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the activity of getting a large group of people to finance a particular project, especially by using a website where people can make contributions
'The duo, who struggled to raise finance for the business the traditional way, have decided to launch a crowdfunding project on Bloom VC to reach out to a wider audience to raise the £7k they need to take the business to the next level.'Scotland Food & Drink 9th January 2012
'WAKAWAKA is a solar LED lighting project being crowdfunded on Kickstarter. The project aims to change the lives of 1.5 billion people who earn less than $2 a day.'Mashable 7th January 2012
'Portland attorneys Jamie Daigle and Bryan Churchill created the Clutch, an iPad case with a handle that doubles as a stand. They're asking crowdfunders to help get it off the ground.'Oregon Live 8th January 2012
Have you ever, like me, pooled birthday or Christmas 'resources' in order to get something that you really wanted? You announce the desire for a particular gift, the value of which would be a rather big ask from any one individual alone, and then instigate a process of gathering random amounts from family members and friends so that you eventually have enough in the kitty to get what you were after. It's this kind of principle of everyone 'chipping in' financially in order to make something possible, which underpins the concept of crowdfunding.
the financing of projects and people by (large) crowds is on the rise, as people are increasingly turning to each other for financial support when it isn't available through conventional channels
Crowdfunding is the activity of attracting financial investment for a project from a very wide range of sources, each contributing varied and often very small amounts of cash. Usually orchestrated via the Internet, crowdfunding is most commonly used as a platform for entrepreneurs needing capital to launch an idea and start up a new business. However, it's also often used to achieve goals in a variety of other contexts, from funding for creative projects, filmmaking etc, through to political campaigns and even disaster relief. With an economic climate in which lending is restricted and funding institutions are squeezed, the financing of projects and people by (large) crowds is on the rise, as people are increasingly turning to each other for financial support when it isn't available through conventional channels.
There are now dozens of websites dedicated to crowdfunding. In a typical scenario, the entrepreneur explains their goal, often on video, indicating the amount of money needed and the incentives people can earn if they are prepared to support the project. Funding is then received if and only if the amount of pledges submitted either hits or exceeds the target amount within a specified timeframe. If the project is supported, then the hosting website will take a percentage of the proceeds. The website Kickstarter.com is one of the more well-known crowdfunding platforms. If you're interested in what kind of projects attract crowdfunding, check out this link in which the site reviews the projects it helped to launch in 2011.
Though the concept of crowdfunding seems like it could only function as a positive opportunity for anyone wanting to launch a new enterprise, one potential disadvantage is that it does mean that the details of a new product or business idea are fully disclosed for public consumption, thus opening up the possibility of it being copied and developed more quickly by better-financed competitors.
The concepts underpinning crowdfunding have long been used by charitable organizations and other creative enterprises, but the term itself didn't first appear until 2006, by which time the idea had been galvanized by social media and web-based payment technology (which makes it straightforward to collect contributions from supporters at relatively low cost). The activity is also sometimes referred to as micropatronage.
Crowdfunding could in linguistic terminology be viewed as a hyponym of the neologism crowdsourcing, which refers to the activity of completing a task, solving a problem, etc., by asking a wide range of people or organizations to help, also usually via the Internet. Like crowdsourcing, crowdfunding has also spawned a related verb crowdfund, often realized as participial adjective crowdfunded (e.g. a crowdfunded project/enterprise …) and an agent noun crowdfunder.
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This article was first published on 6th March 2012.
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