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Crowdfunding: Putting the power of financing in your hands

18 Nov 2014

In 1885, Joseph Pulitzer launched one of the first crowdfunding campaigns for a pedestal for the Statue of Liberty. Over 125,000 New Yorkers raised a total of $102,006.39 and the construction of Lady Liberty was completed.

Today, crowdfunding is the fastest growing method for artists, inventors, creators and entrepreneurs to fund a project - whether that project is to create a graphic novel, a new game console, computer mouse or raise equity.

Currently there are a number of different crowdfunding sites, and while they do vary they share the same fundamentals.

A project starts with an idea, the creator chooses a crowdfunding site, outlays their pitch, the amount of money they want to raise, and time they want to raise it in. Often the creator promises ‘rewards’ to donors. Some platforms won't pay out the funds if the target isn’t met, and if it goes over the target, the creator will get every cent.

For Kiwis, there are a number of options. Kickstarter was founded in 2009 in New York and is one of the most well-known sites, with a success rate of 44%. Boosted was founded in 2013 in Auckland and is best suited to arts projects.

PledgeMe was founded in 2012 and is best suited to social good, with a success rate of 49%. Since its inception, the site has had 704 successful projects and raised $3 million.

The company has just announced it is adding equity crowdfunding to the mix, starting by crowdfunding itself.

PledgeMe aims to raise up to $100,000 through up to 15% of the company. Everyone has the opportunity to purchase a share for $20, with a minimum buy of $500.

With the funds, PledgeMe says it will mainly grow its crowd, optimise the site for mobile and build their team.

“PledgeMe is crowdfunding crowdfunding,” says Anna Guenther, PledgeMe, CEO. “By engaging our crowd of supporters, building our core team, and making the site more accessible, we’ll be able to grow - and simultaneously grow New Zealand’s vibrant crowdfunding scene.”

She says PledgeMe is in a unique position in New Zealand, as it is the first crowdfunding platform in the country and the first company to crowdfund equity.

In 2012, Queenstown entrepreneurs, Chris Thompson and Ben Ryan created their dream camera gadget, the Genie, a motion control timelapse device.

The duo found they needed US$150,000 (NZD$187,000) to make take the prototype to a commercial reality.

They listed their project on Kickstarter and within six days had hit their goal. When the campaign closed they had raised US$636,766.

In 2013, Kiwi Opus Fresh Apparel Co. launched a kickstarter with a starting target of $16,000 and the goal to create an innovative adventurewear clothing line that utilised premium New Zealand Merino. By the time the campaign closed, they had 730 backers and had raised $152,444.

With crowdfunding there are many success stories and some outright failures. It’s also largely unregulated, so there is no definite guarantee projects will be completed and promises will be upheld.

However, in providing consumers the freedom to choose who they back and how much they spend, financing is reshaped, with more choice and transparency. Using internet platforms, creators and customers connect directly.

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