Crowdfunding Headed Toward a Curve in the Road
Image courtesy of Exsodus atFreeDigitalPhotos.net
When most people think of crowdfunding,
they likely think of a group of individuals pooling their funds to help a
worthy cause. It’s not so much about a way to make money. It’s about
being able to give back or being the first to get your hands on a new
and interesting product. And generally, that’s how the whole idea got
started.
However, like all new adventures, over
time things change. In the case of crowdfunding, what started out as a
simple tool to allow the haves to give to the have-nots has grown into
something else.
Kiva.org Microlending Trend becomes Crowdfunding
According to the Mashable post,
“The History and Evolution of Crowdfunding,” while microfinancing has
been around for centuries, it came into its own in the mid-1970s through
a research project launched in Bangladesh.
Its current iteration started in 2005
with the microlending website Kiva.org. Kiva established a platform that
allowed individuals to lend in small amounts to poor, rural
entrepreneurs around the world. The return rate has been nearly 99
percent.
In 2006, Prosper.com took microlending a
step further by creating a peer-to-peer lending website. Borrowers
could finance most anything, from a small startup to a family vacation.
The benefit: interest rates were lower than financial institutions.
It wasn’t until 2009 that
Kickstarter.com jumped into the fray with another new twist along with a
new name: crowdfunding. Now instead of lending, crowds of people would
pool their money for a concept – new product or idea – and in return,
they would receive an incentive, such as a sample of the new product.
Next Twist in the Crowdfunding Story
There are four types of crowdfunding formats, according to the May 2012 Crowdfunding Industry Report by Massolution.
Equity-based and lending-based
crowdfunding are designed for financial return and more closely resemble
traditional financial lending. The other two are donation-based and
reward-based crowdfunding, ......More
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