Benefits and Drawbacks of Online Crowdfunding

Benefits and Drawbacks of Online Crowdfunding

Moot Davis has recently completed his PledgeMusic campaign to raise money for his fourth studio album via crowdfunding.  Though Moot’s own campaign was successful, other artists and creators that look to crowdfunding tools such as PledgeMusic, Indiegogo, RocketHub and the well-known Kickstarter may not have the same results. Throughout the crowdfunding process, the benefits and drawbacks of online fundraising efforts became apparent and now warrant some need of  discussion.

First, what are crowdfunding resources, exactly? Crowdfunding itself is the pooling of money and other resources, usually done online, by people and organizations to help fund a specific project or cause. Crowdfunding resources then are websites that aid project creators in generating crowdfunding for their endeavors. As previously mentioned, well-known tools for this purpose, especially those seeking funding for music-related projects , are Kickstarter, RocketHub, Indiegogo and PledgeMusic, the latter being the only site devoted solely to music-related endeavors. These sites allow people to essentially “donate” money  preliminarily to a project in return for set prizes, perks, rewards, or incentives having to do with the project as part of its campaign.

Each project usually has a set amount of funding as its goal, and funders (sometimes also called “backers”) receive their rewards once that goal is met. However, if a project fails to meet its goal the backers generally receive their funding amount back and do not receive the perks associated with their pledge. This of course presents a challenge to project creators, who must have faith in their project’s ability to generate funds as well as their funder’s interest in the project itself. Additionally, project creators are largely responsible for generating their own marketing and promotion efforts which are also primarily done online. Video updates, blog-style posts email blasts, and utilizing social media outlets allow for widespread promotion of a project, but sometimes a project’s target audience isn’t quite tech-savvy enough to fully appreciate crowdfunding endeavors.

Conversely,  crowdfunding websites often provide various ways for project creators to connect personally with their (perhaps more internet-savvy) backers by providing updates, comment/discussion threads, and easy connections between crowdfunding sites and popular social media outlets. It also creates a sense of fulfillment for backers and fans of a project creator due to their direct influence in a project’s chance of successful funding. Lastly, while it can be seen as somewhat risky, backing a crowdfunding campaign is also often seen as an investment in a creator’s project and their goal to bring the project to fruition.

Successes and failures in crowdfunding come in all shapes, sizes, and forms. For example, notable successes include the Kickstarter campaigns for the Veronica Mars Movie project which raised over $5 million and the Pebble smartwatch which raised over $10 million (a previous crowdfunding record which was recently topped by the still-likely-to-fail Indiegogo campaign for the Ubuntu Edge). Failing campaigns, however, may stem from various issues such as the potential flaws of crowdfunding previously mentioned, campaign timing issues (too short, concurrent with holidays, etc.), geographical issues, or by simply setting the goal amount for a project too high. As previously mentioned, the Indiegogo campaign for the Ubuntu Edge smartphone has shattered the crowdfunding record set by the Pebble Watch, and is currently funded for over $11 million. Despite still having over 48 hours left in the campaign this project is largely considered  a failure already by critics and backers alike. But why? Because the goal amount for the Ubuntu Edge has been set at an astonishingly staggering $32 million, and as mentioned before, in most cases if a project’s goal is not met fully then its campaign is unsuccessful.

Obviously there is high risk in starting a crowdfunding campaign for any venture, but now crowdfunding sites have been pioneering tools and features to minimize the risk for project creators. One of these sites in particular is RocketHub, which differentiates itself from other similar websites in that it doesn’t have the usual “all or nothing” approach to funding. Instead, RocketHub allows project creators to keep their total funding, whether  or not it meets their original goal, in exchange for fees depending upon whether the campaign is “successful” or not. This has created less risk for both project creators and their backers and is perhaps the reasoning behind RocketHub’s sensation amongst music creators in particular. Additionally, since its creation in 2010 RocketHub has become partners with various music organizations such as the Recording Academy, the Grammy Awards, CMJ Music Marathon and more to further educate the music industry and the public at large about crowdfunding.

While RocketHub may be a less risky option for crowdfunding music projects, it is not uniquely dedicated  to the campaigns of musicians. Instead, Pledgemusic boasts its devotion solely to music-related project endeavors and the crowdfunding that helps finance them. With its partnerships with companies such as Nimbit, Topspin Media, and Artist Growth that foster various direct-to-fan and direct-to-consumer relationships and outlets for independent musicians, Pledgemusic may in fact be the predominant crowdfunding tool for music creators. All in all though, crowdfunding can be viewed as troublesome and risky or exceedingly advantageous for project creators in various fields and formats, as well as for the people who choose to support them.

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