RealtyShares was able to raise a million dollars

The Oculus Rift virtual reality headset certainly caused a rift with the donors who shelled out $2.4 million on Kickstarter in 2012. When Facebook bought Oculus a year and a half later for $2 billion in cash and stock, backers did not get a jaw-dropping 145x return. Instead they got a T-shirt, a poster or 300 VR headsets. Kickstarter is a donation-based system where the creator does not give out equity. There is no risk involved because you are not “investing” and the reward is often limited to a CD, a T-Shirt or the product itself.

The crowdfunding industry is growing. According to Crowdsourcing.org, total funds raised in 2013 were $5.1 billion and that number is projected to double this year. Nav Athwal runs a real estate platform for project sponsors and interested investors called RealtyShares, the company helps investors get into big property purchases with small amounts of capital. He says it’s important for consumers to understand what exactly they are investing in when they crowd-fund across various platforms. RealtyShares was able to raise a million dollars in less than 15 hours for a property in Cincinnati. Other examples include RealtyMogul, which raised $1.5 million for a 15 percent stake in the Hard Rock Hotel Palm Springs. That was crowdfunded by a group of 85 people.

Take venture-investing sites such AngelList and WeFunder. The latter raised half a million dollars to fund a flying car that you can park in your garage and drive to the airport. It then sprouts wings before taking off on the runway. WeFunder also a funded a startup called Wevorce that makes getting divorced much easier. Investment crowdfunding is typically limited to accredited investors (those with a net worth of $1 million, or an annual income of at least $200,000.) There is a high risk factor involved- failure rates range from 75% 90% of all tech startups. Still you can’t debate the “cool” factor.

Then there’s peer-to-peer lending or debt crowdfunding through Lending Club and Prosper where loans start out as little as $25. There have been all sorts of loans-for medical procedures, weddings and even $18,000 to a Batman enthusiast who got to build his own Batmobile. The average return on debt can be as high as nine percent. Peer lending should be avoided for anyone with a less than medium risk tolerance.

Kickstarter and Indiegogo have funded projects such as the Pebble Watch, with over $10 million raised by 68,000 backers in one month. The Kickstarter campaign for the smart watch had an initial fundraising target of $100,000. It met that goal within two hours and within six days became the most funded project in the history of Kickstarter at the time.

And who can forget the infamous potato salad campaign? Zach “Danger” Brown was seeking $10 on Kickstarter to make potato salad. He got $55,000 instead and used the extra cash to throw a party. It just goes to show, ten bucks may be small potatoes to some investors but crowdfunding can end up being lucrative for backers depending on what you invest in.