Funding Small Projects $25 at a Time

by Mercator Advisory Group 0

(From the standpoint of significant potential growth/payments volume for the players working with the right technology partners)

It’s amazing what can get done when a compelling idea gets enough support to be realized. A pair of funding services vet small scale projects and provide the mechanisms to connect project doers with potential project funders. These aren’t large scale projects but they can be high impact. Environmental mapping via digital pictures taken from cameras hung under balloons and kites is an example. Others are more about making dreams come true (sailing around the world) and sharing in that experience.

This kind of crowd fundraising will never amount to huge payment volumes. We estimate Kickstarter has taken in $5 million. But crowd fundraising like this could make a lot of important projects happen.

On Kickstarter, the average contribution is $25. On IndieGoGo, it’s $84. Some projects have received as much as $10,000 from a single backer, but those cases are rare. The highest-grossing project to date is Diaspora, an anti-Facebook of sorts that would let users keep control over their photos, videos and status updates while sharing them with friends. The four New York University students behind it raised $200,641 on Kickstarter.

Though the sites are reminiscent of single-project online tip jars that popped up earlier in the decade, they work better because they create persistent communities behind the projects.

“Those were predicated on a passive involvement,” said Yancey Strickler, Kickstarter’s co-founder. “Kickstarter is much more structured and active. Projects are focused on specific things, they have finite deadlines, they establish relationships, and they clearly communicate what someone gets in exchange.”

About 2,500 projects have been funded by about 200,000 people through Kickstarter since the site launched in April 2009. About the same number have failed to meet their funding goals.

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http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2010/09/19/financial/f095211D07.DTL&feed=rss.business