The evolution of the idea was probably inevitable.
Once people got comfortable using social media sites like Kickstarter to crowd fund creative projects like indie band albums or low-budget movies, sooner or later, someone was going to launch a pooled-money platform focused on funding the collective activities of groups of friends.
Such is the purpose of Crowdtilt, a Palo Alto, Calif., startup that allows users to create online campaigns to "group fund anything."
"Instead of funding a $40,000 documentary, the site is being used to fund weddings, bachelor parties and backyard barbeques," said Crowdtilt's 25-year-old co-founder, James Beshara.
Among the things people have used the site for so far: Funding a $3,000 group vacation, sharing the burden of expensive wedding gifts, and throwing a Point Break-themed party. (Evidently, the 1990s Keanu Reeves flick still has some fans.)
Friends and family of an engaged couple used Crowdtilt to gather a couple thousand dollars to throw them a low-budget wedding after the groom-to-be got laid off and the bride-to-be needed an extended hospital stay. Environmentalists in Dallas used it to fund a community garden with the help of local citizens.
How it Works
Like other group funding sites, Crowdtilt is based on helping groups gather enough money to make a goal "tilt" -- the minimum amount needed to make the objective happen -- before a clearly delineated expiration date.
"It's harnessing the power of the Internet to change the dynamics and economics of these collective objectives," said Beshara, a self-described "economics nut" who studied the subject at Wake Forest University. "It's using the power of the Internet to switch economic models on their head."
In the old economic model, Beshara explained, "one person has an event -- like an invited speaker -- and sells tickets for a set price, hoping the price [they've] chosen covers the fixed costs."
That involved some challenges: The merchant/organizer had to choose an optimal price for her tickets or goods or services, and then hope that market demand was high enough.
And in the case of collective purchases -- like large wedding gifts, for example -- if people wanted to split the cost, one person would handle the transaction, then wait and hope that others paid him back.
Crowdtilt, by contrast, allows contributors to donate as much as they'd like based on their means and perceived utility. Instead of being charged equally across the board, consumers get to interact with the pricing strategy.
"The enemy of spontaneity is friction, so it's been our mission to remove that friction," Beshara said. "Seeing the growth and virality we've been able to achieve is a testament that we must be on to something,"
Peer Pressure vs. Peer Motivation
A big source of that viral energy has been the collective pressure to participate.
Of course, the catch is that -- as with Kickstarter campaigns -- if the minimum amount to meet the fixed cost isn't raised, no money changes hands. "The crowd-selling model is what drives the momentum," Beshara said. "When it gets to 30% or 35%, we know a campaign is going to tilt."
Beshara gained in-depth insight into the social pressures of financial participation when working on his first start-up in Capetown, South Africa: Dvelo.org, which presented group-fund loans to micro-insurance organizations.
"In micro-finance, you see how important social motivation is," he said. "Social collateral is so much more important to people: You not paying a loan back and having seven neighbors know about it was so much more important than an interest spike or a collateral on property you owned. Peer pressure -- it sounds like it's trivial, it's the principle that micro-finance is built on."
Crowdtilt itself was born out of a socially collective effort. Beshara and his 27-year-old co-founder Khaled Hussein, an Egyptian tech whiz formerly at Rackspace, were connected through an angel investor in Austin, Texas, and the project had backing from Y Combinator. The site initially launched in Dallas and Austin in beta form through friends and friends of friends before moving to Silicon Valley.
Currently, Crowdtilt doesn't take a percentage of the money that groups pool on the site, but at some point, it will start taking a 2.5% to 3.5% cut.
The crowd-funding online sector has been especially energetic of late: Kickstarter had two separate million-dollar campaigns meet their goals in February. Elevation Dock, a company that created a holding station for the iPhone, was the first Kickstarter campaign to earn seven figures, and Double Fine Adventure, a campaign to fund the creation of a new game by Tim Schafer and 2 Player Productions, became the second.
Beshara is bullish about harnessing that kind of energy at Crowdtilt.
"You're unleashing this latent power within groups," Beshara said. "It can happen within 48 hours. You can fund pretty crazy, on-a-lark ideas. People just want to do something with a group. The world needs more of that."