Raising funds goes global

By Sheryl Smolkin

SHUTTERSTOCK
SHUTTERSTOCK

Whether you are starting a business, writing a book or spearheading a charitable cause, you may need to raise money. Crowdsourcing or crowdfunding web sites allow you to globally market your campaign well beyond the boundaries of your own community or province.

For example, you can raise money on Indiegogo for just about anything including community, health-related and environmental projects. In fact, in June 2012 Max Sidorov, a Toronto college graduate used Indiegogo to raise over $700,000 to send tormented school bus monitor Karen Klein on a vacation, with lots to spare.

In another recent project, Courtney B.C. resident Shawn Wood almost tripled his initial goal of $5,000 to finance a dream wedding for his fiancé Emily Niinmets who has terminal lymphoma.

And even celebrities are getting in on the act. In a six week campaign, author Margaret Atwood raised U.S. $94,995 (original target $85,000) to develop an online event space where artists and performers can connect with fans and aficionados called Fanado.

You can opt for one of two funding models.

  • With flexible funding, you pay 4% to Indiegogo if you reach your target amount, or 9% if you do not. This encourages people to set reasonable goals and promote their campaigns through other forms of social media.
  • A fixed funding option also costs 4% if you reach your objective, but if you do not, you receive nothing and your contributors are refunded.

Currency exchange fees may also apply and there is a 3% fee for credit card processing plus a $25 wire fee for non-U.S. campaigns.

Your campaign is built online using the Indiegogo platform and will typically include one or more videos and text. One-click social media integration, direct email and announcement features are designed to help spread the word, raise awareness and increase funding. Indiegogo also uses an algorithm they call the “gogofactor” to select the most active campaigns featured on its homepage.

Kickstarters is another popular crowdfunding site limited to raising money for creative projects. The catch is that unless you raise all the money you need, you don’t get any of it. If the project is successfully funded, the credit cards of all contributors are charged on the same day and Kickstarters deducts a 5% fee.

Until recently it has been largely inaccessible to many Canadians as participants had to satisfy the requirements of Amazon Payments including having a U.S. bank account and a major U.S. credit or debit card.

However, with the recent launch of Kidstarters Canada, this popular platform is more accessible to creative Canadians. For example, The Aesthetic Studio of Toronto has raised $96,708 (original goal $55,000) to develop little customizable robots and entrepreneur Y.Z. (full name not provided) has raised 147% of the money he needs to develop a token card  designed to hold 8 Toronto Transit Commission tokens and fit into your wallet’s credit card slots.

A research report released last year by industry publication The Daily Crowdsource says crowdfunding has gone from a $32 million market to a $123 million market in the past two years.

Ninety-three per cent of successful campaigns offer donors incentives for contributing. For example, Toronto-based Matthew Ogelsby’s drive to raise $10,000 to expand his comic book series, “Romantically Apocalyptic Books of Captein” generated $51,873. For a $10 donation, contributors got pdfs of two previous books. CDs, greeting cards and an autographed print were added to the package for larger donations.

Kickstarters reports that the average crowdfunding campaign tries to raise $5,000 and 56% of all campaigns fail. With an average campaign target of $3,700, 80% of Indiegogo projects fail.

“The most successful campaigns are proactive, have a good pitch and find an audience that cares,” says Indiegogo spokesperson Rose Levy.  “The campaigns with the greatest challenges are those where participants think all they have to do is post their story and the money will pour in.”

The U.S. Securities Exchange Commission has recently passed equity crowdfunding rulings that allow backers to reap eventual financial returns on investments. The investment scale for businesses and start-ups is much larger than for typical donation-based crowdfunding campaigns.

The Ontario Securities Commission issued a progress report stating their interest in moving forward with the development of a regulatory framework for equity crowdfunding. However, the report highlights the difficult balance that must be attained to provide investors with adequate protection against the risks of investing through this new marketplace without imposing excessive regulatory burdens on issuers and funding portals that would unduly impede the effectiveness of this means of raising capital.

For the pros and cons of crowdfunding, see this CBC article. Filmaker Ian MacKenzie has compiled a list of crowdfunding sites with links for various purposes.

Have you had a personal experience with crowdfunding as a donor or a fundraiser? Share your tips with us at http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card. And remember to put a dollar in the retirement savings jar every time you use one of our money-saving ideas.

If you would like to send us other money saving ideas, here are the themes for the next three weeks:

31-Oct Winter travel Planning your winter getaway
07-Nov Augmenting your income Seasonal jobs
14-Nov Work expenses Why you should pack a lunch

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