Crowdfunding- The Past, Present and Future.

THE PAST, PRESENT AND FUTURE OF CROWD FUNDING.

The idea and practice of crowdfunding has been around for centuries. In the early 17^th Century, public fundraising was used to finance the publishing of books, before they were tangible goods. Later on, in 1885, when the US government was unable to come up with the last US$100,000 they needed to complete the base intended to hold the Statue of Liberty, Joseph Pulitzer, owner of the New York World, decided to publish a crowd sourced campaign on the front page of his newspaper. This campaign was entirely successful, and five months later, the city of New York had enough funds to complete the project.

One of the advertisements for the crowdfunding campaign of The World Newspaper in 1885

Since then, the idea of crowdsourcing has been propelled into the 21^st century, thanks to the Internet. The first known use of the actual term ‘crowdfunding’ comes from 2006, when coined by Michael Sullivan with the launch of his website initiative, Fundavlog. Although his mission wasn’t entirely successful, the effect that the idea of crowdfunding has had on the online landscape has been lasting. Not until Kickstarter launched in 2009 did the world truly get to know the definition of crowdfunding in practice. Since it launched, more than 8.8 billion people have pledged US$1.8 billion, funding 86,000 creative projects. In 2013, the crowdfunding industry worth reached to over US$5.1 billion from over 452 crowdfunding platforms  and a 2013 World Bank Report predicts that, in China, this figure will rise to US$50 billion by 2025.

The beauty of crowdfunding lies in its inherit democratic nature. “If someone creative wants to make something they’re passionate about, and they can convince others of its worth, then they will be able to do so, at the cost of their supporters” says Ewen Smith, 26, who had launched his own Kickstarter campaign but unfortunately could not successfully fund his campaign to fulfilment. Of the campaign he says he "couldn’t quite get the social traction one needs to truly gain momentum for these sorts of things, so unfortunately I became one of the 'failed projects'. I did learn a lot though, and plan to try again in the future with a different approach. I think the future of this medium is really promising, because it allows for creators to make something without external people telling the creator 'who', 'what' 'where' or 'why' when it comes to the actual product. As for now though, we're taking the product back in for review.”

The same goes for people wanting to raise money for those in need, housing, legal support or things similar, where if they can successfully convince people of their needs, they will be funded. Unlike before, the possibilities of backers for any given project has been unleashed onto the entire world, unlike before when people were limited to those in their local vicinity. This business model allows for project makers to find people who are like-minded from a bigger pool of potential backers who want to see their projects come to fruition at the expense of those in support of it.

There are many stories to credit crowdfunding and its successes some making a difference, and some a product of the Internet simply supporting something because its entertaining to see something ridiculous gain momentum. An example of the latter, in July 2014, Zack Danger Brown launched his campaign for Potato Salad. He simply wanted to raise ten dollars to eat potato salad, declaring in the mission statement, ‘Basically I'm just making potato salad. I haven't decided what kind yet.’ This ‘mission’ of his then elicited a huge response from the Internet due to its random purpose and subsequently raised just over $55,000 of his $10 goal. Given, he did put this money to good use and created an event called PotatoStock, (project makers are only allowed to spend the money on the elicit purpose of the project, regardless of funds raised). The funds from this event were which he used to create a fund to help end hunger and homelessness in Ohio.

There are cases, however, where the creator doesn’t follow through on their promises and there have since been new laws passed in order to ensure this doesn’t happen again. One such creator, Erik Chevalier, has cancelled his Kickstarter campaign for a board game halfway through the allotted time, keeping the funds raised, and not making any form of product for the market. The Federal Trade Commission has since acted upon this crime and he is now banned from any form of misleading crowdfunding practices and must always act in accordance with the law and policies regarding refunds for such campaigns.

There have been other success stories, more meaningful and change effecting than a ten-dollar bowl of potato salad as the end goal. There has been funding to re-establish a local Portland family restaurant, which was a local treasure, for new mosquito repellent technology to be made available in Africa, creating engineering toys for girls and sending disadvantaged children from New York on field trips to Harvard, organised by the creator of the blog Humans Of New York, Brandon Stanton.

On a more local level, crowdfunding is also being used on a smaller scale to help with small costs of day to life when the creator is in financial strife. Kayla Roze, 21 and Psychology student at the University of Melbourne knows these advantages well. Her best friend, who wishes to remain anonymous, has started a campaign to raise money to help her struggling family with legal costs against her father, who after sexually abusing a young member of her family, is now fighting with their mother to regain custody of the children. So far she has raised $587 of her $2000 goal. Of her friend, Kayla says that it’s “hard to describe how filled with gratitude she is. She hasn’t told her family that she’s raising money yet, she is going to present them with a lump sum once the funding is complete”. Kayla says she doesn’t know whether this method of anonymous fundraising is going to work, but states that “the Facebook sharing option has been a huge help, when people can see that they’re own friends are getting behind a project, it can humanize the issue allowing for larger success.”

The success behind most of these campaigns can be attributed to social media and the virality of these types of campaigns. People are excited about an original idea that they genuinely believe would enhance their everyday life, they can back an emotional issue from a human-interest standpoint, or they are just looking for some light-hearted entertainment, as with the potato salad campaign.

In terms of the future, the face of crowdfunding is set to change, though, with the introduction of the JOBS (Jumpstart our Business Startups) Act by Barack Obama in 2012. This means that now, businesses, or startups, can sell up to $1 million in shares and have up to 1000 stakeholders in their company before having to register with the US Stock Exchange. This means that instead of selling prizes or giveaways as means of payment to the backer, they are instead purchasing shares in the company. Before, only wealthy investors, or accredited investors, were able to invest in startups, but now this means that anyone over the age of 18 and the money to invest can do so at their leisure. This will aid hugely in the US' slowing business market and is sure to create a ripple effect across the rest of the world, pending its success.

Though it may seem the resource of crowdfunding has been largely utilised, the reality is that it remains wholly untapped when speaking in terms of its ability to go beyond smaller creative projects. The fact that the US government is now acting upon change as a result of the explosion of this medium says something about the foreseeable future of the idea.