[Advanced] Everyone Is an Investor (1)

Crowd funding fuels businesses, charities and creative ventures
By Roger Yu, USA TODAY

Entrepreneurs and dreamers are flocking to crowd funding, an emerging field of finance that, by using the Internet as an efficient middleman, often manages to be both more intimate and more high-tech than traditional means of raising seed money. The idea has existed for years but is receiving renewed attention now that social media, online networks and payment technologies increasingly strip away legal, psychological and logistical barriers for money solicitations.

"The gradual success of many projects has validated this as a real option, a real way to make things," says Yancey Strickler, co-founder of Kickstarter. "The Internet is incredible for harnessing organizational power."

A few dollars here and a couple of hundred bucks there can add up quickly. About $1.5 billion was raised in 2011 by about 450 crowd-sourcing Internet sites worldwide, says a report by Crowdsourcing.org.

"This expands on the angel investor model" in which a wealthy individual puts up money in return for equity, says David Rubenstein, partner at accounting firm WeiserMazars. "There is some good to this. This will ultimately result in growth of companies and additional jobs."

Financing dreams
Kickstarter, one of the largest crowd-funding sites, has so far counted $200 million of pledged contributions, though not all were given to fund seekers. Fund seekers on Kickstarter get their hands on the money only if they can meet their goal. If a campaign fails, money is returned to donors. About 20,000 Kickstarter campaigns have met the goal, or about 44% of all campaigns.

Successful Kickstarter campaigns average about $5,000 in funds raised. "Kickstarter changes the question of funding from 'Is this a good investment?' to 'Do I want this to exist?' And that's a much lower bar," Strickler says.

Still, crowd-sourcing proponents are betting that the advent of another fundraising channel will be a boon to entrepreneurs whose dreams have been kept in check by finances.

Notes and Vocabulary
entrepreneur n. 
/ˌɑ:ntrəprəˈnɚ/
a person who attempts to make a profit by starting a company or by operating alone in the business world, especially when it involves taking risks

middleman n.
/ˈmɪdlˌmæn/
a person who buys goods from the person who makes or grows them and makes a profit by selling them to a store or a user

seed money n.
money that is used to start a business or activity

logistical adj.
describing the careful organization of an activity so that it happens in a successful and effective way

solicitation n.
/səˌlɪsəˈteɪʃən/
a request for money, information or help

equity n.
/ˈɛkwəti/
one of the equal parts, or shares, into which the value of a company is divided

- Do you have a great idea, but no money to finance it? Crowd-sourcing might be the answer to your entrepreneurial dream.


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