Crowdfunding, as defined by Wikipedia, is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the Internet. And this practice is taking us to places that were hard to imagine just some years ago…
Kickstarter and Indiegogo are the two most popular platforms to jumpstart almost any idea. Through these platforms we have already seen some remarkable success stories, such as the Pebble smartwatch which started their campaign hoping to get $100k, reached their goal within 2 hours and ended up racking $10.2 million. Or how about the Occulus Rift virtual reality headset, which was looking to raise $250k and got $2.4 million (and was later acquired by Facebook for $2 billion).
Pebble this year returned to Kickstarter to launch their follow-up product, the Pebble Time, with a campaign for $500k and received $20.3 million.
This author has personally backed 9 different projects across the two platforms in the past 5 years and unfortunately got scammed once (and lost $160 supporting this).
Crowdfunding has many risks and relatively zero accountability as it works on the honor system. And this has regulators all-around the globe scratching their heads figuring what their role is in this multi-billion-dollar market.
People have mocked the model and abused of it to show how ridiculous it can get, as Zack Brown proved in December 2014 with his Potato Saladcampaign. He wanted to raise $10 (ten dollars) to make a potato salad and ended up with FIFTY-FIVE THOUSAND DOLLARS. 21 people pledged the highest perk, contributing $110 to get:
THE PLATINUM POTATO: Receive the recipe book, the shirt and the hat along with a bite of the potato salad, a photo of me making the potato salad, a ‘thank you’ posted to our website and I will say your name out loud while making the potato salad.
Talk about disposable income.
Once more, crowdfunding is all over the news because a British citizen is trying to bail-out Greece through Indiegogo. He has created a campaign to raise 1,600,000,000€. Yes, one point six billion euros. You can chip in to the cause starting at 3€ which gets you a postcard of the Greek Prime Minister, Alex Tsipras, shipped from Greece.
At the time of publishing, the campaign had a little over a day left and 105,438 backers that helped raise 1,868,161€ (with 5 individuals pledging 5,000€ to get the second highest perk). This amount, while remarkable, is not even 1% of the money needed to successfully rescue Greece (and they seem reluctant to be rescued, anyway).
In sum, we can only hope serious and committed entrepreneurs continue leveraging these platforms for noble purposes and create inventions that advance the human race forward, so they keep outnumbering those looking to abuse the goodwill of millions of people all-around the word.