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Crowdfunding

Crowdfunding is a method by which individuals, organisations and projects, social enterprises and businesses raise money from small investors over the internet. It works through the web, using social media to engage with ‘the crowd' and is seen as having the potential to reach large numbers of potential investors each contributing small amounts of money for wider benefit.

 

 

Organisations and entrepreneurs typically use a crowd funding website such as Kickstarter or Crowdcube as an intermediary, where potential investors can view proposed projects and choose to what extent they want to invest.

Slindon Forge a community owned forge and café raised over £50K over a 4 month period towards its funding goal of £200k+ needed to turn an old forge building into a community owned shop and café.

Splashmaps is a new company which makes washable, wearable, waterproof maps. Their founder raised just over £8K from 101 backers through a crowdfunding pitch on Kickstarter.

Pants to Poverty raised £58K exceeding their £30K target through the Buzzbnk platform to fund an ethical supply chain for fair traded underwear from 104 backers.

Home baked raised over £18K from a Kickstarter campaign to buy an oven for a cooperative bakery in Anfield from 494 backers from all over the world.

 

WSSEN's Crowdfunding conference [Nov 2013] brought together representatives from social enterprise, voluntary and community sector organisations and others to hear about crowd funding – what it is, how it works and the practicalities of making a pitch.

View the conference presentations: 

View the worshop presentations:

 

How does it work? People or organisations use an online platform to pitch an idea for funding and anyone who wishes can pledge money towards the target often within a set timescale and usually for something in return. This can range from a reward to a loan arrangement, a withdraw-able share in the business or pure equity investment.

 

How big is crowd funding? Globally it has been estimated that crowd funding activity is worth around £3.5Bn. While it began in North America, activity in Europe is developing rapidly and is extending worldwide. Some examples:  

  • Kickstarter is open to creative projects.
  • Crowdcube is for equity investment.
  • Microgenius is a new platform for Community shares
  • Buzzbnk is a UK social enterprise crowd funding platform for donations and loans.

 

Regulation and oversight Crowdfunding is not without risk – the promoter could be a fraud or the project could be unsuccessful.

  • Different crowd funding sites contain information about how the platform works and tips on making a good pitch.
  • Some web platforms offer help with how to make a good pitch.
  • Arrangements for how money is paid over varies between different platforms.
  • Other safeguards include a checking process for investors and pitches.
  • The FCA has recently conducted a consultation about regulatory aspects of crowd funding.

For more information download our Crowdfunding Feature.

 

 



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