Examples of Social Finance: Kickstarter, Indiegogo, and SIBs in UK
This week, we've got several interesting articles about social finance. What inspired me a lot is that smart people have come up with many creative ways to raise money for social good, like Microfinance, Crowdfunding, Social Impact Bonds and so on. So I started exploring some typical examples of financial innovation like Kickstarter, Indiegogo and Social Finance, to study their models and achievements, which maybe beneficial for us to form a real picture of social finance.
According to the information provided in its website, Kickstarter is a for-profit company based in New York City's lower east side, its mission is providing a fundraising platform to help creative ideas and projects come to reality. Launched in 2009, Kickstarter has already funded 48000 projects and raised 798 million dollars, and over 4.8 million people have participated in this platform. So how does it work? In fact, the model of Kickstarter is called "All or Nothing". Suppose an artist created a project to make musical films, he can simply post the project on Kickstarter and start attracting potential contributors. If he reaches the funding goal and successfully carry out his project, he will have to pay 5% of the raised fund to Kickstarter. However, if he doesn't reach his goals with the money, he will have to refund all the collected money to his contributors. Currently, Kickstarter is open to US, UK, Canadian creators over the age of 18. And businesses, non profits, organizations can also participate. However, the projects on Kickstarter are mainly focusing on art and design areas like games, music, films, etc.
The second example is Indiegogo, which is an international platform for people and organizations raise money or to fund the things they like to see in the world. In 2008, Indiegogo was unleashed in independent film industry. Just one year after that, Indiegogo expanded to an international level covering all kinds of social projects. As is posted on its website, "Indiegogo helps whoever are passionate and work hard to raise money." Actually, Indiegogo's pricing policy is slightly different from Kickstart. First, people create "campaigns" on Indiegogo and have to pay some platform fee. If the starter raises enough money and reaches his goal, 4% of the fund raised will be charged by Indiegogo. However, if the starter doesn't have a fixed goal of funding but raises some money for an unsuccessful campaign, then he will have to pay 9% of the raised fund to Indiegogo. In addition, Indiegogo has some special discount for non profit organizations. Topics of campaigns include art, environment, education, health, etc, which are much broader than Kickstart.
At present, Indiegogo is the world's largest crowndfunding platform with 7000 active campaigns online at any given time and 100,000 completed campaigns in total. According to an interview of Indiegogo, people love contributing to crowdfunding because this platform provides them with pride, participation, perks and passion. People here are paying for a future world they want.
Apart from Kickstarter and Indiegogo, I also did some research about the non profit organization called Social Finance, who is the first one to bring social impact bond to reality. Social Finance is a platform too, on which commisioners, service providers and investors can communicate and collaborate with each other. The services of Social Finance have expanded to US, Canada, Middle East and Australia. And their current projects are mainly focusing on criminal justice, chaotic families, health and drug rehabilitation, etc. In September, 2010, the first ever SIBs was launched by Social Finance and it raised oversubscribed fund of 5 million euros. The most recent project of SIBs is about interventions for 2500, 15 years old teenagers on their guidance and education in Bracknell. The investor is DWP Innovation Fund, and the service provider is a charity organization called Adviza in Bracknell. Adviza will use the money raised by SIBs to provide educational services to local young people and solve their adolescent problems.
The model of SIBs may evolve more intermediaries and communication cost, which is not as direct and simple as crowdfunding model, so is crowdfunding a more efficient way to raise money? In addition, I'm still confused about how Kickstarter and Indiegogo evaluate the results of the project. Are there any tools for us to measure if a project has reached its goals or not? How can they ensure the credibility of the project launchers and reduce social risks?
SOURCE:
http://video.foxbusiness.com/v/2650065920001/the-growing-popularity-of-crowdfunding/
http://www.kickstarter.com/discover?ref=nav
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