Dawn Ferris, a 29-year-old fashion designer in New York, couldn’t be where she is today without her dad, and now she wants to give him something in return. So she is turning to crowdfunding site youvegotfunds.com to help pay back her father, a truck driver who took out $60,000 dollars in loans so she could attend the Pratt Institute and pursue her dream of being a designer.
“My dad is getting a lot older — almost 60 now — and still working 15-hour days. He has all this money he still owes and should only really be working for the next few years,” she said. “I wanted to do this campaign to take the burden off of him. He’s always put me first before everything, so I wanted to give back to him.”
Ferris is among many worldwide turning to family, friends and strangers on the Internet to help raise cash for a personal financial need. Websites devoted to "crowdfunding" — which allows users to start a campaign to raise small to large amounts of money through a group of contributors — are popping up in increasing numbers. Over the past few years, in the depths of economic recession, crowdfunding has gone from a $32 million market to a $123 million market between 2010 and 2012, according to a research report from The Daily Crowdsource, an industry publication.
And while companies and nonprofits have turned to sites like Kickstarter and Indiegogo to fund startups and projects when traditional sources of funding fail, individuals are also turning to crowdfunding to finance everything from college education to infertility treatments to honeymoons.
“The growth we’ve seen lately has been with personal crowdfunding projects,” said Ellen Sperling, co-founder at youvegotfunds.com, the site Ferris is using to raise money for her dad. “More people are doing it. For the average person, expenses have become so high that people are more open to trying different alternatives to connect with people who can help.”
Not just asking for cash
When Ferris decided to start a crowdfunding campaign, she was a little hesitant about just asking people for cash on the Internet. “You know, there’s a little pride involved,” she said. “You don’t want to go out asking for money. But you see other people doing it and I figured it can’t be so bad. I think it’s definitely starting to be a bit of a norm right now.”
Despite the potential stigma attached with asking for money, crowdfunding has experienced incredibly high levels of growth. According a report from Massolution, a crowdfunding advisory firm, global crowdfunding volumes increased by 81 percent between 2011 and 2012, and $5.1 billion will be raised through crowdfunding platforms in 2013, compared with $2.7 billion in 2012 and $1.5 billion in 2011.
The setup of crowdfunding is meant to diffuse the pain of asking others for money, according to experts in the industry. By starting a “campaign” instead of going directly to a friend or relative for cash, there is an intermediary between the giver and the recipient of the money, said Lee Andrews, a crowdfunding consultant and vice president of business development at crowdfunding site, When You Wish.
“Culturally, people aren’t comfortable asking for money, even when they really need it, but when there’s an intermediary, or the person receiving funds can offer something in return like a hand-written note or a thank you video, it kind of relieves the cultural pressure of asking for money,” Andrews said.
Marcos Cordero, the founder of GradSave — which allows friends and family to contribute to a child’s college savings — said the number one hesitation from people considering crowdfunding is asking for money. But the combination of having his site act as a go-between and people’s desire to give something of value means contributors feel less like they are being asked for a handout and more like they are helping build a child's future.