A lending-based crowdfunding platform occurs when investors receive fixed periodic income payments and expect repayment of the original principal investment.
In stark contrast to equity-based and lending-based models, reward-based and donation-based models are characterized by nonfinancial motivations for engaging in crowdfunding.
Reward-based crowdfunding platforms allow investors to gain a nonfinancial benefit in return for financial contributions. Nonmonetary rewards often take the form of a token of appreciation or the pre-purchase of products or services.
Donation-based crowdfunding platforms provide investors with a way to donate to causes that they want to support with no expected compensation such as a philanthropic or sponsorship-based incentive.
It has been used for funding disaster relief, supporting artists by reaching out to their fans, funding political campaigns and funding a startup company, movie or small business.
Crowdfunding was tied into the United States of America JOBS Act — Jumpstart of Business Startups Act — that allows for a wider pool of small investors with fewer restrictions.
Launched in 2009, Kickstarter claims to have received over $1.1 billion in pledges from 6.3 million donors to successfully fund over 63,000 projects, including films, music, stage shows, comics, journalism, video games, food, art, technology and fashion, among other things.
Among other successful Utah campaigns launched through the platform are Zen Float Co., which developed an affordable isolation or float tank for home use, and Tessel Supply, which created a backpack that allows the user and the contents of the bag to influence the form of the bag and make it unique with every use.
Both Salt Lake City-based companies far exceeded their initial pledge goals and plan to use the added funding to grow their business or pursue new projects.
“Kickstarter is good for validating an idea to determine if there is a demand for it and also have the money upfront to get it produced,” explained Tessel Supply co-founder Daniel Shirley.
Shane Stott, director with Zen Float Co., said having the upfront capital will allow his company to advance much faster than a typical startup with limited financial resources.
“This will allow us to get staff right away (and) a building,” Stott said. “It’s the sweetest way to start it because we would have had to run it out of our current (smaller) location and put in more hours. But now this allows us to get rolling faster ... with so much less struggle.”
Top three Kickstarter projects from Utah
RigidBot 3-D printer, $1.1 million
"Tex Murphy — Project Fedora" video game, $598,000
SnapRays Guidelight, a power outlet with a built-in nightlight, $480,000
Past Utah projects:
Salt Lake Film Society projector upgrade
"Life on Bitcoin," a documentary about a couple that vowed to spend nothing but Bitcoin for 90 days
"Faith in America, Religious Buildings of the United States" photo book
Tessel "jet pack" backpack
Corilynn fashion line
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