Thursday May 31, 2012 0 comments
CommunityFunded gives Fort Collins organizations an innovative funding kick
By Kate Hawthorne
FORT COLLINS -- While banks may be holding tight to their purse strings these days, there may be another way to get your project funded.
Crowdfunding has come to Northern Colorado in the form of CommunityFunded.com, a new Fort Collins-based site that seeks to connect local projects with investors.
In 2011, about 450 crowdfunding platforms raised almost $1.5 billion globally for more than a million projects, according to the first-ever Crowdfunding Industry Report, which expects this universe to double in 2012 ( http://www.crowdsourcing.org/research ).
Locally -based CommunityFunded.com launched May 4 and by Memorial Day CF had raised more than $16,000 for 16 projects ranging from a proposed in-town hostel to medical treatments for a 10-year-old boy. More than 850 individuals and 200 organizations have registered on the site.
Just don't call it crowdfunding. McCabe Callahan, owner of Mugs Coffee Lounge and one of the three founders of CommunityFunded, prefers "mega community collaboration."
"What we want to do is engage the community on a long-term basis," he said. "Blue (Hovatter) and Ryan (Stover) and I were inspired by problems we wanted to solve right here in Fort Collins. Our motto is: Anything's possible when it's Community Funded."
Whatever you call it, online funding generally falls into four categories. The first two, which account for about 40 percent of the money raised, are familiar to entrepreneurs: the equity model gives funders a piece of future revenue or profits, while the lending model repays funders for their investment.
Then there are the nonprofit models: Donations, with no return other than a warm fuzzy (49 percent), and pre-sales with non-financial rewards (11 percent).
Think public broadcasting tote bags.
CommunityFunded combines the different types of funding with its giftback program: businesses don't have to give up equity, but do have to provide something in return for pledges -- be it a bumper sticker, a product or a "community offering" from a third-party supporter.
"It's really a win-win-win," Callahan said. "The businesses get exposure for their support, the funders get their giftbacks, and projects get funded."
Crowdfunding has become more attractive as bank financing remains tight in the wake of the Great Recession. Congress recently loosened regulations to allow companies to raise money from pools of small investors and advertise to do it through passage of the Jumpstart Our Business Startups Act (JOBS).
(These "investments" could be subject to sales, income, gift or other taxes, depending on state rules, and final IRS regulations are pending. Anyone considering crowdfunding should consult their financial advisor.)
KickStarter pioneered the rewards-based model for creative projects. Since 2008, the site has been used to bring video games to market, complete book projects, and make records in return for T-shirts, a pre-release copy or a date with band members.
CommunityFunded's "agents of change" help requesters develop their project pitch and decide on achievable goals. This service has been free for founding members, but Callahan said the site will begin charging an application fee later this year.
"CommunityFunded is just one of our fundraising tools," said Brian Hughes, executive director of nonprofit community radio station KRFC. The station set a goal of $15,000 in 60 days for a technology upgrade. "Its community focus fits nicely with our focus, which is 'live local, listen local.'"
Like everyone looking for money on CommunityFunded, KRFC produced a video about the project. A humorous tour of the station and some of the equipment to be replaced is conducted by "Willy FundIt" and a familiar band of obnoxious kids.
Callahan said the 3- to 8-minute movies on the CommunityFunded site let potential funders "see the passion in the eyes of the people" when they talk about how their project helps the community.
For more information:
Colorado Crowdfunding Meetup
Crowdopolis Conference, July 19, Los Angeles
The JOBS Act