Inspiration Case 21: Crowd Funding Mechanism

INSPIRATION CASE 21: CROWD FUNDING MECHANISM

© Clear Village 2011

General Information In creative industries, the arts or for charities or start-ups, donations or common loans are the predominant funding models to pool money for running their businesses. However, some projects like our inspiration example “The Age of Stupid” are applying innovative bottom-up crowd funding models by gathering a mass of people, often in internet and social media channels, that each spends a little amount of money for the good of all participants.

Within crowd funding models, people’s engagement ranges from donating smaller amounts for small benefits via larger loans, equity investments or mixed models.

Inspiration & Parametres for change a) innovative funding model In creative industries, charitable sector or the arts, it is a common sense that money raised from donations are often not sufficient to tackle different social problems. Using a hybrid model between traditional and innovative funding models for certain projects might mitigate the drawbacks and improve the strong features of both options. b) getting a large group of people involved Getting people to give money to a certain project, either as donation, equity investment or as a loan is not an easy task. If one has the additional chance to not only ask for money but also involve them in the project offers word to mouth communication and the opportunity to raise bigger funds. One success factor is: make the project as transparent as possible, ask for specific contribution and offer specific benefits for the donors, investors and lenders.

Information and pictures sourced from http://www.spannerfilms.net/films/ageofstupid | http://www.time.com | videoproducent.blogspot.com | smallbiztrends.com | cmat.be | openreflections.wordpress.com | All rights reserved.

INSPIRATION CASE 21: CROWD FUNDING MECHANISM Our inspiring example: The Age of Stupid Film, UK, 2004-2009

© Clear Village 2011

The Age of Stupid is a 2009 British film directed by Franny Armstrong. The film is a drama-documentary-animation hybrid that stars Oscar nominee Pete Postlethwaite as a man living alone in the devastated world of 2055, watching archive footage from the mid-to-late 2000s and asking “Why didn’t we stop climate change when we had the chance?”

The makers of The Age of Stupid were the first who successfully use a crowdfunding model and pioneered a new distribution system, Indie Screenings, which allows anyone, anywhere, to hold a screening of the film and keep the profits for themselves.

How did the model work in detail for The Age of Stupid?

Franny Armstrong pioneered a new model to fund the production of The Age of Stupid. Now popular with independent film makers, crowd-funding involves the pooling of money and other resources to support efforts initiated by other people or organizations in a hybrid crowd funding model thus either as a donation or as a loan that grants certain benefits to the donor or lender.

The film was crowd-funded with a £450,000 budget being raised by 242 individuals and groups in form of both donations and loans. Smaller contributions between £20 and £5,000 were given as donations for very specific cost items; in return the donor received credit on the website, DVD and was given a chance to star in the movie. Loans ranged from £5,000 to £35,000 and were received either from individuals or lending groups, for example a hockey team or health centre.

All loan investors were given a pro-rata share in all profits, alongside the 105 crew who worked for survival wages.

What does this mean for the community?

Crowd-funding is a re-thinking of traditional funding mechanisms for venturous projects which is meanwhile successfully used in start-ups, art projects and many other occasions. In the traditional donation model, people give money to an organisation that decides how to spend these funds. Crowd-funding donates or lends money to a specific project or even more specific cost items within a project.

That gives people the freedom to choose where they want to spend their money. It also provides them with additional returns – either credit or financial bargain.

For organisations, crowd-funding means new opportunities to generate income.

Applying social media or innovative distribution channels successfully, they can receive money from parties which otherwise wouldn’t be interested in their causes.

Information and pictures sourced from http://www.spannerfilms.net/films/ageofstupid | http://www.time.com | videoproducent.blogspot.com | smallbiztrends.com | cmat.be | openreflections.wordpress.com | All rights reserved.