Did you know that crowdfunding raised an estimated $5.1 billion in 2013?
THE BRITISH ROCK BAND Marillion is credited with inventing crowdfunding, the process of soliciting small donations from a large number of people through the Internet. In 1997, fans contributed $60,000 to an online fundraising drive so the group could go on a U.S. tour. But the idea for a system of giving money to people outside traditional bank loans dates back to the 1700s, when author Jonathan Swift founded the Irish Loan Fund, which provided small amounts to Dubliners.
ARTISTSHARE, the first website dedicated solely to crowdfunding, launched its first project in 2003. Musicians who wanted fans to finance their albums could initiate campaigns on the site. According to Massolutions, a firm that studies crowdfunding, by 2012 there were 452 crowdfunding websites.
THE MOST POPULAR crowdfunding site is Kickstarter, which has processed pledges totaling over $1 billion since it was founded in 2009. Projects funded through Kickstarter must “create something to share with others”; the site does not allow campaigns intended only to fundraise for charities or social causes. Its biggest competitor, Indiegogo, does. Some websites, such as Fundly, Causes, FirstGiving, and Razoo, cater exclusively to nonprofits or social causes. All crowdfunding platforms charge fees, for everything from setting up the campaign to processing pledge payments. The fees can reach up to 11 percent of the total donations.
CROWDFUNDING RAISED an estimated $5.1 billion in 2013, almost double the amount from the previous year. The majority of the money generated through this method – 30 percent – goes toward social and philanthropic causes. Business and entrepreneurial ventures are the second most popular category, receiving 16.9 percent of donations.
IN 2013, individuals who set up a crowdfunding page for a charitable cause raised an average of $534.39. Groups who set up crowdfunding pages benefiting a charitable cause raised an average of $9,237.55. Donors contributed an average of $88.22 to philanthropic projects financed through crowdfunding.
THE LARGEST crowdfunded project to date is for Star Citizen, a video game. As of April, the creators had raised $44 million. The largest charitable campaign was Kony 2012, operated by Invisible Children to help stop warlord Joseph Kony. It received $4.8 million.
ABOUT 40 PERCENT of online charitable gifts are made during December. In 2013, more than $19 million in online donations was processed on the second annual #GivingTuesday, the Tuesday after Black Friday when nonprofits ran daylong drives on their websites and crowdfunding platforms. This represented a 90 percent increase over the previous year. – Patty Lamberti