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Crowdfunding

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by

Becky Johnson

on 19 November 2014

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Transcript of Crowdfunding

What is Crowdfunding?
Image by goodtextures: http://fav.me/d2he3r8
The use of small amounts of capital from a large number of individuals to finance a project or business (non-profit or for-profit).

Crowdfunding Defined...
Makes use of the easy accessibility of vast networks of friends, family and colleagues through social media websites like Facebook, Twitter and LinkedIn to get the word out about a new project and attract funds.

Unregulated
Donations
Reward
Pre-purchase
Lending/Debt
Regulated
Equity
Non-accredited Investors
Accredited Investors
Types of Crowdfunding
2 Basic Models:
All-or-nothing
Hit the goal, or receive no funding.

Flexible Funding
If you don’t reach your goal, you can take what you raised (at a higher cost).
Pros of Crowdfunding
Ability to reach large number of fans.
Expand your fans & advertise
A way to gauge interest and support for a project.
“Free money”
You can raise funds above your goal.
If don’t hit your goal, you don’t owe any rewards (in all-or nothing campaigns).
You keep 100% ownership of your work.

Cons of Crowdfunding
If you don’t reach your goal, you get nothing (in all-or-nothing campaigns).
If you fail, it may discourage fans and future funders.
Money not really “free.”
It can be hard work to run a successful campaign.
Rewards and fees can take 1/3 of funds.
Staff time has been used, even if you fail.
You must openly share your idea with the world.
PROS & CONS
2008: credit was limited during economic downturn, so crowdfunding took off
2012: crowdfunding platforms raised $2.7B
2013: projected to raise $5.1B
Equity crowdfunding investment projected to reach $700M in 2014

Growth of Crowdfunding
Presented and prepared by Croatan Institute Staff

To learn more about Croatan Institute and crowdfunding, visit www.croataninstitute.org.
0% interest loan product
Funded entirely via online crowdfunding $25 per person
Trustee-backed

Crowdfunded Loan Products
Community Sourced Capital
0% interest product
CSC sells squares for $50, up to 5 per customer
CSC support

Kiva Zip
Community Sourced Capital
Businesses chosen with at least a year of proven revenue in their books can apply.
Minimum and maximum loan amounts chosen.
Payback as percentage of revenues.
CSC charges flat fees to businesses for services.
Squares purchased to support a specific business with capital, not to make money from an investment.
Currently expanding outside WA state area.
Planning to develop larger loans, pre-payment model, and investment returns in the future.

0% interest loans to small businesses not otherwise qualified for conventional loans
Designed specifically for financially excluded, socially impactful entrepreneurs who need small starter loans up to $5,000
Funded entirely via online crowdfunding
Lower cost of lending through using PayPal
Directly connects borrowers with a ready community of lenders who they can turn into fans and advocates
Full transcript