What's in it for development aid?

In the 1870s, French sculptor Frédéric-Auguste Bartholdi came up with the idea of building a colossal monument of iron and steel, today known as the Statue of Liberty.1 It was a gift to the United States from the French people to celebrate the centennial anniversary of the American Declaration of Independence. Both
countries agreed to co-finance the project: the statue itself was to be funded by the people of France, Americans were to provide the pedestal and the site. But fundraising proved difficult on both sides. To raise money for this unique project, the French-American Union organized a lottery and other events, Bartholdi even sold miniature statues, on which the name of each buyer was engraved.

But despite these efforts the project still lacked funds even when the body of the statue was finished, ready to be shipped from Paris to New York. To close the financing gap, Joseph Pulitzer, publisher and owner of “The World”, initiated
a fundraising marathon, promising to mention the name of every donor in his newspaper. After six month it was done: in August 1885 more than $120,000 were raised by the American population to complete the pedestal and transport the statue to the United States. Most of the contributions were smaller than a dollar.


The Statue of Liberty is thought to be one of the first documented crowdfunding projects.


Since then, many other projects have been realized with the help of private onations. But it was only with the advent of the Internet that this alternative form of project funding could develop towards an open and transparent financing
tool with its own infrastructure in the form of crowdfunding-platforms (CFPs). According to the Crowdfunding Industry Report, published by private company Massolution, there are currently more than 450 CFPs worldwide, a decade since the first platforms emerged shortly after the turn of the millennium.


The first sectors to embrace crowdfunding were the music and film industries.

In 2000, ArtistShare was founded by Brian Camelio, launching its initial project in October 2003. The platform is dedicated to music projects, using a so called “fan-funding” approach that enables the general public to follow the funding and recording process and later get access to the final product (e.g. a CD) or other
special rewards.


A few years later, in 2006, Netherlands-based company SellaBand launched its crowdfunding services, also focusing on music projects. In 2010 the platform filed bankruptcy, but soon relaunched as SellaBand GmbH with new owners and headquarters in Munich. Since then, the platform has established itself as a major player in music-crowdfunding. One of the industry’s first major crowdfunding successes was accomplished by the platform: fans of American
Hip Hop-legends Public Enemy pledged over € 59,000 to support the band’s comeback-plans.

Figure 1: Illustration from U.S. Patent D11023, Filed Jan 2, 1870 by Bartholdi. (http://static.neatora ma.com/images/2007-05/bartholdi-liberty-patent.jpg)


A break-through for the industry was the launch of the web-based service Kickstarter. The platform focuses on all kinds of creative projects, ranging from art to music and film, but also publishing and technology projects. It had its first major success with Diaspora, a decentralized social network often referred to as the “Anti-Facebook”, in which users can fully keep control of their data. Within six weeks, more than 6,400 backers pledged over $200,000 and the project received tremendous attention from both online and offline media. Kickstarter benefited from this huge success of one of its projects as well and soon became the global market leader in terms of crowdfunding. In a way, Diaspora’s campaign also marked the beginning of a
crowdfunding hype that continues to date.


In 2006, Berlin-based company Betterplace started its crowd donation services, addressing “charitable organisations, but also small grassroots initiatives round the corner from you, or anywhere in the world,” according to its website. After the devastating earthquake that shook Haiti in 2010, more than €750,000 were donated to disaster relief measures through Betterplace.


In the same year, the term “crowdfunding” was coined by fundavlog founder Michael Sullivan to explain his approach of building and financing
a network for video-blogger:


"Bulding from the 'Crowd' is the Base of which all depends on and is built on."


“Many things are important factors, but building from the ‘crowd’ is the base of which all depends on and is built on. So, Crowdfunding is an accurate term to help me explain this core element of fundavlog.”


Since then, crowdfunding has been established as a standard term for describing a joint network of funders of cultural and development projects and ventures.


In Germany, further CFP’s launched in autumn 2010 with Startnext and mySherpas, followed by Inkubato, VisionBakery and pling for creative and nonprofit projects, and in 2011 by Seedmatch, the first crowdfunding platform for
startups in Germany.


>> Ch. 2 Changing the fund-raising sector