NOTABLE CROWDFUNDING OPTIONS
GoFundMe (gofundme.com): No deadlines or limits with withdrawal available any time. GoFundMe gets 5 percent of each donation.
Kickstarter (kickstarter.com): All-or-nothing platform for projects; only releases funds if goal is met by deadline. Kickstarter gets a 5 percent cut and a payment processing fee.
Indiegogo (indiegogo.com): Indiegogo gets percentages for donations, credit card processing and possibly for PayPal. A wire fee can also apply.
Lending Club (lendingclub.com): Someone looking for a loan applies and is rated for risk by Lending Club. Investors can then choose which loans to fund and earn monthly returns from the borrower.
YouCaring (youcaring.com): Accounts receive funds as they're donated, and YouCaring takes 2.9 percent plus 30 cents per transaction.
A rise in online fundraisers has helped local families cope with costs in the wake of tragedies and small businesses get their start.
But experts also warn that while the campaigns can yield tremendous success stories, consumers should also beware of online scams before divulging their credit card information to crowdfunding websites.
Crowdfunding campaigns allow individuals to raise money online through programs such as GoFundMe, Kickstarter, Indiegogo and YouCaring. But with thousands of campaigns popping up, the world of crowdfunding can be tricky for well-meaning individuals to navigate.
A sampling of 500 GoFundMe campaigns in southwest Ohio through July gained an average of $2,550 in donations, ranging from $500 for a woman seeking travel expenses to participate in a juvenile diabetes medical study to more than $200,000 for the family of Cincinnati police officer Sonny Kim, who was shot and killed while on duty in June.
“It pays to be aware of who the source is and to read what description they have,” said Derek Bauman, the Mason police officer who launched the GoFundMe account to raise funds for Kim’s family.
“At a certain point, though, you have to trust,” Bauman continued. “It’s good to keep an eye out. Don’t blindly send your money and do a little research into what the cause is.”
Success stories
Bauman, who’s GoFundMe account has raised more than $205,000 for Kim’s wife and three sons, said the online campaign was successful because people were so heartbroken over the tragedy and Kim was a well-known 27-year veteran of the police department. It helped, too, that Bauman is a known police officer in the Cincinnati community.
The day Kim was shot — June 19 — Bauman set a goal to raise $10,000 for the family. It was reached within a half-hour. Since then, nearly 3,100 people have donated. A police union from Australia raised money and a cop from New York also donated to the fund, which Kim’s wife is able to access.
“I would have never guessed that in a million years it would raise that kind of money,” Bauman said of the account. “It would be much more challenging to raise into the six figures through other channels.”
Others use crowdfunding sites to raise money for medical bills, pet care, burial expenses and family support.
Businesses, too, have benefited from viral crowdfunding campaigns.
Mark Lankford works with roughly 200 businesses annually as an adviser for the Small Business Development Center of Butler County.
He said the online campaigns are suited best to help small businesses owners who need $10,000 to $15,000 to get started or to expand.
“You can’t use that as a primary source of funding for your business,” Lankford warned.
And, business owners need to have a solid network of friends and family who can share the campaign through social media or word of mouth. The efforts can pay off.
“Basically, these people are contributing to your business,” Lankford said. “It’s a great way of getting some funds without having to worry about interest rates or paying someone back.”
He said he’s seen most small businesses use Kickstarter or GoFundMe to raise money.
The site Kickstarter is tougher on campaigns, releasing funds only if a defined goal is reached by a closing date. More than half of a sampling of 4,000 Ohio Kickstarter campaigns failed, reaching just 12 percent of their goals, on average.
Jenni Hubbard, chose a GoFundMe account to help raise money for equipment — from sinks to fresh ingredients — before she opens up The Almond Sisters, a bakery that will be located at the Artspace Lofts in downtown Hamilton. She hopes to open up the store in October but needs to raise about $10,000 for finishing touches first.
“The cost for construction was just outrageous … that killed our budget,” said Hubbard, who has raised $730 from 13 people on the account. “We just need to get a few more things under our belt.”
Hubbard doesn’t have to look far for GoFundMe business fundraisers that ended happily.
The founders of Noxgear, a Dayton company that makes neon, glow-in-the-dark vests for nighttime bikers and runners, started their company after raising more than $29,000 through Kickstarter in 2013. That was $10,000 more than their goal.
“We grew and opened up manufacturing in China and launched another Kickstarter campaign, and we barely got by on that, but we’ve grown to a larger company,” said Simon Curran, co-founder of Noxgear.
Charges of deception
Other crowdfunding campaigns haven’t ended so rosy.
The Federal Trade Commission just settled its first crowdfunding case in June, after one man didn't follow through on his Kickstarter campaign promises to make a board game with the $122,000 more than 1,200 people raised. Instead, he spent the money on himself leading the FTC to accuse him of deceptive practices.
Since then, the FTC has advised financial backers to research the crowdfunding creator’s backgrounds and reviews to avoid being the victim of a scam.
The Butler County Sheriff’s Office hasn’t investigated any crowdfunding scams, said Chief Deputy Anthony Dwyer. Warren County hasn’t issued any indictments for the scams, according to David Fornshell, the county’s prosecutor.
But he expects his office will prosecute one eventually.
“It’s just a matter of time before we see one of those cases,” Fornshell said.
The Ohio Attorney’s General Office found just two records about GoFundMe, Kickstarter or YouCaring in its consumer complaint database, and both involved the same account touting playing cards.
Tina Harper, of Springfield Twp., was sentenced last week to two months in jail after setting up a campaign on YouCaring.com to raise money for the King family, whose son was killed June 10. Harper allegedly gave the Kings only $1,600 of more than $2,800 raised.
Urbana resident Heather Gaus was sentenced to one year in prison on July 15 for falsely claiming she had brain cancer while raising money on YouCaring.com. She pleaded guilty to a felony theft charge and owes more than $3,200 to 30 victims.
Champaign County prosecutor Kevin Talebi, the prosecuting attorney in the Gaus case, said charitable fraud cases will be more frequent, in part, because people are generous.
“I think the good news is these cases are still rare and most of the folks soliciting money actually receive the benefit,” Talebi said. “It’s still a very rare event that I receive a charitable fraud case.”
About the Author