengel]

Yes, the SEC limits your ability to raise funds in exchange for equity. The rules are (surprise, surprise) complex, but if you're asking people to invest who aren't principals of the company, they need to be "accredited investors":

http://www.sec.gov/answers/accred.htm [sec.gov]

The idea had been to prevent people from being bamboozled into making bad investments. With Kickstarter, right now, you're being told explicitly: this is not an investment. It's a gift, with token prizes, not a piece of the action. "Accredited investors" are rich enough that they can afford to absorb losses. That changes next year with the JOBS act:

http://en.wikipedia.org/wiki/Jumpstart_Our_Business_Startups_Act [wikipedia.org]

There is some concern that it will be used for fraud, as people give a lot of money for impossible returns. I think those concerns are well-founded, but we'll have to see. It might just be our next bubble.

Re:wrong question

[brit74]

A little viral marketing, and you have $50-100k in no time because a buck is nothing to people and you are never scrutinized for wanting some pocket change.

Honestly, I think it's about a hundred times more difficult to get something to go viral than this sentence suggests.

Numbers?

[brit74]

That article was remarkably free of actual numbers. I was hoping for some statistics. Speaking of which, here's an article about Kickstarter projects that I read a while back ( http://www.appsblogger.com/behind-kickstarter-crowdfunding-stats/ [appsblogger.com] ). They included some actual numbers - for example: "Projects that are featured have a 89% chance of being successful, compared to 30% without." (I presume that means "featured on the Kickstarter homepage".) The downside to that statistic is that, as more projects appear on Kickstarter, the smaller percentage of them will be on the front page (because there's limited space). If that's true, it means the percentage of successful Kickstarter projects will decline as more projects appear on Kickstarter.