Crowdfunding

{{Economics}}'''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 <small>(supposedly)</small>.

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.''<ref>{{cite web |url=https://www.nps.gov/stli/learn/historyculture/joseph-pulitzer.htm |date= |title=Joseph Pulitzer (National Park Service) }}</ref> Charities like the {{wpl|Live Aid}} concert of 1985 and public radio stations often hold pledge drives, where people can call, text, mail a check, or donate online. 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==
Crowdfunding isn't so great from a business's perspective, especially compared to a conventional IPO.<ref>{{cite news|first=Christopher |last=Mims |url=https://www.wsj.com/articles/tech-startup-crowdfunding-isnt-all-its-cracked-up-to-be-1449464460|title=Tech Startup Crowdfunding Isn't All It's Cracked Up to Be |work= [[Wall Street Journal]]date= 7 December 2015}}</ref> 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 as long as the government which hosts the crowdfunding service is friendly. [[Wikileaks]] found itself cut off after leaking too many American secrets, and the [[Canada convoy protest]] of 2022 was cut off from banks because the Canadian government was worried they would try a coup.

As of 20225, almost all online payments pass through Paypal or Stripe, and in the USA most pass through Visa or Mastercard. This lets execs and the US government decide who can crowdfund for what. Alternatives such as SEPA bank transfers or [[cryptocurrency]] are less popular and many crowdfunding services do not accept them. Services which offer [[Pornography|sexy content]] usually face pressure from the payment processors, and whole countries like [[Iran]] can be cut off if the US government does not like their government. These few US companies also get to skim a percentage of the Internet economy even if a Danish artist is raising money from Swedes and Germans to build a visual arts installation in Copenhagen. [[Apple]] has also tried to claim a percentage of crowdfunding payments made through iOS apps as part of the Epic Games vs. Apple case. Creators often rely on American [[social media]] to find potential donors, and most crowdfunding services are based in the USA too. While crowdfunding is marketed as decentralized people power, a few American companies collect a percentage and decide who is allowed to crowdfund online.

Crowdfunding can be divided into tips, subscriptions, and payment for forthcoming products or services. Tips are harmless but rarely bring in much money (except for telethons, cam performances, and other live entertainment). Subscriptions can be problematic if the creator is not honest on how the money is spent, or if the creator puts in large amounts of work for a tiny paying audience hoping that more will come. Patreon donors sometimes signed up, downloaded subscriber-only content, then cancelled their subscription. Payment for forthcoming products or services, such as a prototype device or editing and printing a book, sometimes ends with the creator running off with the money, and sometimes with the creator finding the money is not enough. One webcartoonist raised $1.2 million US dollars then severely injured his hand, and ever since his ability to produce the strip and deliver custom rewards has been limited.<ref>https://www.kickstarter.com/blog/featured-creator-rich-burlew-creator-of-order-of-t?lang=de</ref><ref>https://www.reddit.com/r/oots/comments/f1zewz/what_is_the_status_of_the_kickstarter/</ref> Payment-processing fees, currency conversion, the crowdfunding service's cut, late cancellations, and taxes and bookkeeping services can also be significant expenses. 

Projects to produce something that does not yet exist often underestimate costs. R&D is always uncertain, and events such as the global supply chain crisis of 2021-2023 or the Trump tariffs of 2025 can raise prices after patrons have already paid. People seeking crowdfunding often offer special bonuses if they reach funding thresholds, and its easy to overpromise. In turn, fans sometimes overestimate how close a project is to completion and how easily the engineering or manufacturing issues can be solved. Many crowdfunding services have policies around speculative projects, but both creators and patrons sometimes let their desire overpower their reason. A $500,000 project to create a better sword-fighting video game never went beyond a prototype in ten years, leaving some patrons feeling cheated.<ref>Kabir Chibber and Kabir Chibber, [https://qz.com/268852/neal-stephensons-failed-500000-video-game-and-the-perils-of-using-kickstarter Neal Stephenson’s failed $500,000 video game and the perils of using Kickstarter], ''Quartz'', 21 July, 2022</ref>

==Fraud==
Unfortunately, the flexibility and independence of crowdfunding, in the absence of any regulation, makes it ideal for [[scam|scammers]] and [[Quackery|quacks]]:
*The latest form of the classic [[419 scam]] is the person on social media with a sob story e-begging for money. Just like the email was not always sent by the Nigerian Finance Minister or Aisha Ghaddafi, that crowdfunding page and social media account do not always belong to a refugee who was in a car accident and has a sick puppy with big black eyes. There is a whole industry of crowdfundraisers to pay for medical costs in the United States, and it can be hard to verify if someone really had a medical emergency. Whereas the classic 419 scam relies on collecting large sums from a few marks, this is more like street begging, but with some photoshopped images instead of a fake sore or Surplus Store uniform. 
*According to the ''British Medical Journal'', crowdfunding may funnel millions of Pounds a year to [[Cancer#List of quack cancer treatments|quack 'cancer treatment']] centers in the [[UK]] alone.<ref>{{cite web |last1=Cara |first1=Ed |title=Crowdfunding Sites Are Putting Money in the Pockets of Cancer Quacks, Report Finds |url=https://gizmodo.com/crowdfunding-sites-are-putting-money-in-the-pockets-of-1829004277 |website=Gizmodo |publisher=Gizmodo |accessdate=10 December 2018}}</ref><ref>{{Cite journal |last=Newman |first=Melanie |date=2018-09-12 |title=Is cancer fundraising fuelling quackery? |url=https://www.bmj.com/content/362/bmj.k3829 |journal=BMJ |language=en |volume=362 |pages=k3829 |doi=10.1136/bmj.k3829 |s2cid=52193362 |issn=1756-1833}}</ref><ref>{{Cite web |url=https://sciencebasedmedicine.org/crowdfunding-the-fuel-for-cancer-quackery/ |title=Crowdfunding: The fuel for cancer quackery |date=2018-09-17 |website=Science-Based Medicine |language=en-US |access-date=2019-01-12}}</ref><ref>{{Cite web |url=https://arstechnica.com/science/2018/09/crowdfunding-raises-millions-for-quack-cancer-remedies-like-coffee-enemas/ |title=Crowdfunding raises millions for quack cancer remedies, like coffee enemas |last=Mole |first=Beth |date=2018-09-20 |website=Ars Technica |language=en-us |access-date=2019-01-12}}</ref>
*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.<ref>{{cite news|last=Hrynkiw |first=Ivana |url= https://www.al.com/news/birmingham/2017/11/woman_who_faked_cancer_for_don.html|title= Woman who faked cancer for donations sentenced |work= The Birmingham News |date= November 8 2017 |accessdate= }}</ref>
*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.<ref>{{Cite web|url=https://www.forbes.com/sites/mattperez/2019/05/01/exclusive-the-saga-of-star-citizen-a-video-game-that-raised-300-millionbut-may-never-be-ready-to-play/|title=Exclusive: The Saga Of 'Star Citizen,' A Video Game That Raised $300 Million—But May Never Be Ready To Play|last=Perez|first=Matt|website=Forbes|language=en|access-date=2020-03-16}}</ref>
*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.<ref name="vincent2015">{{cite web|last=James|first=Vincent|url=https://www.theverge.com/2015/10/13/9518163/laser-razor-kickstarter-banned-indiegogo|title=$4 million laser razor campaign banned from Kickstarter is already on Indiegogo|date=|website=The Verge}}</ref><ref name="indiegogoupdate">{{cite web|last=Gustavsson|first=Morgan|url=https://www.indiegogo.com/projects/the-skarp-laser-razor-21st-century-shaving/x/19311138#/updates/all|title=The Skarp Laser Razor: 21st Century Shaving: Updates|date=19 May 2018|website=Indiegogo}}</ref>
*Triton Inc. claimed that its crowdfunded ''"Triton Gills Rebreather"'' could be used to breathe underwater. Numerous [[scientists]] and [[journalist]]s assessed these claims as complete [[bullshit|porpoise hork]], and Triton eventually paid around $900,000 in refunds after admitting to deceptive [[marketing]].<ref>[https://www.deeperblue.com/triton-underwater-breathing-gill-scam/ https://www.deeperblue.com/triton-underwater-breathing-gill-scam/]</ref><ref>{{cite news|last=Hughes |first=Owen |url= https://www.ibtimes.co.uk/triton-artificial-gills-creators-repay-nearly-900k-after-misleading-indiegogo-backers-1553086|title= Triton 'artificial gills' creators repay nearly $900k after misleading Indiegogo backers |work= International Business Times |date= April 6, 2016  |accessdate= }}</ref>

==Use by extremists==
Crowdfunding has emerged as a key fundraising tool for the [[alt-lite]] and [[alt-right]].<ref>[https://www.inc.com/sonya-mann/counterfund-far-right-crowdfunding.html The Alt-Right Is Using Crowdfunding to Take on Liberal Silicon Valley]</ref><ref>{{cite news|last=Jasser |first=Greta |url=https://www.fairobserver.com/region/north_america/great-little-men-device-alt-right-crowdfunding-financing-news-16661/|title= Great Little Men: Why the Alt-Right Begs for Money |work= Fair Observer |date= May 31 2019 |accessdate= }}</ref> 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.<ref>{{cite news|last=Dearden |first=Lizzie |url=https://www.independent.co.uk/news/uk/home-news/far-right-extremism-crowdfunding-tommy-robinson-a8937311.html|title= How crowdfunding helps far-right extremism spread round the world |work= The Independent (UK) |date= May 31 2019 |accessdate= }}</ref> 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.<ref name=hill>{{cite news | last = Deese | first = Kaelan | date = September 29, 2020 | title = Christian Crowdfunding Site Raises $500K for Rittenhouse Legal Defense | url = https://thehill.com/homenews/state-watch/518752-christian-crowdfunding-site-raises-500k-for-rittenhouse-legal-defense | work = The Hill}}</ref> People who attended the [[2021 U.S. Capitol riot]] crowdfunded for transportation fees,<ref name=benzinga>[https://www.benzinga.com/fintech/21/03/19919282/paypal-has-blocked-a-crowdfunding-site-that-provided-financial-support-for-us-capitol-riot-attendees PayPal Has Blocked A Crowdfunding Site That Provided Financial Support For US Capitol Riot Attendees] by Tim Fries (March 01, 2021 1:16pm ) ''Benzinga''.</ref> and people charged with crimes from the riot have been trying to raise funds for legal fees using crowdfunding.<ref>[https://www.usatoday.com/story/news/nation/2021/03/28/online-trump-supporters-insurrection-raise-money-lawyers-legal-fees/4751712001/ 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''.</ref>

People involved in the [[Canada_convoy_protest|Canadian convoy protest]] of 2022 crowdfunded to pay for essential expenses like hot tubs and really loud horns. When one of these was broken up, firearms, body armour, and a pipe bomb were confiscated and two protestors were charged with conspiring to murder police (although eventually found not guilty).<ref>[https://www.ctvnews.ca/calgary/article/protesters-not-guilty-of-conspiring-to-kill-mounties-at-coutts-blockade/ Protesters not guilty of conspiring to kill Mounties at Coutts blockade], ''The Canadian Press'', August 2, 2024</ref> Controversially, the Canadian government cut the protestors (and their families) off from the banking system to stop the flow of cash and get them out of the center of Ottawa.

Crowdfunding services tend to sort out into a few frontrunners with similar values and large audiences, then a long tail of services which are more open to pornography, weapons, or radical politics but have much smaller user bases. For example, the mainstream service Patreon is matched by SubscribeStar, a similar subscription service with a small right-wing audience (they also have subscribestar.adult with a small ''horny'' audience). Since all these services use the same payment processors, and most are based in the USA, there is not much room for differentiation. The historical firearms [[YouTube]] channel ForgottenWeapons created a SubscribeStar account in 2018<ref>https://www.facebook.com/ForgottenWeapons/posts/2048001658595600/ December 10, 2018, ([https://archive.ph/HmqIM#selection-435.214-435.534 archive.ph]) {{quotebox|So, Patreon remains the most effective and robust system for supporting Forgotten Weapons (and other creators like me). However, there is an alternative for folks who decide that they do not want to use Patreon: SubscribeStar. I have just created an account there, and it is available to use. Unfortunately, because it has fewer features and until such time as it has a substantial number of people onboard, I cannot offer the perks that I have on Patreon. But if you simply want a different way to support my work here it is. Thanks!}}</ref> and quietly let it die by 2025. Some [[Intellectual Dark Web]] members expressed interest in creating their own crowdfunding platform.

===GiveSendGo===
The website GiveSendGo, which describes itself as a "[[Christian]] crowdfunding site", has a history of hosting fundraisers for far-right causes that often are disallowed from other platforms.<ref name=gsg>[https://www.thenation.com/article/society/givesendgo-crowdfunding-extremism/ Crowdfunding Hate in the Name of Christ]</ref> For example, it hosted the aforementioned fundraisers for Kyle Rittenhouse's legal fees<ref name=hill/><ref name=gsg/> and transportation to the 2021 U.S. Capitol riots.<ref name=benzinga/> Additionally, GiveSendGo hosted fundraisers for the [[Canada convoy protest|2022 convoy protests in Canada]]<ref>[https://vancouver.citynews.ca/2022/03/04/givesendgo-covid-protests/ GiveSendGo defends groups raising funds for trucker convoy in Ottawa]</ref> that had been banned from GoFundMe for assisting violence,<ref>[https://www.ctvnews.ca/canada/trucker-convoy-fundraiser-removed-from-gofundme-1.5768824 Trucker convoy fundraiser removed from GoFundMe]</ref> and refused to follow an [[Ontario]] court order to stop distributing funds to the convoy.<ref>[https://www.cnn.com/2022/02/11/business/givesendgo-trucker-convoy-protest/index.html Crowd fundraising site says they will defy Canadian court order to stop disbursing funds to convoy protesters]</ref>

==See also==
*[[Deplatform]] - figures like [[Sargon of Akkad]] sometimes get pushed off crowdfunding services as well as [[social media]]
*[[Pump and dump]] - most crowdfunding scams qualify
*[[Alt-right#Alt-tech|Alt-tech]]

==References==
{{reflist|2|90%}}

[[Category:Economics]]
[[Category:Internet]]

Categories: Economics, Internet