Sharon Chayra was pleased to hear that two business acquaintances had married, but her enthusiasm damped after the bride sent her an email with a link to the newlyweds’ crowdfunding campaign. The affluent couple was raising money for their honeymoon, a $10,000 safari vacation in Africa.
Calling in the crowd
What, exactly, is crowdfunding?
Crowdfunding allows people to raise money for a personal
cause from friends, family and strangers through internet platforms, such as Kickstarter, Indiegogo and Giveforward.
Many campaigns are non-profit and seek to fund
political, charitable, commercial causes, but some use crowdfunding to pick up
the tab for personal desires such as sports cars and vacations through sites
including GoFundMe and GoGetFunding.
“I thought, ‘seriously? I’m not invited to the wedding. I don’t get my beloved cake. And you want me to pony up money for your African safari?’” said Chayra, the president of Chayracom, a public relations company in Las Vegas.
To avoid awkwardness, Chayra contributed $50. She later saw that others had given $250 or even $500. “So then I thought, ‘Jeez, it’s only $50. They’re probably thinking, ‘Gosh, she’s so darn cheap.’ But too bad!” she said with a laugh.
Crowdfunding has raised money for worthy social causes, groundbreaking journalism and individuals hitting hard times. But the lure of easy cash has a growing number of people — Americans, in particular — asking friends, relatives and strangers to pick up the tab for less-noble causes, such as home renovations, sports cars, vacations, security deposits, and travel expenses to reality-show auditions and bikini-model competitions.
For her part, Chayra had received outlandish crowdfund requests before, including another couple’s pre-wedding vacation in the California wine country and a friend’s birthday plea for breast implants.
“I felt like saying ‘I want a tummy tuck for my birthday. You’re not getting your boobs till I get my belly,’” said Chayra. “I mean, where does it end?”
Crowdfunding has become an increasingly addictive way of asking for funds for personal use. GoFundMe, which was created specifically for personal requests, has seen the annual amount raised by its campaigns soar to $128m in 2013 from $5.65m in 2011. The growth “is due to the massive increase in personal fundraising across all of GoFundMe's categories,” said Chief Executive Officer Brad Damphousse.
The requests can make the people on the receiving end very uncomfortable, said Jeff Yeager, a Virginia-based personal-finance expert who has published four books on frugal living. The technology has enabled people to succumb to their lazier and more entitled impulses, he added.
“Prior to crowdsourcing, you had to do it the old-fashioned way — work, save money and spend less to get what you want. Now, for a lot of people it becomes, if not the default setting, then near the top of the list of how you’re going to do that,” Yeager said.
Some crowdfunding platforms such as Kickstarter and Indiegogo are geared toward artistic, business and charity endeavors. GiveForward is designed for altruistic intents, such as raising money for loved ones with expenses related to illness or injuries.
Yet other sites like GoFundMe and GoGetFunding cater to individuals looking to raise money for just about anything, including the bathroom sink.
End of civilised society?
While some see personal-desire crowdfunding requests as a sign of the demise of civilised society, Ethan Mollick, a professor of management at the University of Pennsylvania’s Wharton School, said this, too, shall pass. In time, a consensus will develop about what’s appropriate.
“Over time the people who are looking to raise money for a Ferrari, unless they are funny and good, will disappear,” Mollick said. “Think about the decrease in the number of forwarded jokes from relatives you get from 2000 to today.”
Since these campaigns are so public, Mollick believes the market will ultimately punish the abusers. “What makes crowdfunding interesting is everyone gets to see whether you succeed or fail,” he said.
Also, crowdfunding can be an expensive way to get what you want. Most sites keep between 4% to 5% of the donations, and additional 3% to 5% goes to a processor, such as PayPal or Stripe.
The burning question: How do these sites keep people honest? What’s to keep the honeymoon couple from buying a new car instead of trekking through Tanzania, for instance?
The sites that handle entrepreneurial or charitable requests often vet requests, said Gordon Burtch, a management professor at the University of Minnesota. “In most cases, however… there is not much in the way of policing going on.”
Uncomfortable for both parties
For recent grads and struggling artists, crowdfunding offers a chance to obtain something otherwise financially unattainable. Christopher Ott, a recent university graduate, was nervous about publishing a campaign to finance the purchase of a used laptop for $800. “I almost didn’t press the final button. It feels too self-indulgent and pandering,” said Ott, a 23-year-old from Murfreesboro, Tennessee.
A fledgling freelance photographer and audio engineer, Ott currently works at a pizza restaurant as he attempts to develop his career. The laptop, fully loaded with the software he needs, would significantly aid that advancement. To stave off the idea that he was a freeloader, he also offered something in return: test strips, photo shoots and prints to donors of varying levels.
Ott says his $30,000 in college loans made him reluctant to pay for a new computer with a credit card. “I probably could have borrowed,” he admitted, “but I saw there was a better way.”
Ott expected — and received — some criticism. Why didn’t he use his tax return? Why didn’t he save for it? Will you stop spamming me? On the other hand, he also raised the full $800 in a week and got several donations from people he’d never met.
“The attitude seemed to be, ‘This guy is working as hard as he can. It sucks that he is limited by this financial burden and let’s just help him out,” said Ott, who has begun scheduling photo shoots for his $50 donors.
For Melvin Bowser Jr, progress has been more slow going. In February 2013, Bowser created a GoFundMe campaign asking friends and family from his Texas hometown to help finance his dream of being an actor in Los Angeles, seeking help with everything from rent and groceries to classes and headshots. The 25-year-old hotel valet supervisor had raised $640 at press time — well short of his $5,000 goal — but he has also achieved some acting success, including a small recurring role on the Fox Television US series Surviving Jack.
Bowser said his friends and family back home have given him only positive feedback, adding that he has never directly asked anyone for money, but simply posted his campaign on his Facebook, Twitter and Instagram pages.
“If you want to donate feel free. If not, no big deal. I understand that everyone has bills of their own,” said Bowser. He also said he donates to other people’s funds, like a friend’s recent request for voice lessons.
Mollick said this sharing is common for many artists’ campaigns: “It is often the same $5 being passed around.”
Oftentimes, though, the money trickles upward to those less needy.
Jean, a New York City media executive who asked to be identified by her first name only, was shocked when a friend sent a blast asking for money to pay the vet bill for her sick cat. The friend, she noted, earned more than $75,000 at her entertainment-industry job and would drop $140 on a pair of shoes without blinking.
In less than 48 hours, the pet owner had the $3,000 she needed for the vet bill. Jean explains that most of the donors were people hoping to break into the entertainment industry: “They were basically trying to kiss her butt. These were people in the Midwest making $32,000 a year, and they were donating $5, $10, $25 for her cat’s medical expenses.
“She asked me if I could share her plea on Facebook. I was so uncomfortable with that that I just pretended I never saw her email,” she said. “I didn’t even know how to respond. I was so horrified.”
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