Kristina Kapanova 2012CrowdfundingWhat, Why, How, Best practices

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What is Crowdfunding?CROWDFUNDING is specific type of crowdsourcing where creators raise funds through crowdfunding platforms.

The objective is the financing of a project of a venture by a group of individual instead of professional parties (Larralde,B., Schwienbacher, A. 2010).

Crowdfunding occurs without any intermediary: artists/entrepreneurs approach the crowd to raise money directly from individuals

The audience, now more than ever, can directly put their money where their preferences lie, instead of relying on an institution to make decisions for them.

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Hemer, Joachim, (2011), A snapshot on crowdfunding, No R2/2011, Working Papers "Firms and Region", Fraunhofer Institute for Systems and Innovation Research (ISI)Types of Crowdfunding?JOACHIM HEMER in his paper "A snapshot on Crowdfunding identifies several types of crowdfunding: Crowd donation altruistic donation, where the donor expects nothing in return. Crowd Sponsoring the entrepreneur and the donator agree on a predetermined reward the former one is to give the sponsor after completion of the project.Crowd preselling through crowdfunding something is to be produced book, movie, music, product or software, etc. The rewards is early delivery of the produced product.Crowd Lending the investor lends money to the entrepreneur and expects to receive his lending money and any possible interest .Crowd Equity crowdfunder invest in shares in a venture, receiving dividends, voting rights, etc.

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Raise funding bypassing the traditional channels.Involving people during the early stages of development engages supporters.Raise awareness for the work/product.Retain full creative control Keep 100% copyright. Choice and flexibilityGain better understanding of consumers tastes.BenefitsCrowdfunding is not just about the moneyDirect access to audienceNew aspects of the relationship between artist and audienceThrough Crowdfunding you can test, promote and market the product.Your funders become your most active advertisers.

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Crowdfunding PlatformsThe biggest playersKikstarterThe biggest crowdfunding platform.For funding projects in the creative fields from photography, film, publishing to technology. Your campaign needs to be successful in order to keep the funds.Rockethub For funding projects in the creative fields from photography, film, publishing to technology. After the project deadline has passed, you can keep all the raised funds.Rockethub has also crowdfunding section for science projects.

IndieGoGoFor funding projects in the creative fields from photography, film, publishing to technology. You can choose between Fixed or Flexible funding. With fixed, you receive the funding only if the campaign was successful, while with flexible, you keep whatever have been raised.

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Crowdfunding PlatformsSome Niche marketsMusicCrowdfunding Platforms, allowing musicians to raise money to produce, record ,distribute their music, make concerts, etc.SelllABand complete flexibility in funding plans, no right holdingArtistShare have to be approved, not clear funding modelPledgeMusic All or Nothing fundingEquity PlatformsEquity crowdfunding will allow entrepreneurs to sell shares directly to investors.After the passing of JOBS act, many equity crowdfunding platforms are expected to launch in the near future.

Non-ProfitCrowdfunding platforms that try to help social entrepreneurs change the world. Kiva - people make charitable, interest-free loans to entrepreneurs from developing countries33needs: for social enterprisesAdvert Activist-U.K.-based platform that helps fund advertising campaigns for social causes.

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What To ConsiderWhen developing crowdfunding platform

How much money do you want to raise?How many days do you need and when do you want to run your campaign?What platform do you want to run your campaign on?What is the fee of the crowdfunding platform, if you use oneWhat is the transaction fee from you financial institutionWhat is the cost of your perks including production and shippingFor Successful CampaignBefore you start, ask yourself:

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When choosing a crowdfunding platform be aware of its strengths and weaknesses.

Benchmark your project against similar campaigns in your chosen category.

Take advantage from advice from other crowdfunders their insight is invaluable.

Build clear and strong call to action. Create a sense of urgency around your campaign.

Establish early on what makes your product unique and compelling enough that people would want to put their money into it!Take Under ConsiderationGeneral Guidelines

"Your backers become your built-in marketing team and crew of brand evangelists, helping to promote your project to all their friends and contacts."9

Understand your target audience

Generally your pitch will consists of: Video and Written Introduction.

Decide on the type of approach you will take to introduce your message - humorous, serious, quirky, imaginative, straightforward, etc.

Test how easy it is to read your proposal and whether all the key details and features are described.

Is the pitch confusing or easy to grasp even if the backer is skimming your message?

Decide on the advertising and marketing activities to promote your project. What are the most suitable social media channels to be utilized?Developing the Campaign This is not an exhaustive list How often are you posting updates?

Can backers easy and successfully share your project to their social networks?

Do you have clear and exciting reward tier? Are they various tier levels backers to choose from?

Would you develop a website/blog for the project where you can post updates, relevant information, etc.

Reference: Steinberg,S.DeMaria,R. Kimmich,J. Migicovsky,E. (2012)The Crowdfunding Bible: How to Raise Money for Any Startup, Video Game or Project. READ.ME

"Your backers become your built-in marketing team and crew of brand evangelists, helping to promote your project to all their friends and contacts."10

Good Luck!Create, share, engage with your audience!

Thank You!Emailkkapanova@gmail.comTwitter@k_kapanovaGoogle+Kristina KapanovaBlogwww.sfkpublishing.com/blog

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