Crowdfunding with a Capital C: It’s Future in Hollywood

There are downsides to consider, however. As a CFP user, there are things to take into account. If you’re the one looking for funds, you must be aware of the conditions on some of these crowdfunding websites. You don’t necessarily receive all the funds raised and in some cases, not at all if the goal isn’t met.

In Kickstarter, a project must successfully reach its financial goal by a particular time in order for the funds to be obtained. If not, all proceeds will be returned to the backers. In the case of a successful campaign, the crowdfunding website collects 5% of the donations. Indiegogo, another CFP, allows users to keep whatever funds they raise regardless if they reach their goal or not, and they gobble a small percentage of the funds as well. Other rules and restrictions may vary depending on the location of the user.

With crowdfunding still relatively new, growing and largely unregulated, those who are contemplating contributing to crowdfunding projects should also be warned about the risks. With the JOBS Act coming into full effect soon, legal and financial experts worry that when the crowdfunding system fully opens up to equity investment, there will be more room for fraud, misunderstandings and more opportunities for projects to “crash and burn”.

Today, concerns of scams and fraud are accelerated by social media. The Internet’s simplicity and easy access makes it effortless for scammers to create supporting websites that make fake products look legitimate, or to steal product ideas from others and claiming them as their own. In August, Ted Hall’s Kickstarter campaign for the ShopBot Tool, Handibot, was attracting double the attention when a similar campaign was also launched on Indiegogo. Hall later discovered that the campaign running on Indiegogo had graphics and text copied from his Handibot Kickstarter page, adding to the fear that scammers can raise money under false pretenses.

Another fear is that backers are being asked to take a greater leap of faith than ordinary consumers because they are buying into the unknown, as opposed to others who are buying into an already finished product. There is also the possibility of a time lag of several months before a funder will get to see the outcome of their donation, and that is ifthe project is successfully completed.

It remains to be seen just how much funds received from the public will actually translate into films. Will John Herzfeld’s Reach Me come to Hollywood? There is no way of knowing, but Chinyere Fidel nonetheless hopes that her donation will be put to good use.

Known as Michelle, she’s been writing since hands could grasp paper and pencils. She’s learned that a pencil is an extension of the hand, a gateway to the psyche. Currently, she is an undergraduate at the University of Toronto, completing a BA in English and Book & Media Studies. For more of her quirkiness, follow her blog at http://therealmichellemonteiro.wordpress.com.

Banner and feature images courtesy of Glen Scarborough