Crowdfunding: Catching the Public’s Eye

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By Catherine Wolinski: Assistant Editor

There’s a new approach to raising money for your organization, and it doesn’t require changing the way you run your business. The method is crowdfunding, and it is emerging as a simple and engaging way for companies and causes to gain support for new ideas and products online. As more project leaders are turning to this process, numerous cases are beginning to show that with the appropriate web platform, reaching target audiences and financial goals can be quick and easy.

Some of the most visible crowdfunding websites include Kickstarter.com, Indiegogo.com, Crowdrise.com, Fundable.com and Fundly.com, with an increasing amount of sites competing for cyberspace as the concept takes hold. A vast marketplace exists throughout, particularly in “creative” areas such as fashion and film, and within these categories, health-related and small business campaigns have become increasingly prevalent. Among them, eyecare is starting to gain significant traction.

Two of the most visible sites are Kickstarter and Indiegogo, which stand out as catalysts for eyecare initiatives. The platforms mirror one another in a variety of ways—they leave campaigning entirely up to the creator, they incorporate a value exchange by which creators offer a reward system to their potential pledgers, and they charge a small fee (typically between 1 percent and 3 percent) depending on how much funding is achieved. There are, however, some fundamental differences.

 
The Kickstarter homepage at www.kickstarter.com. 
Kickstarter, geared toward artistic projects, is arguably the most popular platform to date. According to a spokesperson, the site launched in April of 2009, and in just over three years has seen the exchange of $360 million between backers and project owners, has hosted over 70,000 projects and has labeled 30,000 of these projects as “successful,” meaning each reached the funding goal determined at its launch.

The site operates using “fixed funding,” meaning that the determined amount of money must be met in order for the project to receive pledged dollars. If the goal is not reached, the pledged amount is refunded to the project backers. While the majority of projects are not successful in this model, the spokesperson said, the majority of money pledged goes toward successfully funded projects. “Backers know they’re only getting behind a project if it has sufficient funds to go forward,” he said. “It protects the backers and the creators—everyone is emotionally invested, so they help push it forward.”

 
The Indiegogo homepage at www.indiegogo.com.
Indiegogo takes a more distinct and democratic approach. Unlike Kickstarter, which requires a U.S. bank account to launch a campaign, Indiegogo is global, has no application process and encourages “anyone, anywhere, anytime” to use their site, according to founder and COO, Danae Ringelmann. The site also offers both fixed and flexible funding, Ringelmann said, meaning campaigners can choose between placing a fixed goal amount upon their campaign, or opting for flexed funding, the more popular option, with which all pledged funds are gained.

“One big misconception about crowdfunding is that you need to raise all the money you need at once to get a project going, and we fundamentally disagree with that,” Ringelmann said. “It’s a great way to get startup capital together, or to get finishing funds together, or to complement other forms of financing. Crowdfunding is also a way to activate your community and customer base and get them more involved in your project.”

 
 Danae Ringelmann, Indiegogo founder and COO.
Perhaps the most significant distinction between Indiegogo and other crowdfunding sites is the “Gogofactor,” an analytic formula created by the company. According to Ringelmann, the Gogofactor assures that fundraising on Indiegogo is “completely meritocratic,” meaning each campaign has equal opportunity for exposure. Essentially, the formula determines which campaigns are successful by measuring their activity—how frequently they are updated by the owner, how many visitors they attract and how many times they are shared on social media sites like Facebook and Twitter. The higher this activity rate, the higher the Gogofactor, and the higher the Gogofactor, the higher the campaign appears on the Indiegogo homepage.

“We’re a very data-driven company,” Ringelmann said. “We match the art of social discovery with the science of analytics. The best is not determined by us, but by the campaign owners and the communities themselves. I think this is what makes us totally revolutionary.”