Crowd Funding

Introduction

Nothing has changed the way entrepreneurs go about raising funds like crowd funding. One of the first and biggest examples of a crowd funding platform is Kickstarter.com. Kickstarter has facilitated the launch of numerous innovative products and ideas over the years. This paper discusses the advantages of crowdfunding for new entrepreneurs, how Kickstarter builds a community for them, and what a specific example of a successful Kickstarter campaign, the Forever Sponge, looks like.

What is Crowd Funding?

Crowdfunding is a method of raising funds for a project, cause, or business venture by collecting small amounts of money from a large number of people, typically through the internet. This approach allows entrepreneurs, artists, and organizations to access capital without relying on traditional funding sources such as banks, investors, or venture capitalists.

Crowdfunding usually takes place on online platforms, such as Kickstarter, Indiegogo, or GoFundMe, which provide a space for creators to showcase their projects and engage with potential backers (Enfroy, 2021). These platforms facilitate the collection and management of funds, enabling project creators to offer rewards or incentives based on the amount of money contributed by backers.

There are different types of crowd funding, such as rewards-based crowdfunding, which is popular for creative projects and product launches, where backers receive rewards or products in exchange for their financial contributions (this is the approach of most projects on Kickstarter.com, including Forever Sponge). Equity crowdfunding offers backers a stake in a company, usually in the form of shares, allowing them to potentially benefit from the company's future success. Donation-based...

Then there is debt crowdfunding, also known as peer-to-peer lending, involving backers lending money to project creators or businesses who then repay the loan with interest over time (Wangchuck, 2021).

Forever Sponge on Kickstarter.com

Forever Sponge is an interesting idea: a kitchen sponge designed to last a lifetime. It is made of high-quality, durable, and eco-friendly materials, but is also both cut-resistant and bacteria-resistant (promotional videos show it holding up under a samurai sword blade and a kitchen knife). Its uniquely woven structure allows it to dry quickly and prevent the growth of mold and mildew, but best of all people who use sponges to wash dishes...

…engaging with backers.

Kickstarter handles the collection and transfer of pledges through a secure payment processing system. The platform charges a fee, typically around 5% of the total funds raised, plus payment processing fees. If a project reaches its funding goal, Kickstarter transfers the collected funds, minus fees, to the entrepreneur's account. However, if the project fails to reach its goal, no money is collected or transferred, and backers are not charged.

Conclusion

Crowd funding is a great way for new entrepreneurs to gain backing for their ideas and projects. The success of the Forever Sponge campaign on Kickstarter exemplifies the benefits of crowdfunding. The creators of Forever Sponge were able to access capital, validate their market, gain publicity, engage with customers, and test their idea with low risk: if they did not get the goal amount, they had no obligation to satisfy the promises made to pledges (and pledges would be refunded). The various pledge tiers attracted backers who saw value in the innovative, eco-friendly, and long-lasting kitchen sponge. This case highlights the potential of crowdfunding as a viable means for entrepreneurs to bring their ideas to life and the importance of thorough research and…