Introduction to

Crowdfunding

Nick Wolff, Andersonville Chamber of Commerce

Trista Li, Kiva Zip Fellow Chicago

Introduction

• Kiva is a non-profit community fundraising

organization.

• Online community of 1,000,000 lenders who

love to support small businesses.

• Kiva’s lenders provide interest-free loans to

entrepreneurs.

• Kiva has loaned more than $500,000,000 to

1,000,000 borrowers in 79 countries.

What is Crowdfunding?

• Hundreds (or thousands) of people support a business with a small donation or loan.

• Entrepreneur uses internet & social media to build ‘buzz’ and support to fund their project.

• The ‘crowd’ votes with their dollars for the project to succeed or fail.

What is Crowdfunding?

How big is it?

What are the websites?

(Chicago specific)

How does it work?

How does it work?

• You submit your proposal to the website for

approval. Approval can take several weeks

(Kiva Zip takes one week).

• Once approved, your project appears on

the site.

• You have (usually) 30-60 days to secure

funding (Kiva Zip 45 days).

• Once funded, you receive money and

website takes a fee (Kickstarter 3-5%; Kiva

Zip is FREE)

What if I don’t hit 100%?

• Depends on the website you use.

• For Kickstarter and Kiva Zip, if you don’t hit 100% of your target, you will not get the funds . It’s all or nothing.

• These sites choose this funding model because it motivates users and has a higher funding rate.

• Indiegogo will still pay funds if the target is not reached, but they will take a fee of 9%.

Is crowdfunding

right for me?

• Our mission: Empower local

businesses and neighbors to

shape their communities

• Local businesses open a

LendSquare loan and create

an outreach campaign to

fund it

• Customers and neighbors

receive a return on their

investment and help grow

their neighborhood

Opportunity for:

o Chambers/business/citi

zen engagement

o Augmentation of TIFF

funds or façade grants

programs

o Growth of drought

zones

o Several businesses to

develop a community

campaign together

www.lendsquare.com

• Largest website ($1 billion dollars funded)

• 8-10% fee charged

• All or nothing model

• Money raised is a “donation” to the user in exchange for a “reward.”

• Restricted to creative projects, E.g. you must make a product or produce a creative work.

• Strict review process by Kickstarter before acceptance.

• Seed Chicago is Accion Chicago's

curated Kickstarter page that

highlights small businesses and

community development projects

that will grow jobs, facilitate economic

activity, revitalize communities or

promote education and training.

How were projects chosen for Seed Chicago?

• Accion Chicago and the Local

Initiatives Support Corporation

Chicago (LISC) assisted WBC in

identifying Seed Chicago’s inaugural

projects

• Around 11-12 projects are chosen a year

kickstarter.com/pages/seedchicago

• Smaller website (1/6th size of Kickstarter).

• 4% fee charged (9% if you don’t reach 100% of funding goal).

• Not all-or-nothing, you get what you raise.

• Money raised is a donation.

• No restrictions on purpose, you can raise money for anything.

• Open to anyone (no review process).

• Smaller website, but strong community who lend frequently.

• The loans are 0% interest and there are no fees. The loans are repaid over 2 years.

• All or nothing funding model.

• Loans up to $5,000 for first-time borrowers, $25,000 for repeat borrowers.

Pay for legal fees

Hire staff and help

Purchase vehicles

Upgrade their websites

Improve their technology

Market and advertise

Purchase inventory

Invest in equipment

Expand product lines

Use of the loan

How to succeed?

• Strong personal story and business plan

• Great photo or video

How to succeed

• Promote yourself to your own community

• Push hard on social media (Facebook,

Twitter, Instagram, LinkedIn, Yelp, etc)

Success rates?

• >90%

• 44%

• 33%

Questions?