I promised to write about the 3 models of crowdfunding but within hours of writing that, I found a blog post with 4 models of crowdfunding which made me stop and think.
For many years, I and others have spoken about 3 models of crowdfunding and I thought, coming from a business viewpoint, there were only three. But this new approach proposed that donations were another model and then I realised that donations largely go to charity and charity is actually big business.
Here are some quick stats to support that opinion. In Australia (April, 2011), there were about 60,000 charities and in New Zealand (September 2012) there are 25,279 charities registered under the Charities Act 2005. Many millions of dollars annually are poured into charities and spent by them. Big business indeed!
So hence, the title of this blog post is ‘3, Whoops! 4 Models of Crowdfunding!’
1. Funds 4 Equity – (crowd investing, crowd equity) lots of people each giving a small amount of money in exchange for shares which provides the business with the large amount of money it requires. Legal and working in the UK, but not downunder!
2. Funds 4 Debt – lots of people each giving small amounts that are pooled together to provide loans. Typically this has been used for microloans in developing countries and these loans are repaid. The best known platform is Kiva.
3. Funds 4 Donations – people making donations, typically to charity and some of the crowdfunding platforms allow charitable listings such as Give a Little.
There are platforms that allow crowdfunding donations for health assistance. The most controversial, being one that allows women to seek crowdfunding for breast enhancement surgery.
Obama’s 2008 presidential campaign is considered to be a major crowdfunding success with a huge number of online, small donations together totalling a very, very large sum of money.
Another interesting example of Funds 4 Donation is from the US and it even made the news downunder. Bus monitor, Karen Klein was bullied by teenagers and the video recording of the incident went viral on the internet. A subsequent crowdfunding campaign was set up to raise $5000 to give her a holiday. The campaign on the platform Indigogo raised $702,454 in donations from a crowd of over 30,000.
4. Funds 4 Rewards – this is typically the type of project that is listed on the three crowdfunding platforms downunder. Project creators publish their project and offer a variety of rewards to people who fund their projects by each contributing a small amount of money. Check out the numerous examples on iPledg, Pozible and PledgeMe.
And those are the 4 Models of Crowdfunding and hopefully you will enjoy checking out some of the examples provided.
In Australia and New Zealand, Funds 4 Donation and Funds 4 Rewards are legal. In the UK and China, Funds 4 Equity are legal. The USA has just passed the JOBS Act making Funds 4 Equity legal although it is not active yet because the Securities and Exchange Commission (SEC) is currently working on the rules for implementation.
For the most part, this blog will focus on – Funds 4 Rewards and helping Australians and New Zealanders get the most from this form of crowdfunding.