Money Fix: Crowdfunding to raise capital
Crowdfunding is the cool way to raise capital, be it for a business, film project, repaying student loans, medical bills -- nearly anything. But is it for you? Credit: iStock
Crowdfunding is the cool way to raise capital, be it for a business, film project, repaying student loans, medical bills -- nearly anything. Tell your story at Kickstarter.com, GoFundMe.com, Indiegogo.com, YouCaring.com, PigIt.com or other sites.
According to Massolution, crowdfunding platforms raised $2.7 billion in 2012, up 81 percent from 2011. But is it for you?
Tobias Holler, an associate professor at the New York Institute for Technology in Old Westbury, raised more than $30,000 on Kickstarter to help build a student-designed recycling center in Costa Rica.
"We surpassed our goals but were surprised by how much work it takes to continuously advertise a campaign -- the Facebook, tweeting, answering people's questions," he says.
Have a strategy: Put a time limit on your campaign, says Marcia Stepanek, new media adviser at New York University's philanthropy and fundraising center. Keep the message clear and short: "$25 feeds 30 hungry New Yorkers," for example. Invest time and money in your pitch video, says Patty Lennon, a crowdfunding consultant in Danbury, Conn.
Know the costs: Payment processing fees can run 3 percent or more. Ask your financial adviser about tax implications of money you raise.
Be realistic: The most popular pledge on Kickstarter is $25, says Kristan Wheaton, a professor at Mercyhurst University in Erie, Pa. Look at successful and unsuccessful projects like yours to get a feel for pledge levels to expect.
Next week: Money Fix looks at crowdfunding from the investor's perspective.
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