iPledg Blog

“Money never starts an idea. It is always the idea that starts the money”. But when the money hasn’t started rolling in or when it is required more quickly to get the idea off the ground, there are a number of external sources from where capital can be obtained. The traditional way was to go to the bank, and win over the bank manager. Over the years, more creative methods came into being. With the greatest requirement for funding being small tranches, crowd funding is leading the way as the fastest growing form of e-commerce on the planet.

At the top of the funding ladder is the stock exchange. Reserved primarily for “the big boys”, an average listing will cost you around $500,000, not to mention the surrender of equity you have to face in raising capital this way. One needs to consider the handover of control to the investment bankers, lawyers and accountants from the time you even consider putting together a prospectus. Furthermore, start-up companies must demonstrate the potential to develop into profitable enterprises that will deliver significant annual increases in sales and earnings.

Step down a couple of rungs on the funding ladder, and we have the traditional custodians of cash – the banks. Capital raising by way of obtaining a loan from banks has been successfully accomplished for many years. However it is the need to meet the criteria for acceptable risk so that you can obtain the loan, as well as the additional (hidden) charges, the cost of interest, and the cashflow impacts from the need to make regular repayments that have seen traditional bank lending being overlooked in preference for crowd funding.

The counter-side to loans is to give away equity in your initiative, idea, or business. Venture Capital from institutional funds is available, but post-GFC times have seen an evaporation of much of this funding and the bar considerably raised by the risk-adverse funders. Should you be successful in securing funds from a venture capital institution, there is the need to surrender some of the control and the profit, and to ensure that you serve more masters than just satisfying your own goals and desires.

Whilst less stringent or demanding than seeking the venture capital solution, angel investors do also offer an alternative source of funding. Angel investors can also offer the additional benefit of their personal involvement to the evolution and commercialisation of your concept, idea, product or business. However, there remains the need to give away equity and some control, meaning a need to give away some of what you have worked so hard for, not to mention the requirement to ultimately pay back the capital at some time.

Grants offer yet another form of funding to various forms of initiative. Assessment criteria are usually quite high, and there are stringent performance criteria and reporting requirements to be completed along the way, which can consume productive time. There is also the suitability of the grants on offer. Case in point was when, in early 2012, there were 8 schemes available on one particular government website (that of a government department set up to help small business), 5 of which had closed, and of the remainder, the smallest amount on offer was $10mil. Given the fact that 99% of businesses are small business, and most requirements are for small packages of funding, this case highlighted the disconnect between available grant funding and the needs of the market to whom such funding is aimed.

Until the advent of crowd funding, there were (and still remain) many options available at the top of the funding ladder. However, crowd funding now not only offers a sustainable and relevant solution to fill this gap, but a fresh, new and highly workable answer to the funding requirements for creative, commercial, charitable and community initiatives all around the world – a solution that does not involve loans that need to be repaid or the surrender of equity in the idea, product, or service. Is it any wonder that the providers of the traditional forms of funding are more than a little concerned at the global rise and rise of Crowd Funding?

For any startup or business with a new to world idea, the biggest challenge is to create a rock solid proof of concept trial. If executed successfully, it is valuable collateral for any business, giving the idea credibility and gravitas in the eyes of potential customers, investors, suppliers, and partners. But proof of concept trials can be costly in both financial terms and in the time and resources required to implement, monitor, and collate the outcomes. Crowd funding is now proving to be the game changer in the way proof of concept around new ideas is worked up.

Proof of concept, as the name suggests, is real world verification that the idea works and does what it is intended to do, or that the market anticipated for the proposal actually exists and is desirous of the product or service. Proof of concept can be achieved in trials that show that the widget not only could perform in the manner expected, but does in reality do what is expected (or more!). It can also show that the customers, when offered the widget and a chance to buy it at the proposed price or through the proposed distribution channels are willing to purchase. Proof of concept trials traditionally cost money to fund testing of the widget against real world conditions or real market expectations.

Social proof is, by many, being considered as the newest iteration of proof of concept. Proving the widget does what it purported to do is one thing, but commercial viability is, for many, the real evidence required for the project to go ahead. When the makers of the Tick Tock watch crowd funded their campaign to go into full scale production, it wasn’t so much the $941,000 that they raised that saw the project take off, but the 13,000 people that put their hands into their pockets and pre-purchased the watch that saw the greater public sit up and take note, and it was then that the investors, potential partners, and wholesale suppliers and customers came flooding in. Whilst the money raised was nothing short of phenomenal, the real benefit came in the form of the social proof that demonstrated the tremendous commercial viability around the product.

For many, the pre-sales and test marketing that crowd funding offers can be a greater outcome than the money raised. Much like social proof, the test marketing provides confirmation or validation that there is a need or a want “out there” for the product for which the crowd funding campaign is being conducted. Crowd funding can be the first foray into sales for new ideas and products. A successful campaign in which the reward or inducement is an attractive offer to pre-purchase the product may very well be the best way to prove the supposition behind the concept.

Whether the campaign is successful or whether it falls short of its target, crowd funding can provide the necessary real world feedback to go back and “tweek” the product or the offering. Candid honest feedback is always hard to come by when the concept is kept “in house”. Family and friends are always full of praise, but the harshest critics, the ones who will give you the most honest feedback, are your potential market. They will tell you if your concept or product is too big, too small, the wrong shape or colour, or perhaps even too dear. This priceless information allows you to go back to the drawing board with the necessary guidance to make the changes required to satisfy the buying public.

If nothing else, your crowd funding campaign will assist in getting your story out there. The more people to whom you can expose your idea, concept or product, the greater the awareness you generate. Crowd funding is an effective platform on which you can build an awareness campaign, and if you can get others to “share the love” and distribute the campaign to their networks, the more awareness you generate, the more feedback you receive, the greater the volume of test marketing you can do, and the bigger the proof of concept you will achieve.

Whilst crowd funding is indeed the ultimate proof of concept trial, project creators must be aware of protecting their IP, and ensuring they do not push their idea too deeply into the public domain and losing their patentable position. The best advice here is to consult with a suitably qualified patent attorney who will guide you in how to put your product “out there” and crowd fund its birth while achieving your proof of concept trial without giving the game away.

Crowd funding – offering you not only funding, but social proof and collateral to seek buy-in from future funders, investors, suppliers, and strategic partners. It can offer you exposure to the crowd and to your future customers who will give you honest feedback, allowing you to go back and refine your product or offering. Traditionally, proof of concept trials cost the project initiator considerable time, money and resources, but through the wonders of crowd funding, project creators can prove up their offering while raising the funds to get them into monetizing their passion.

It has often been said “Money never starts an idea. It is always the idea that starts the money” But once the money actually starts, and continues to come in, the one thing you can be sure of is that the question of taxes will be asked. The answer will vary all around the globe, and the way in which it is assessed and countless complex external considerations need to be factored in. Wading through all of this requires a knowledge of local tax laws, as well as an intimate understanding of the project creators personal circumstance.

The first consideration must be that of the nature of the incoming funds. Depending on how the campaign has been structured will affect the manner in which the contributions are assessed. If the campaign is put together in a manner that makes the revenue appear as “income”, it will be viewed in a very different manner to a case in which the monies raised are considered as “capital contributions”, as both have very different regulations around how both are taxed.

And it is not only the structure of the campaign and the resulting nature of the contributions that need to be considered. The structure of the project creator should also be understood, as the income will be assessed very differently if the project creator is an individual as opposed to if they are a business or corporation of any sort. The scenario changes quite considerably again if the entity is a Deductible Gift Recipient (DGR) or a registered charity to whom donations are tax deductible.

There are also views around how the activities of the project creator are factored in to their regular income generating activities. If the project for which they are crowd funding is a hobby, it may put yet another slant on the assessment of the revenue generated. Are they doing it as a one off, or will this be an ongoing activity, and how does it tie in to the primary income of the project creator?

Many countries have a Goods and Services tax (GST) or a Value Added Tax (VAT) or any similar form of consumption tax. Different campaigns and different situations in different countries will cause the income generated by a crowd funding campaign to be assessed in different ways as to whether the consumption tax in payable and whether this proportion of the funds raised needs to be bundled up and sent off to the government. If there is a consumption tax component payable on funds raised, the good news is that input credits, or the consumption tax paid by the project creators on items purchased and costs associated with the manufacture, provision and delivery of the project outcome, can be deducted from the money owed to the government for consumption taxes collected.

And the other good bit of advice for those whose campaign funds are liable under local tax laws is that many of the costs of good, raw materials, and expenses are tax deductible. This means any costs you incur as a project creator could possibly be taken off the amount you have raised, and tax is only payable on the net balance once you have taken your costs off the total raised (and not on the total raised itself).

Confused? Scared off?? Feeling a headache coming on???

Relax. There is one overarching piece of advice that can help clarify things simply and easily for each person in every scenario and in every case. And the advice is this – Please ensure you discuss your campaign with your accountant, tax advisor or financial consultant before you embark. They will know your own particular circumstance, and marry this to their understanding of local tax law, which should give you comfort around your liabilities and responsibilities to the taxman.

Crowd Funding – the Complexity of Taxation

Kevin Bacon, the star of Footloose, Animal House, A Few Good Men, and Apollo 13 was also at the centre of the Kevin Bacon Game back in the mid nineties – a game that illuminated the way for the possibilities of Crowd Funding which was to follow a few years later. It showed the way in which we are all inter-connected, and how, through the powers of the Six Degrees of Separation, we can spread messages to far away networks that reach around the globe and back again. Harnessing this power is at the very epicentre of crowd funding success.

In 1994 in a magazine interview, Kevin Bacon claimed that he had worked with everyone in Hollywood or at least someone who has worked with them. This throw-away comment spawned the headlines “Kevin Bacon is the Centre of the Universe”. These headlines moved a group of local university students to create The Kevin Bacon Game. This game started with a simple exercise of having friends suggest names of Hollywood stars, and they would demonstrate how each one of them was connected to Kevin Bacon. The game concept saw a book written, and then an actual board game was created.

Behind the fun and the silliness, a deeper scientific formula and social experiment lay brewing. The concept of a “Bacon Number” came into being, based on the Erdos Number theory. Kevin Bacon was given the number of 0. Those who worked directly with him were given a Bacon Number of 1 (as an example, we will call this guy “Bob”). Then those who didn’t work directly with Kevin Bacon but did work directly with “Bob” were given a Bacon Number of 2, and so on as the network extended outward.

88% of all actors in Hollywood achieved a Bacon Number, and the largest number was a 9. That is, there were 9 degrees of separation between Kevin Bacon and 88% of all actors in the entire Hollywood community. This was based on who had worked with who, and when the experiment was carried out using the presumption of who knew who, the ultimate Bacon Number was far less.

Since this experiment was conducted, similar concepts have been trialled. In one of them, six people in remote locations around the world were given a (controlled) parcel to send to the President of the United States. The only rule was they could only send it to someone they knew personally, someone with whom they share a relationship on a first-name basis, or with whom they had had some form of personal interaction. Each of these parcels made it to their destination, proving the power of the six degrees of separation.

So how does all this relate back to crowd funding?

Quite simply.

If we are to start a crowd funding campaign, it is of utmost importance that the project creator gets the message out to their “first degree”, asking them not just to pledge their support, but asking them to pass the message on to their networks and so on. If we assume that everyone on the planet knows 100 people, the first degree network of the project creator is 100. If each of those people in turn knows 100 people and they let each of them know about the campaign, the second tier network amounts to 10,000 (that is, 100 x 100 people). Assuming each person in each tier (or degree of separation) passes news of the campaign on to the 100 people they know and so on, the message can go viral, with potentially over 1 trillion people hearing of the campaign by the time it reaches the sixth degree of separation (yeah, we know it signifies more than the total population of the earth, but it shows the potential of getting the message moving and amplified through the extended networks).

In 1993, Will Smith and Stockard Channing starred in a movie called, Six degrees of Separation.   Stockard Channing’s character says in the movie, “I read somewhere that everybody on this planet is separated by only six other people. Six degrees of separation between us and everyone else on this planet. Everyone is a new door opening into other worlds. Six degrees of separation between us and everyone else on this planet.   But, to find the right six people…”

This so well encapsulates the essence of crowd funding. Through the power of the internet, campaigns have the chance to viral, to spread, to be heard and supported by millions, billions, and potentially trillions of people. The key is to get the campaign out, and to do so often, so the news is heard by the “right people” who will pledge their support and continue to spread news of the campaign to their networks and beyond.

And it is this that is at the epicenter of crowd funding success!

(Just for the record, Kevin Bacon has been proven not to be the centre of the universe – the centre of the universe is Dennis Hopper!)

One must continually question government stance on over-regulation and inconsistent policies protecting the crowd from self-harm. Currently, anyone can take their hard-earned life savings to any casino and place it all on red, and the government seems happy to allow one to do so. But try to invest $1,000 in a start-up – a venture that has the potential to create employment, generate sustainable returns, and bring a new product or service into being – and the government will stop you so that you don’t naively place yourself at risk of losing your cash. How and why are we in this situation?

For well over a year, the US government has promised to take a proactive stance on bringing sensibility into play through the implementation of the JOBS act. 2013 was held up to be the “Year of the Entrepreneur” with over $300bil of community funding coming on stream to assist start-ups and small business. All of this funding was going to be made available without a single cent coming from government, thus reducing fiscal pressure and potentially assisting to balance the country’s books by energising commercial activity which would generate taxes and spending.

Daunted by the Fiscal Cliff which the US economy faced as Christmas fell at the end of 2012, focus was taken off the implementation of the JOBS Act which was to pave the way for investment crowd funding to become part of the economic landscape. Momentum was taken out of the sails, and we slipped past the critical dates without the fanfare that was to welcome in new legislation. Since that deadline, we have seen the devil getting well and truly tangled up in the detail, and little clarity exists on how the tangle will become unraveled.

Much of the worldwide economic community continues to mark time as we watch the US attempt to unscramble the egg, and sort out to painfully minute detail as to how they will protect investors from any form of self harm by potential lost investment. It seems that the main thing that has been lost is the fact that investment, by its very definition, involves risk. Astute investors mitigate risk by research, assessment, and hedging their outlay. The US government continues “paralysis by analysis”, and dares not make a move for which they could possibly held accountable. Governments that are watching the US and who plan to move based on the US experience (like the Australian federal government) continue to be content to stand in the queue and not move, being satisfied to maintain the status quo.

But the detail is not a “new to world” science. Organisations like the Australian Small Scale Offerings Board (or ASSOB) have years of experience in investment crowd funding. For almost a decade, ASSOB has operated its platform to permit the issue of securities to be made to certain types of investors without a disclosure statement and regulated promotion securities offers. Under the 20/12 rule, companies on the ASSOB platform are able to raise up to $2mil from 20 or fewer persons in any rolling 12 month period. With no frauds in this time, and having facilitated the raising of over AUD $130mil to date, surely this experience must be a consideration on which governments can amend policy to allow broader range investment crowd funding. The experience and the rules of the game are tried and (successfully) tested. Surely there must be grounds there for governments to make a start and allow investment crowd funding to assist in areas to which government budgets just won’t stretch.

Whilst ASSOB has the longest history in investment crowd funding, they are not alone in this space. Employing quite a different model to ASSOB, Crowd Cube in the UK have successfully funded £6mil in start-up, early stage and growth businesses. Their experience extends across sectors including retail, professional services, technology, tourism, IT, education, and oil and gas. Interestingly, and perhaps the greatest testimony to the way in which investors feel suitably comfortable and protected is that 18% of investors have invested multiple times.

Investment crowd funding does not need governments to reinvent the wheel. The experience is there in a number of models, and the overall experience seems to be fair and good, with players from both sides completely aware of what they are entering in to, and with full understanding of the risks and rewards on offer. Governments can access the template by simply engaging with the operators who have proven success under their belts. Then it will be up to them not to draft the game rules (for they are all written), but to define the extent of the rules, to govern prudent investment crowd funding activity, and enjoy robust economies supported by community funding.

Regardless of the type of campaign, and whether it be on a “pledge-model” platform or one that facilitates investment, crowd funding initiatives must straddle the emotional and rational motivators to attract people to support a campaign. And there is a clearly defined link between where the supporters come from and their motivation to support a crowd funding campaign. It is the ability to incorporate science (what we know or the logical motivators) with art (what we feel and how we are motivated emotionally) that brings about crowd funding success.

In the raising of capital or support for a campaign by way of pledges, the “ground floor” is occupied by the project creators, founders, shareholders, directors, management, and trusted advisors. It is the inner core that creates the basis for the movement to begin and the spread of support to commence. All inertia begins here based on what they have created, what they use to attract their followers, and how they go about communicating their funding efforts to “the crowd”. It is the inner core’s ability to understand the need to put forward emotional and logical drivers that will largely determine to what extent the call for funding will extend.

Beyond the “inner core” is what is termed “the first tier”. This tier is inhabited by those people closest to the inner core, largely friends, family, fans and followers of the project creators. The “Four Fs” usually have a strong personal tie to the project initiators or to the niche associated with the project, and therefore are primarily motivated by emotional drivers. It is essential that the project creator quickly engages followers from the first tier to give the campaign credibility and to signify to the broader community that it is alright to follow and pledge their support. They validate the campaign and make it OK for others to follow. This is where the movement is created or lost.

The second tier is then the friends of friends. This is where “tribes” are formed, and their engagement is largely dependent upon an introduction or specific link from people in the first tier. As such, there is less of a direct link to the project creator, so the emotional motivators to support the campaign are not as strong, and logical reasons start to come in to play. There is usually a tangible and traceable pathway from the second tier back through involvement from the first tier and then back to the project. Often members of the second tier will have an affinity with the sector or the nature of the project, e.g. they will support a technology-based campaign when introduced to it if they have an affinity with technology.

It is engagement with the third tier where the real money comes in. It is the connection with “smart money” or angel investors, VCs, private investors, or sophisticated accredited professionals that really starts large volumes of cash being invested or pledged to the project. At this stage there is little in the way of a personal connection to the project originators, and the want to invest or support is largely financially motivated. In the case of “pledge-model” campaigns and platforms, the case is the same in that the motivator for the third tier to get involved is more of a logical reason than the emotional reason that drove the initial support from tier one.

The most successful crowd funding campaigns motivate both the emotional and rational supporter through a skilful balance of science and art. The closer the supporter is to the first tier, the more emotional the motivator needs to be. The further you move from the project originators means the inducement needs to change from the emotional to the rational and logical. The project initiators must quickly engage the Four Fs to get on board for the emotional reasons (“If you really love me, you’ll pledge your support”), and this initial support will give credibility to the campaign and give others comfort that it is OK for them too to jump in and support the campaign. Once inertia starts and if the first tier can be reminded to spread the word to the second tier and so on, word will reach the cash-rich third tier, and it is engagement with this group of funders that will ultimately lead to crowd funding success.

Footnote:

1. Thanks to Paul Neiderer of ASSOB for his discussion and debate that drove much of the content of this blog

2. Whilst investment crowd funding is not available or heavily governed under legislation in many parts of the world, I have referred to it here as examples only, and such references should be taken to demonstrate the way in which campaigns can be supported in any manner – investment, pledge, or otherwise. It does not indicate that investment crowd funding is available or lawful in your part of the world, and guidance should be sought from a suitably qualified professional before embarking on such a project.

The old philosophical thought of “If a tree falls in a forest and no one is around to hear it, does it make a sound?” could very well have been written about crowd funding. You could have the best project, a wonderful outline, killer rewards and captivating media, but if no one gets to hear about it, does it really make a sound? In effect, it is the engagement with the crowd that is the most crucial component of crowd funding, so the first step in any campaign must be the have a crowd to whom you speak.

So how do you build the crowd?

The advent of crowd funding is perfectly timed. With the existence of the internet and social media, the crowd exists just a few mouse clicks away, and anyone can build a crowd if they use the right tools applied in the correct manner. Facebook is the greatest supplier of traffic to crowd funding campaigns, so how do we create a following there? Start with the people you know – family, friends, neighbours, workmates, and anyone who you meet face to face. Then use the Find Friends button to suggest even more people you can approach, and your numbers will start to grow. Make sure you put a link to your facebook page in the signature line of your emails, and watch people start to follow you as you routinely go about sending emails (and while you’re sending emails, do an email blast to let people know you’re after Facebook followers). Use every opportunity to refer people to your Facebook page, like on your business cards or by putting a Facebook “LIKE box” on any blogs you might write.

Twitter also represents a great, simple, and fast was to reach and build a crowd. Start to search out and follow people who share similar interests to you and what your campaign is about. Check out their followers and follow them as well. There are various websites and tools that can help you find people to follow and to make the whole process of connecting that much easier. A simple Google or You Tube search will help you find these, and then it’s a matter of using these to help you increase your reach. A word of advice – make yourself aware of the rules of Twitter, as to how many people you can follow, etc so you don’t go upsetting people or putting your page at risk of being barred or banned.

Building a crowd on a number of social media platforms will expose you to different groups and allow you to speak to a number of different audiences. Google Plus is fresh and growing exponentially so is a good one to get on to. You Tube is technically not a social media platform, but is the second most used search engine on the ‘net, so it’s well worth starting to be part of it with a simple video. Linkedin can be especially useful for commercial projects as it tends to have a greater following amongst businesspeople and professionals.

The key to building and retaining a following is to engage and not just communicate. Don’t just stand on your soapbox and address the crowd. Step down, walk amongst the crowd, and start a dialogue. Asking questions and posting pictures are powerful tools for building crowd engagement. And be sure not to just ask for cash – your social media activity should not always be about the money. The central theme of your social media program should be your campaign, and what your project will deliver. Remember, this is the crowd that will not only fund your campaign, but who will spread the word, and be loyal fans for the life of your project and well beyond.

The importance of building a crowd before you start your campaign cannot be understated. As a general rule, 10% of your total crowd (that is 10% of the total of all your followers on all forms of social media, less any double-up) will pledge an average of $50. If the total of all your social media followers is 1,000 and 10% of these (100 people) each give $50, you are well placed to raise $5,000. You could easily raise more if the word goes viral or if you get support from traditional forms of media, but it is the size and calibre of your initial crowd that will largely govern the basis for your success.

Your crowd funding campaign does not start on the day your project goes live on the site or even when you submit it to the platform for their consideration. Your campaign must start days, weeks, or even months beforehand as you build the crowd and get their engagement primed well before you expose your campaign to the world. Get this right, and you have laid the foundations on which to build a solid

Crowd Funding – Creating a Crowd

At a time of low trust in governments, crowd funding of civil-natured projects is reducing the chance of projects being selected for purely political reasons. Governments are turning to crowd funding to allow their constituents to truly participate in their democracy, and to vote with their money. Whilst original views were that funds raised in such a manner were simply a “tip jar” for governments, the crowd is now realising that this is the best way to have their say in what projects go ahead, with projects that don’t make it over the line falling back into traditional government processes.

With traditional crowd funding campaigns offering material rewards to entice project supporters to pledge their support, governments are successfully offering public recognition and kudos as the incentive for people to get behind the campaign. Whilst most people are pledging their cash purely out of a desire to see the project come to life, many are motivated by naming rights for part or all of the project, recognition on honour boards or the like, and an array of rewards that do not encroach on the funds raised but give the supporter their 15 minutes (or more) of fame.

Perhaps the best known example of a civil-natured government project that has been crowd funded is in the city of Rotterdam, where the government conducted a campaign to build a pedestrian bridge funded by the public who were relied upon to purchase individual planks for its construction.  The wooden pedestrian bridge was to span 350 meters and require 17,000 planks. Citizens were invited to pledge their support with pledges of anywhere between EUR 25 for one plank and EUR 1,250 for an entire bridge section. In return for their support, the public were able to inscribe their section with their name or any other text of their choice.

Other governments are engaging their community and crowd funding to leverage limited government funds. They are asking project creators to crowd fund for the capital they require, with set criteria to be met in order to receive matched funding for any successful campaigns. In such a way, the government is able to drive more funds to certain sectors without having to fund it in its entirety. Screen West in Western Australia (WA) introduced a “Matched Funding” initiative on a crowd funding platform, giving 27 WA filmmakers the chance to receive $3 for every $1 they raised through their campaigns. Over $100,000 was pledged by the public in less than 24 hours, and seven film projects received matched funding from the available pool of $250,000.

Perhaps the greatest innovation is the implementation of a Tipping Point, which acts as a regulator to still allow projects to proceed if the initial target is an overly ambitious one, but if a lesser version of the original project will suffice or is more desirable by the community. A campaign to raise $30,000 for bbqs and seating around the perimeter of a lake might set $9,000 as a tipping point for which bbqs will be provided without the seating, This gives the public the chance to get to the tipping point, but to pledge no more if they wish for only the small part of the overall campaign to go ahead (and then they can bring their own seating).

Crowd funding is increasing be utilised by astute governments to not only provide more to the community than government coffers will allow, but to engage with the communities they serve, who put them into power in the first place, and who will determine their security of tenure.

The space race in the sixties saw opposing camps fighting tooth and nail to get ahead of each other to go further than any man had ever gone before. Through the spirit of healthy competition, the winner was not only the first person to set foot on the moon, but the entire industry which benefited from collective learnings and a focus to do better than had ever been done before. The same can be said for crowd funding, which is now fostering healthy competition amongst industry groups to help entire sectors obtain funding previously unavailable to them.

iPledg is leading the charge with an initiative that calls for industry groups, for example the sporting community, to promote to their members to pitch for the chance to win success-fee-free campaigns, supported by regular expert advice from their own sector as well as from authorities on crowd funding. The offer is a simple yet effective one – the industry group announces to their members a competition that offers a fully supported crowd funding campaign. Hopeful applicants are asked to submit their entry by outlining their project in 100 words or less, and why they would like to use crowd funding to generate the funds they need. From all the entries, a select number receive weekly support in the setting up of their campaign, the launch, and ongoing assistance for the life of the campaign to help the project creator achieve the greatest degree of success. Additional promotion through iPledg’s extensive social media presence, newsletters, press releases, and blogging are also on offer as part of the prize, as is the benefit of being coached by experts in the field of crowd funding, combined with instruction from the industry body themselves.

Through such competition, crowd funding is taken to a whole new level. Individual project creators challenge themselves to pitch their campaign in the best way possible, leading to a better campaign. Competition between members of the community or industry group to win one of the fee-free, fully supported campaigns leads to better project descriptions, more creative rewards, and fantastic media as project creators produce entertaining and engaging short videos and photos to support their fund raising efforts. And the industry body or community themselves benefit. They have more successful members with projects that are funded without any impost on the community, they show their members a way of raising required funds through crowd funding, they have great newsworthy stories to share with their members, and they have successes off which they can breed more success.

The first group to introduce such a competition in Australia is Sports Community, whose membership is made up primarily of sporting clubs, from the very small to those at the highest levels in national competition. Sports Community have promoted the competition to their database, not only leading their community into the brave new world of crowd funding, but creating some interest and excitement within their ranks. Working closely with iPledg, Sports Community will support the campaign winners in the lead up to the start of the campaign, and throughout the life of the campaign to give the project creators the best chance possible to succeed. But the winners are not just those who win one of the 5 fee-free, supported campaigns. All members of Sports Community can follow the progress of the campaigns each week, and learn more about crowd funding to give them a host of hints and pointers on how to run their own crowd funding campaign. As such, the community as a whole benefits.

And it is not just with the Sporting Community that this form of competition can work. It is about to be tried in the IP arena, the entrepreneurial space, to assist start-ups, and with creative and artistic groups. Charities too are welcome to try, and have their members benefit from friendly competition and a chance to win a fee-free, supported package. Community groups such as Rotary and large institutions like Universities also are well suited to enjoying success through crowd funding in this way.

Fitter, faster, higher, stronger – not just an Olympic credo, but the benefits that can be offered to members of community groups and industry bodies that opt to try creative crowd funding competitions like that offered and supported by iPledg

** If you are interested to have iPledg partner your group, university or community in such a competition, please contact us through www.ipledg.com

Many projects that fall short of reaching their funding target do so because the project creator has just been too ambitious with their funding goal. But with a tipping point like that on iPledg, funding campaigns have a built in mechanism to allow a reality check to come into play, allowing the crowd to have even more say if a project should be successfully funded, albeit in a simpler format than the project creator had originally envisioned. And, since introducing the concept of the tipping point, more projects than ever before have transformed from dream to reality.

A tipping point is a simple concept. In traditional crowd funding, project creators are faced with an “all or nothing” scenario. Fall a dollar short of your funding target and (in theory) you get nothing. Then it’s back to the drawing board to see if you can either use the momentum of your first campaign and try again, or trim your project back a little to a lesser funding amount and have another go. A tipping point overcomes this problem by allowing the project creator to set up their campaign in the usual manner, but they can nominate at the outset what they could do if only a percentage of the target funding was raised.

Let’s take for example the case of an author who uses crowd funding to raise the money they need to publish their recently written masterpiece. The funding target may be $10,000 which will allow them to print their works in hardback. But at the outset the aspiring author nominates that it they achieve $3,000 (or 30% of their ultimate target), they can e-publish their book. OK, not their preferred option, but it still sees their book becoming a reality, and available to the world in soft-copy. Once the campaign hits the tipping point, it is considered “live”, and any funds that are raised will be paid to the project creator at the completion of the campaign. So if their target of $10,000 is not met, but they exceed their tipping point of $3,000, the money is collected, and the (lesser) project of publishing their e-book is now a reality.

A tipping point is not unlike the reserve price at an auction. Whilst the seller of a property wants to get as much as they can and dreams of the vast sums that their property can achieve, they set a reserve at a minimum level that allows them to move on and achieve their goals moving forward. Similarly, a tipping point is the position at which the project creator accepts the ability to move forward with their project at the base level. The ability is still there to achieve far greater amounts, and to achieve (and exceed) their ultimate funding goal, but a tipping point allows for them to be “in the game” and achieve at least their base level of funding.

Often the crowd recognises the worth of a campaign. They will determine through their collective voice if a campaign should be funded. They will determine that a widget made of gold may not be worth the funding target of $5,000, but one made of wood is a great idea, and well worth the $2,000 (or 40%) tipping point. A tipping point gives the crowd a greater voice, and a greater say as to whether a project is successful, and in what format the project will go ahead.

In addition, project creators have a higher chance of achieving their funding goal in one way or another. Not only will the crowd provide them the funding they need, they will provide the project creator invaluable feedback, purely based on which of the options are funded. Where else can a project creator receive the funding they require, plus the feedback of an engaged and supportive market? The project creator opens their project up to achieve funding for the more realistic or the stretch goal depending on the collective opinion of the crowd.

Not only will commercial projects benefit in a manner that cannot be offered elsewhere than on a site with tipping point functionality, charities have the special ability to set an exceptionally low tipping point, almost assuring them of all funds raised, given that they put in enough effort to get to their low “reserve” or tipping point.

iPledg’s tipping point allows for even greater democratisation of funding, giving the crowd the chance to say yes to lesser ambitious goals, or to see the whole funding target reached if the crowd see fit. And with the project creator now having two bites of the cherry in the one funding campaign, they have a far greater chance of having their campaign funded, along with being told by the crowd as to which option is going to be better perceived by the market.