Crowdfunding

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Crowdfunding has become a very popular way to raise money in the digital age. A corporation, artist, craftsman, or some guy on a podcast crowdfunds by soliciting for contributions from the general public to support the launch or maintenance of a product, service or endeavor. These initial contributions are typically repaid in kind: small donations earn trivial recognition, while large donors receive more value (supposedly).

Broadly defined, crowdfunding is not new and includes familiar concepts like mail-order subscriptions and bonds. Most notably, in 1885, the pedestal for the Statue of Liberty was successfully crowdfunded to the tune of over $100,000 (millions today) with appeals from Joseph Pulitzer in his newspaper The New York World.[1] The word itself is a neologism coined in the mid-2000s to describe internet crowdfunding, as the practice today occurs almost entirely online. It is this scope to which this article will be limited.

Benefits and risks[edit]

Crowdfunding isn't so great from a business's perspective, especially compared to a conventional IPO.[2] But it can be effective for certain niche businesses, typically those with fixed or easily-scalable costs and a small but devoted market. It also provides consumers a way to directly support up-and-coming artists, who may not have access to traditional grants or fundraising. It can also be a lifeline for activists or movements experiencing censorship or government interference.

Fraud[edit]

Unfortunately, the flexibility and independence of crowdfunding, in the absence of any regulation, makes it ideal for scammers and quacks:

  • According to the British Medical Journal, crowdfunding may funnel millions of Pounds a year to quack 'cancer treatment' centers in the UK alone.[3][4][5][6]
  • In 2019, an Alabama woman was convicted of fraud and jailed for two years after earning more than $200,000 from a series of posts on crowdfunding websites in which she falsely claimed to have terminal cancer.[7]
  • Cloud Imperium Games has crowdfunded nearly $300 million for its video game Star Citizen, which has been delayed more than six years and still has no release date; the company has never officially released a finished product.[8]
  • Yes, the "Skarp Laser Razor" really promised to use a laser instead of a blade to cut hair. The inconvenient fact that the central concept behind their product is total bullshit hasn't stopped Skarp from crowdfunding more than $4.5 million to bring it to market.[9][10]
  • Triton Inc. claimed that its crowdfunded "Triton Gills Rebreather" could be used to breathe underwater. Numerous scientists and journalists assessed these claims as complete porpoise hork, and Triton eventually paid around $900,000 in refunds after admitting to deceptive marketing.[11][12]

Use by extremists[edit]

Crowdfunding has emerged as a key fundraising tool for the alt-lite and alt-right.[13][14] Dive into the deep end of the alt-right internet, and you'll find rhetoric liberally sprinkled with shortlinks to crowdfunding sites. Well-known examples of the master race, like Milo Yiannopoulos and Tommy Robinson, have crowdfunded legal fees and other expenses.[15] An Illinois teenager who shot three people in Kenosha, Wisconsin after Black Lives Matter protests and incitement by a local right-wing group has crowdfunded more than $500,000 for his legal defense fund.[16] People who attended the 2021 U.S. Capitol riot crowdfunded for transportation fees,[17] and people charged with crimes from the riot have been trying to raise funds for legal fees using crowdfunding.[18]

See also[edit]

References[edit]

  1. "Joseph Pulitzer (National Park Service)". 
  2. Mims, Christopher. "Tech Startup Crowdfunding Isn't All It's Cracked Up to Be". Wall Street Journaldate= 7 December 2015. 
  3. Cara, Ed. "Crowdfunding Sites Are Putting Money in the Pockets of Cancer Quacks, Report Finds". Gizmodo. Retrieved 10 December 2018. 
  4. Newman, Melanie (2018-09-12). "Is cancer fundraising fuelling quackery?" (in en). BMJ 362: k3829. doiWikipedia:10.1136/bmj.k3829. ISSN 1756-1833. 
  5. "Crowdfunding: The fuel for cancer quackery" (in en-US). 2018-09-17. 
  6. Mole, Beth (2018-09-20). "Crowdfunding raises millions for quack cancer remedies, like coffee enemas" (in en-us). 
  7. Hrynkiw, Ivana (November 8 2017). "Woman who faked cancer for donations sentenced". The Birmingham News. 
  8. Perez, Matt. "Exclusive: The Saga Of 'Star Citizen,' A Video Game That Raised $300 Million—But May Never Be Ready To Play" (in en). 
  9. James, Vincent. "$4 million laser razor campaign banned from Kickstarter is already on Indiegogo". 
  10. Gustavsson, Morgan (19 May 2018). "The Skarp Laser Razor: 21st Century Shaving: Updates". 
  11. https://www.deeperblue.com/triton-underwater-breathing-gill-scam/
  12. Hughes, Owen (April 6, 2016). "Triton 'artificial gills' creators repay nearly $900k after misleading Indiegogo backers". International Business Times. 
  13. The Alt-Right Is Using Crowdfunding to Take on Liberal Silicon Valley
  14. Jasser, Greta (May 31 2019). "Great Little Men: Why the Alt-Right Begs for Money". Fair Observer. 
  15. Dearden, Lizzie (May 31 2019). "How crowdfunding helps far-right extremism spread round the world". The Independent (UK). 
  16. Deese, Kaelan (September 29, 2020). "Christian Crowdfunding Site Raises $500K for Rittenhouse Legal Defense". The Hill. 
  17. PayPal Has Blocked A Crowdfunding Site That Provided Financial Support For US Capitol Riot Attendees by Tim Fries (March 01, 2021 1:16pm ) Benzinga.
  18. Insurrection fundraiser: Capitol riot extremists, Trump supporters raise money for lawyer bills online by Brenna Smith et al. (Published 6:00 a.m. ET Mar. 28, 2021; Updated 4:09 p.m. ET Mar. 28, 2021) USA Today.