TECH TALK Aviation Projects Crowdfunding By John Pawlicki
“Crowdfunding is the process of funding your projects by a multitude of people contributing a small amount in order to attain a certain monetary goal. Goals may be for donations or for equity in a project.” Like most other industries, aerospace and aviation
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have also been aff ected by this, and there are many diff ering types of ideas for which individuals and companies are requesting fi nancial support. Some of these are to develop products or services and others are more artistic or philanthropic endeavors relating to the industry or its past. Due to many reasons (primarily safety issues), aviation can be considered a rather ‘closed’ industry in which outside infl uences can only penetrate at a slow rate, or once they have been proven out elsewhere. With the encroachment of consumer electronics and software into aviation, it is becoming easier than ever for those with good ideas to launch their new ideas and obtain funding from others. For this set of reasons, crowdfunding is expected to bring a rash of innovative products and services into the aviation market in the coming years.
CROWDFUNDING: AN OVERVIEW The rather recent era of crowdfunding begin back in 2003 with the initial focus being on creative artists seeking capital. This soon burgeoned into other areas and in 2013, ~$5.1B was raised by projects around the world. In the U.S. alone, there were ~191 crowdfunding platforms active in 2013 and this fi gure has grown. Global growth in such funding is exploding as Europe and Asia have also jumped on this bandwagon.
This statistic in the chart (courtesy of Statista and Kickstarter) shows the number of launched and successfully-completed projects on crowdfunding website
Kickstarter.com from 2010 to 2013. In 2013, 19,911 projects successfully raised their pledged amount of seed capital in agreement with the web site’s all-or- nothing funding method. There are two basic types of crowdfunding: rewards- based funding and equity funding, as well credit-based crowdfunding (a diff erent type of lending that we are not covering here). With rewards-based funding, which
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he phenomena of crowdfunding to fi nance new products, companies or projects has taken off . For those of you unfamiliar with this concept, the best defi nition which describes it is from Wikipedia:
NUMBER OF SUCCESSFULLY CROWFUNDED PROJECTS ON
KICKSTARTER.COM FROM 2010 TO 2013 20,000 19,911 18,109 15,000 10,000 11,836 5,000 3,910 0 2010
Source: Kickstarter © Statista 2014 Additional Information: Worldwide; Kickstarter, 2010 to 2013
2011 2012 2013
has received the most attention, people who donate to an idea either receive discounted products or services, or merely accolades for contributing to help a dream get off of the ground. The funding you provide in this type of scenario does not provide you with any equity in the project, besides the good karma you get for being a supporter (which is priceless). On the other hand, equity investing is essentially similar to being a venture capitalistic or early-stage investor. In this type of crowdfunding, companies sell ownership stakes in the form of equity or debt, and the investor shares in the upside if a company becomes successful. It is debatable if it is better to be a rewards- type funder where you are nearly guaranteed to receive something in return to helping a small emerging company or an individual get their dream started, or, whether to risk your outlay on a startup in which a large majority never return a penny of an investment. Caveat emptor!
WHERE CAN YOU GET CROWDFUNDED? There are many web sites that have sprung up recently to address this need, and we will concentrate our focus on rewards-based sites due to the reason that equity sites require you to qualify yourself as an investor fi rst. These are not for everybody and they have far less information available on possible investments until you sign up. Of the hundreds of sites around the world, here are six notable U.S.-based platforms to consider: 1.
Kickstarter.com – This most-well-known crowdfunding site encompasses all types of projects and has more aviation/aerospace-focused projects than any of the other sites.
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