I talked in a previous post about microfinance loans – a bunch of donors each giving a small gift/investment so that people in need of small loans and those with little to no access to capital can have a chance to borrow money for investment in their ventures. Economists believe this access to capital is better than a handout for building sustainable economies and empowering people to improve their lives.

Another way to raise capital is crowdsourcing or crowdfunding. Crowdsourcing is a campaign via a website, that backers can contribute to in any amount they can afford. Unlike microfinance loans, most crowdsourcing is not paid back, but you do have to offer some kind of freebie for donors at different levels. It is more of a handout or fundraiser than a loan like microfinance, but it often serves the same purpose of bringing a smallish infusion of capital into a project. Here in the U.S. crowdsourcing has been used by individuals (for things like adoption fundraising, medical/funeral expenses, or educational expenses), non-profits, self-publishing/producing of books, music, or movies, and business start-ups. It has even been used for some ridiculous things. Last year there was a guy asking for money to learn how to make potato salad. Sometimes the absurd works out; he made a good deal of money (THOU$AND$!!!). Crowdsourcing for an individual or business has the added complication of dealing with the IRS, but for non-profits it’s simpler because they can accept tax-deductible donations.

There are a number of crowdsourcing websites out there, so if you’re thinking about doing a campaign for something, be sure and do your homework. And prepare yourself for some hard work; you don’t just click a few buttons and watch the cash roll in. You have to manage and advertise the campaign to get people’s attention (and their dollars!), and you have to offer some kind of freebie they actually want.

Inc Magazine had this map to help you find the right crowdsourcing site. My image here is small, but if you click on it you’ll be redirected to their original article and the full-size image.

Another source for information is Crowdsunite – they offer information on the different crowdsourcing options and allow you to narrow the list and find sites that fit with your needs.

My personal experience with crowdsourcing is pretty limited. At the museum where I work, we had an Indigogo campaign to try and raise funds for an event, but after a week without a bite, we received word that a private donor wanted to fund our project, so we cancelled the campaign. I’ve also donated to a few campaigns by friends who were raising money to adopt and (nerd alert!) to help the guys at RiffTrax fund an MST3K reunion show. But I have seen it make a huge difference for people when it’s done well.

Have you ever raised funds through crowdsourcing? Tell us about your experience in the comments!