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Crowdfunding (also spelled crowd funding) is an Internet neologism referring to the practice of raising capital for a project idea through donations from a grassroots network of individuals on the Internet.
The earliest known instance of an online grassroots fundraiser dates back to 1997 when American fans of the British rock group Marillion independently funded and organized an entire U.S. concert tour through an Internet-based campaign, raising over $60,000. A fe years later in 2000, the first music-focused crowdfunding platform ArtistShare was launched. Early examples of crowdfunding campaigns also sprang up in Japan with the group Electric Eel Shock raising £10,000 from 100 fans in exchange for lifetime guestlist privilege, becoming one of the first unsigned acts to fund their recording albums and concert shows.
The “crowdfunding” business model is believed to have originated from the broader concept of crowdsourcing, which describes the process of accomplishing a set goal through contributions from a large group of people on the Internet, rather than from traditional employees through centralized efforts. Meanwhile, the term “crowdfunding” was coined by Michael Sullivan in August 2006 with the launch of fundavlog, an incubator project for emerging video blogs and project proposals.
Many things are important factors, but funding from the ‘crowd’ is the base of which all else depends on and is built on. So, Crowdfunding is an accurate term to help me explain this core element of fundavlog.
That same year in 2006, general fundraising site Pledgie and music crowdfunding community Sellaband were launched. Throughout the late 2000s, several other crowdfunding platforms were established, most notably IndieGoGo in 2008, Kickstarter and Fundly in 2009, GoFundMe, Appsplit and Microventures in 2010. Following the resounding success of Kickstarter and IndieGogo, similar platforms for DIY fundraisers continued to emerge, as many as 450 unique platforms by mid-2012.
The crowdfunding model has also seen a visible impact in political campaigns through a similar concept known as “moneybombing,” a term initially coined during the 2008 U.S. presidential campaign to describe the record-setting 24-hour fundraiser organized by the supporters of former Republican presidential nominee Ron Paul. On November 5th, 2007, Paul’s supporters raised $4.5 million dollars in one day through YouTube and the official website ThisNovember5th.com. Since then, moneybombing has become an increasingly useful tool in election campaigns at all levels, most notably during the 2010 midterm elections and 2012 presidential election in the United States.
There are two well-known models for crowdfunding platforms: All or Nothing, which allows the entrepreneur to collect the pledged donation only if the goal has been met, and Keep it All, which allows the transfer of fund regardless of the outcome or let the entrepreneur decide whether to collect or refund. The third but less known model is Bounty, which assigns the collected fund to anyone who completes the project first.
Kickstarter is an online crowdfunding website that facilitates grassroots fundraisers for a wide variety of creative projects, ranging from indie films, music and print publications to journalism, video games and food-related projects. It is considered the most well-known and highest performing crowdfunding platforms on the Web.
Indiegogo is an international crowdfunding website that provides a service similar to Kickstarter, however, with significantly less limitations on eligibility of applicants and immediate disbursement of the donations through PayPal accounts and credit card payment. Its most successful campaigns include Let’s Give Karen the bus monitor H Klein A Vacation ($703,833), “Stick-N-Find” ($861,165), “Bug-A-Salt” ($577,546) and “Let’s Build a Goddamn Tesla Museum” ($1.3 million).