3 Realities of Crowd Funding

As my new role at 20th Century Fox Film Entertainment, it is my job to help with Social Media Strategies across operations. But the day before I began consulting, I was a guest host for a crowd funding seminar. For those of you who missed what I said, I talked about why and who and what raises the most money via crowd-funding.

Let’s cut to the quick. Only three things get you money via crowd-funding:

1) Social Capital
2) Presale Tulips
3) Bionic Cause

Okay, so what the hell does that mean. “Social Capital”, briefly is the number of people who you share trust or share values. The best example is that of the New York City Diamond district. A significant portion of the diamond district is run by Hasidics. So if one dealer needed an appraisal for some diamonds, he would just hand over a bag to a competitor to appraise them. That bag of diamonds might be worth 50-100 grand. No paper work, no escrow account, no lawyers nor bankers are needed, because the shared religious, ethnic, cultural values binds them together, even as competitors. That efficiency is valuable. Have you ever bought a house or car? The paper work alone could bury you.

If you have a large network of friends that trust you in the endeavor in which you wish to raise money, then you are borrowing against that social capital. So the first and most valuable commodity for crowd funding is a huge amount of social capital, in the endeavor. So if you wish to make a movie, and your sole reputation is as a trusted and smart accountant, do not be surprised that you can’t raise the funds that you need for that screenplay.

Next is “Presale Tulips”, which is to say, a cool never produced watch, video game console, or other product so scarce and so special that consumers are willing to pay for it despite its non-existence. Here, some social capital goes a long way, but if you can make a video, provide a prototype to press and present the offer as a no-risk purchase, many individuals have raised the money they needed by offering others a chance to be the first to own their ground breaking product.

Keep in mind, a cool t-shirt is not a ground breaking product no matter how unique the design is. A watch that links to your smart phone in you pocket via blue-tooth and speaks the time and can play back messages from your phone is. So is a home door lock that can be opened remotely via a free smartphone app. So is an album from a popular recording artist, that needs money to produce the album independent of record companies. Scarcity, access and privilege can add intrinsic value to any presale product as long as the producer of the product can show or has shown they too have the prerequisite trust in producing successfully an amazing product.

Finally is “Bionic Cause”, where the fund demands action against a social wrong that not only will money help, but the act of sharing or promoting the donation of the cause is of equal personal value. This is the most rare of crowd funding strategies. It can work, but generally competes with sound and established charities from the Red Cross to Save the Children. Here, the key ingredients are urgency and personal story. A single individual(s) personal story that can have a direct change in direction with your help. But, their plight is endemic of a larger problem, that not only your donation will help but also your sharing of your donation via your own social networks.

Success stories from this category range from Koni to Holocaust victims making movies to tell their story. Again, this is a difficult one, but if you lack any social capital and lack any presale item, then this may be your only option.

The question arises why not try all three. I am sure it is possible, but generally 1 and 2 do not mix. Making money or focusing on a product when their is urgency or danger as well, may appear opportunistic.

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The Content Manager is the person responsible for the articles, posts, and links about crowdfunding and social media at large.

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