Pulling in the crowd
The concept of crowd-funding became popular only a few years ago. Crowd-funding (also known as crowd-financing) is the collective effort of individuals who network and pool their resources, usually via the internet, to support efforts initiated by other people or organisations.
Before the internet, this concept was, and is still used for disaster relief, artist support, political campaigns, start-up company funding, free software development, scientific research and more. This changed in 2008 where a team led by Perry Chen, Yancey Strickler and Charles Adler launched Kickstarter. The aim of this website is to facilitate gathering monetary resources from the general public.
Projects must meet Kickstarter’s guidelines to launch – for instance, charity, causes, fund-my-life projects and open-ended fundraising are not permitted. Project creators choose a deadline, goal and the minimum amount of funds to raise.
If the chosen goal is not gathered by the deadline, no funds are collected. Money pledged by donors is collected using the Amazon Payments system. The platform is open only to permanent US residents who are 18 years of age or older, with a US address, US bank account, a US state-issued driver’s licence, and a major US credit or debit card, so unfortunately this is, for now, not open to Maltese citizens.
Kickstarter takes five per cent of the funds raised and Amazon charges an additional three to five per cent transaction charges. Unlike many forums for fundraising or investment, Kickstarter claims no ownership over the projects. However, projects launched on the site are permanently archived and accessible to the public. After funding is completed, projects and uploaded media cannot be edited or removed from the site.
In June, Kickstarter began publishing statistics on its projects. As of August 10, there were 66,904 launched projects (3,891 in progress), with a success rate of 44.01 per cent. The completed successful projects had raised a total of $265 million (€213 million).
Last February saw a number of landmarks set by Kickstarter. Designed by Casey Hopkins, an iPhone dock became the first Kickstarter project to exceed $1 million (€800,000) pledged. A few hours later, a project by computergame developers Double Fine Productions to fund a new adventure game reached the same figure, having been launched less than 24 hours earlier, and finished with over $3 million (€2.4 million) pledged. On May 18, the Pebble E-Paper Watch raised $10,266,845 (€8,246,616) to become themost funded project in Kickstarter history.
There is no guarantee that people who post projects on Kickstarter will deliver on their projects, use the money to implement their projects, or that the completed projects will meet backers expectations. In fact, Kickstarter has been accused of providing little quality control. Kickstarter advises sponsors to use their own judgement when supporting a project and warns project leaders that they could be liable for legal damages from sponsors for failure to deliver on promises.
Projects can also fail even after a successful fund raise when creators underestimate the total costs required or technical difficulties to be overcome.
A technology enthusiast who has his own blog at www.itnewsblog.com.