If you were to do a Google search for “Potato Salad” what do you think will be the very first result?
A recipe…
An update on the nutritional value of potato salad…
A list of places that serve the ‘best’ potato salad…
You will be surprised that it is none of this. Instead, what you may find is a link to a Kickstarter fundraising project initiated by Zach Danger Brown, wanting to raise US $ 10 for his project, which he describes very simply as:
I’m making potato salad.
Basically, I’m just making potato salad. I haven’t decided what kind yet.
Zach put up this very simple project on the crowdfunding platform ‘Kickstarter’ to raise a modest US $ 10 …. And he has already got a commitment of over US $ 50,000 till date! What is even more interesting is the speed at which he has managed to raise the funds and the number of people who have chosen to contribute to the project – at the point when I am writing this article (1st August, 2014) there are 6,730 backers who have pledged a whopping US $ 54,030 against the goal of just US $ 10! Surely, Zach would not be short of US $ 10, and may be, he didn’t even want to make Potato salad… but a creative thought, the promised reward of “…you will get a ‘thank you’ posted on your website and I will say your name out loud while making the potato salad…” was enough to set the crowdfunding community amused enough to make a commitment to the project.
Well, when you ask for US $ 10 and get US $ 50000 instead, it is surely newsworthy. No wonder that the story made its way in to the Forbes e-magazine, with the title “What Potato Salad Teaches Us About Crowdfunding”. The article goes on to explain that, there are many projects that aim at alleviating poverty or making healthcare available to the needy, or making that breakthrough invention…. But every once in a while, it will happen that the project that manages to raise funds has nothing to do with charity, social relevance or technology; the project that catches the fancy of the invisible contributing community is the one that makes no lofty promises but just tickles their funny bone, or amuses them after a tiring day at work!
This brings us to crowdfunding, and what’s new in this funny world of finance.
Kickstarter is a crowd-funding platform with the stated objective of ‘bringing creative projects to life’. It allows individuals with creative ideas to conceptualise the idea, convert it to a project and seek funding for a specific amount through the website www.kickstarter.com.
The project is then hosted on the website for making commitments for contributing to the project. If the project is able to raise the requisite funding within the timeline defined by the project creator, the project goes ahead, the funds committed are collected and given to the project creator – all this for a small fee of 5% retained by Kickstarter. If the project fails to obtain full commitment for funding, it does not go ahead – it is all or none principle for fundraising.
Kickstarter has been successful is raising funds for many projects. The website claims that 6.7 million people have backed a kickstarter project till date, and many of them have backed multiple projects.
Kickstarter is just one of the many crowdfunding platforms – these platforms provide a unique option of raising funds for projects that may not be able to access the traditional banking channels or may not have the requisite commercially viable revenue model that is required under the traditional financing options. Each platform defines the elibility criteria, who can post a project and who can contribute – the rules may vary, but the underlying principle remains the same: using an internet-based platform for seeking funds from a wide and vibrant variety of internet users for ideas, projects, causes, whims and fancies. These platforms give a chance to the contributor to feel a sense of belonging to the underlying cause and feel connected with the community of contributors.
Crowdfunding has made it possible for people to fund projects in the arena of art, design, movie making, theatre, publishing, photography and more. This means of funding is equally popular for raising funds for socially relevant projects, charity, angle investing, developing technology or undertaking some extra-ordinary travel. So, if you have a great art project, an idea about an App that you are convinced will serve a useful purpose, a sculpture that you want to create, a book that you want to write, a movie that is running in your mind…..you know that there could be an eager set of contributors waiting to give you the funds to make that project happen.
I know that many of the readers would be wondering as to how the funds in the hands of the project owner would be taxed, if at all, or how will the Crowdfunding Platform accrue its income, or how do the platform creators prevent abuse and frauds…. As for me, I will stick to telling stories about people who made history in the world of finance by asking for $ 10 to make potato salad!
