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A Guide to Crowd Funding 

 

Dozens, perhaps hundreds, of crowd funding websites help people drum up financial support for everything from creative projects and social causes to medical bills and disaster relief. Based on volume of web traffic, Kickstarter and Indiegogo are the top two, followed by GoFundMe, according to the Internet ranking site Alexa. All are online payment portals that collect funds through a third-party service. The sites charge a fee, and typically so do the payment services. Combined, the fees can run around 10 percent of the total raised and sometimes more.

Crowd funding sites follow two basic models -- all or nothing or keep whatever you get. With all or nothing sites, supporters make a payment pledge, but aren't billed unless the project reaches or passes its dollar goal within an allotted time. With others, all money donated (minus the fees) goes to the project creator, whether a goal is met or not.

Earlier this year, Time Magazine listed four crowd funding sites as among the best for collecting money from friends, fans, relatives and strangers. They are Kickstarter (specializing in creative projects), Gambitious (specializing in games), and Rock the Post (specializing in viable business ideas), and Indegogo (founded with a focus on film, but now wide-ranging).

The field has seen some legal scuffles, among them a patent suit by Kickstarter, which claimed a company called ArtistShare had tried for an overly broad patent. ArtistShare, one of the early pioneers in crowd funding, began in the early 2000s, essentially helping jazz musicians pre-sell records to fans; it's now beta testing an expansion into a wider market.

 

Kickstarter

Founded: 2009

Size: 77,917 total projects to date, 32,644 of them successful, raising $358 million.

Fees: 8 to 10 percent (a fixed 5 percent fee to Kickstarter, plus 3 to 5 percent to Amazon.

Pays: Only if a dollar goal, specified in advance, is reached.

Approval process: Only accepts projects that are creative and that have an end goal. Requires users to accept payments through Amazon.

Prominent successes: A startup called Pebble Technology raised $10 million-plus this year for its E-Paper Watch, a customizable watch that works with iPhones and smart phones.

 

Indiegogo

Founded: 2008

Size: Doesn't disclose specifics, but says "tens of thousands" of projects have been funded to date, with millions distributed weekly in more than 198 nations.

Fees: 6 to 12 percent (4 percent for all or nothing funding, 9 percent if project goals aren't reached, plus 2 to 3 percent to payment processor).

Pays: User has option to pick all or nothing or to keep whatever comes in.

Approval process: There is no application process, and users can arrange payments through Pay Pal or with credit cards.

Prominent successes: Backed films that have appeared at Sundance, Cannes and other prominent festivals. Raised $500,000-plus so far in Hurricane Sandy relief.

 

GoFundMe

Founded: 2010

Size: Doesn't disclose total projects or funds raised to date, but has six current, public projects in Arcata and Eureka, most dealing with medical bills.

Fees: 7.9 percent plus 30 cents per transaction (5 percent to GoFundMe plus 2.9 percent and the 30 cents to WePay, its payment processor).

Pays: Users have three options; All or nothing, keep everything and get each donation immediately, or for charities, keep everything and get paid monthly.

Approval process: Projects don't have to qualify, and can range from medical bills to schools to sports teams to honeymoons, but users are required to accept payment through WePay.

Prominent successes: More than $170,000 for Farrah Soudani, injured in the Aurora, Colo., theater shooting earlier this year, and $16,000 for custom-made shoes for America's tallest man.

-- Bob Doran

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About The Author

Bob Doran

Bob Doran

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Contributing photographer.

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