Crowdfunding is an alternative way to raise capital for a business or project.
The process allows entrepreneurs and startup businesses to ask customers, friends or followers to pool their cash to help finance a new enterprise or support a charitable endeavour.
Statista indicates that crowdfunding campaigns raised over £549 million in 2020, compared to £245 million five years before.
This report analyses the top ten crowdfunding raises and the types of businesses that have leveraged this funding tool with great success.
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EOS raised $4,100 million (£3,585 million) in June 2018, financing the blockchain network through Ethereum – the funds raised equate to 7.12 million ETH.
Created by Block.one, a company in the Cayman Islands, EOS is a decentralised platform where developers can host, run or build dApps, and access a range of tools such as data hosting, security authentication and inter-app communications.
The core functionality combines the EOS.IO operating system and the EOS token, which is the native cryptocurrency. Developers do not need to spend EOS to use the resources on the network or build new dApps – they simply need to be token holders. Users can rent their bandwidth to other developers without running apps.
EOS is primarily an Ethereum competitor and is referred to as ‘Ethereum on steroids’ by crypto insiders, with faster processing speeds, aiming to manage millions of transactions per second compared to 15 on Ethereum.
2. Star Citizen
The Star Citizen video game launched a crowdfunding campaign with a $2 million target (£1.75 million), and the ongoing fundraising initiative has thus far amassed over $500 million (£437 million) through Kickstarter and independent investment drives.
In 2014, the fundraising initiative to finance the game was listed in the Guinness Book of World Records after raising over $40 million (£35 million) through the developer’s website.
Most of the investments were pledges bought on the website for free in-game assets. The game is a multiplayer simulation with combat and trading scenarios and entered pre-production in 2010.
Fundraising continued after the Kickstarter campaign ended by selling ships and in-game content, and it is now the highest crowdfunded video game of all time.
The decentralised, blockchain-based file storage company raised $257 million (£225 million) in 2017 through Ethereum. Filecoin is a crypto competitor to brands such as Dropbox and Google Drive and increases security by devolving storage services across multiple servers and locations.
Anyone can become a storage miner, and retrieval miners facilitate data recovery from the storage miner to the user and are rewarded in FIL payments.
Built on IPFS, Filecoin allows users to rent hard disk space, earning FIL. It used the crowdfunding campaign to fund the Filecoin mainnet, which was launched in October 2020.
Another crypto business, Tezos, raised $232 million (£203 million) in financing with an independent investment campaign that ended in July 2018.
The self-governing blockchain network incorporates self-amending software that autonomously decides what changes to make, with the idea that it reduces the chance of a developer creating a fork.
Developers use Tezos to run smart contracts, design new dApps and vote on potential rule changes using the native XTZ token to signify voting rights.
The first crowdfunding campaign set new records, and financed the blockchain launch but resulted in controversy and several legal challenges. Kathleen Breitman, one of the original creators, said the fundraiser was a pledge drive and offered contributors tote bags as a gesture of thanks – rather than an investment opportunity.
In December 2018, three lawsuits were filed, alleging fundraising fraud and that Tezos acted as an unregistered security, breaching Securities and Exchange Commission investment regulations.
The Tezos Foundation paid $25 million (£21.9 million) in 2020 to settle each legal dispute out of court before the SEC decided if the crowdfunding constituted the sale of unregistered securities.
5. U-Haul Investors Club
U-Haul is a self-drive hire and storage company owned by AMERCO. It invites investors to purchase U-Notes, starting from $100 (£87.45) and with a minimum investment of $25 (£21.86) after the initial amount, earning interest on their contributions.
This alternative investment scheme is reasonably low risk, and investments mature in between two and 30 years with options to invest as an individual, business or trust or combine accounts with Roth IRAs, an individual retirement account used in the US.
Crowdfunding through the U-Haul Investors Club is only open to US investors, and owners must hold funds until they mature. However, contributors can earn extra credits if they make a referral.
The firm uses crowdfunding to finance the development of new self-storage facilities. Since the scheme opened in 2011, it has raised over $195 million (£171 million) and U-Haul now has 40 million square feet of storage space and over 1,000 US depots.
6. The DAO
The DAO stands for Decentralised Autonomous Organisation. The group is an Ethereum-based blockchain network originally setting out to raise $500,000 (£437,000) in 2016. The crowdfunding campaign collected $160 million (£140 million).
As a venture capital fund, The DAO launched alongside its initial token sale and intended to create a new decentralised model for commercial businesses and non-profit organisations.
With an open-source code and no conventional board or management structure, the project raised 11.5 million ETH. As a result, DAO was removed from all main crypto exchanges by the end of September of the same year.
7. Sirin Labs
Sirin Labs is a mobile phone provider and hosted a crowd-sale event to raise funds to pay for a development project. FINNEY is the first open-source smartphone hosted on a blockchain network that also acts as a PC.
The company raised $158 million (£138 million) through the Bitcoin and Ethereum networks in 2017 and pre-sold 100,000 phones with an estimated retail price of $1,000 (£874).
The company incentivised investors to contribute early, offering bonus tokens up to 100 per cent of the value for the first investments.
Bancor, a smart contracts platform hosted on Ethereum, set a crowdfunding target of $100 million (£87.5 million) but raised $153 million (£134 million) in ETH investments.
The blockchain protocol encourages users to pool crypto assets and earn fees, providing market liquidity and a return on crypto tokens that aren’t otherwise going to be traded.
One of the reasons for the investment drive was to finance a major overhaul of Bancor when the platform released Bancor V2 in 2020 with a range of improvements and new tools.
Polkadot is a blockchain protocol that acts as a bridge between networks that would otherwise be incompatible, including Ethereum and Bitcoin.
It launched a crowdfunding campaign on Ethereum in 2017, raising $144.3 million (£126.2 million) to finance the network, which Polkadot brought to market in May 2020.
The multi-chain network is adopted to federate private and public blockchains. One DOT is worth £5.50.
The tenth highest crowdfunding value was achieved by Status in 2017, also raising investment via Ethereum and attracting $103 million (£90 million) against an initial target of $12 million (£10.5 million).
Status is a blockchain-based messaging app using a Web3 browser and offers other services like a crypto wallet with a native token called SNT.
It was the first decentralised Ethereum app, designed for mobile and desktop use, where users can send encrypted messages, log into dApps and store their crypto assets.
Businesses Raising The Most From Crowdfunding FAQ
How does crowdfunding work for businesses?
Most companies that decide to crowdfund want to attract investment in a particular project or product. They usually offer a reduced price, an equity share, or something free in return for investment.
What are the different crowdfunding options?
Crowdfunding can be based on rewards, equity or donations. Campaigns linked with a reward are often publicised through a platform such as Kickstarter or Indiegogo. Investors get a free product depending on how much they invest.
Equity crowdfunding offers shares, and donations are used to crowdfund a charitable or personal need, such as financing a medical cost or paying for a new community facility.
What can I use crowdfunding for?
Although some crowdfunding platforms only allow charitable campaigns, there are no specific limitations. You can crowdfund to finance a business, project, product launch or even to raise personal finances.
What is blockchain crowdfunding?
Crowdfunding links with the ethos of decentralised crypto networks and is a viable way for new blockchain-based services to raise investment, offering a governance stake token or another reward in return.
Most blockchain crowdfunding projects use smart contract systems for security, allowing investors to contribute anonymously.
How does Ethereum crowdfunding work?
The Ethereum Smart Crowdfunding tool is optimised for companies that sell digital services or products, such as software. Businesses can raise financing upfront before a product is licensed or released for general use.
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