When you're involved in an open source project, you know the intense personal commitment you make to ensure its success. Many developers and users have experienced this personal commitment, but not all projects succeed relying on the passion and effort of its founders.

Not everyone can support a project or has the time to do so. Feedback from your peers doesn't do any harm, but it's not enough to sustain a project. One way to remedy this is through crowdfunding [1] , which can provide the resources and funding you need. The term is self-explanatory and refers to a common source of action.

Crowdfunding, however, can do more. For example, it can help clarify goals, but it requires assessing the proper support environment and involves a bit of luck. With enough persuasion, really (almost) nothing can stand in your way.

Successful Campaigning

Joey Hess [2] succeeded with his Kickstarter campaign for a Git-annex [3] and was able to put all his energy into a years' worth of work. Similarly successful was Fairnopoly [4], which was financed through crowdfunding. It is now a Berlin auction cooperative that provides its platform based entirely on Ruby on Rails over GitHub.

The developers of the Neo900 [5] mobile phone, the successor to the legendary Nokia N900, also tried crowdfunding. The campaign was a success, and the team managed to put together the 25,000 Euros they needed for production (Figure 1). The developers are now seeking sponsors for the first thousand units to bring down the price per unit.

Figure 1: Success in prefinancing the Neo900.

Michael Ossmann developed the HackRF [6] Software Defined Radio (SDR) module for different radio and audio frequencies. A side effect of the successful financing from Kickstarter was the public attention his project received. The UDOO board [7] project, which runs Linux and Android and is a compatible Arduino platform, also has become better known thanks to crowdfunding.

Public administrations are also trying out the approach. For example, Swiss Geoportal [8] in October, 2013 reported a successful switchover to the OpenLayer3 library. Supporters contributed more than 75 percent of the funding [9].

Crowdinvesting

From a fiscal point of view, crowdfunding is a contributory model. It's in line with the prepayment model (subscriptions, advance payment, and discounts) and share financing (associations, cooperatives, and stock companies). The principle is the same, but the amounts, liability risks, and costs are lower.

There's a distinction between spending and lending-based support. Lending-based support is called crowdinvesting, or equity-based crowdfunding.

Supporters provide their help and get back surplus value in the end. The participants contribute according to their own best abilities. The upper and lower limits of the shares depend on the project. The proportion applies either upon commitment or at the campaign's conclusion.

Two versions of crowdfunding have been prevalent so far – with or without minimum required amounts. In the first version, the action begins as soon as the targeted amount is achieved; otherwise, the shares are returned to the supporters. The second version follows the hopefulness principle, and the action occurs in any case. The financing takes place during the implementation and is in the form of donations.

A high stress level and highly persuasive supporters are usually needed to best serve the project. At the end, the result is largely free of charge and common property.

Crowdfunding in the past largely occurred in the arts, book production, music-making, and performances. As an independent concept, it emerged only as recently as 2011, although it's been in action for much longer time.

Previously, crowdfunding was typically associated with patrons and sponsors – that is, a few supporters with large resources. In contrast, today's crowdfunding depends on smaller contributions in various amounts from many sources.

The Right Platform

To get supporters' attention, it helps to have the proper communication channels targeted to a thematically appropriate audience – through blogs or advertising or events. The existing larger platforms that specialize in crowdfunding usually integrate this process from the ground up.

Internationally established crowdfunding platforms include Kickstarter [10], Indiegogo [11], Inkubato [12], Betterplace.org [13], and Goteo [14]. These are more or less universal platforms, although the last three are located in Europe. You may find local platforms that are better suited to your project.

Platforms that specialize in open source projects include Bountysource [15] and the Open Initiative [16], both of which started in the summer of 2013. The former includes such famous projects such as Qt, the Cinnamon desktop, LibreOffice, and NetworkManager, whereas the latter hosts the GIMP project (Figure 2).

Figure 2: Call for support for a GIMP feature in Open Initiative.

Tips for Beginners

Apart from a well-defined and meaningful project presentation, you must ask yourself why and for what you are seeking support. You need to indicate your financial need and how long your campaign will last. You also need to make sure you have a supply of merchandising, such as mugs or t-shirts with the project logo, for your supporters. A website that shows a funding progress bar will also help stimulate further donations. Fortunately, many of the mentioned platforms supply a widget that does just that.

You should also familiarize yourself with taxes (income and sales), legal information, and documentation. The account holder is responsible for the account where the supporters' money arrives. Private individuals must report the amounts as income, and companies must declare the taxable business income together with sales tax. Another thing you should factor in is that crowdfunding platforms usually charge a commission – usually from 5 to 10 percent of the total amount.

If you field support through a publicly designated bank account, it's recommended that you secure it with what's called a "write-only" account. This setup forbids direct debit withdrawals or has strict withdrawal policies and will help you avoid unpleasant surprises. Note that if choose to support a project, you should document all transactions and keep all supporting documents. Many donations can be tax deductible.

Widely Scattered

Even if you don't want to go through the hassle of organizing your own crowdfunding campaign, that doesn't mean you can't get small donations from the community. The following services don't aim as much at financing a specific item, as at ensuring a regular flow of money to a project. The goal should be to have as little money as possible going to third parties – after all, the project should benefit more than its service providers. These should certainly be remunerated, but within a reasonable framework.

Apart from banks and savings institutions, PayPal [17] in the US, Luxembourg in Europe, and Skrill in the UK [18] (formerly Moneybookers) are popular services for requesting donations. For the former, only the payee needs a PayPal account, not the payer. For PayPal and Skrill, you set up an email account that you then use for your login.

PayPal and Skrill take between 3 to 5 percent of each payment for themselves, depending on the country. The transaction usually takes just a few minutes worldwide. If you attach a bank account, you can forward incoming payments to it and manage everything from there.

A much cheaper alternative is to use Bitcoin [19]. Bitcoins are purely digital, crowdsourced currency, and there is no central bank or private bank that controls their flow, so there are no commissions.

Variants

What service provider you ultimately choose depends on your comfort level with them, the amount involved, and your circle of interested parties. Although PayPal is available worldwide, Skrill is well known in Commonwealth countries. Bitcoins are more generally accepted among IT folks, while traditional social groups still view them with a certain skepticism – if they're known at all as a payment method.

Services such as Flattr [20] and Kachingle [21] provide interested parties with an opportunity to distribute small amounts of cash over many projects. Both micropayment services allow use of digital content (e.g., photos, videos, and posting in blogs) and thus support their authors.

With Flattr, participants first define a fixed amount to be paid for monthly content that they find worthy of setting aside for support. Kachingle has a fixed amount of five US dollars. The supporter distributes the amount by clicking the corresponding button for the account on the web.

The more buttons that supporters click monthly, the more equal portions are split among the contributions. At the end of the accounting period, the company pays the shares to the authors, which the participants have "flattred." Figure 3 shows the Flattr page for GIMP.

Figure 3: Flattr information for GIMP image processing software.

If you want to raise money for your project, it pays to design your website accordingly. The easiest way is to integrate one of the earlier mentioned services. PayPal provides a "Donate" button you can integrate in the HTML code of your page (Figure 4). Skrill has a WordPress plugin [22].

Figure 4: You can easily add a button on your project website for donations using PayPal.

Alternatively, you can provide the bank connection and its usage as text on a transparent background to make data mining from the search services more difficult.

Conclusion

Crowdfunding focuses the attention of many supporters on a project. To create media attention and profit from it, you need a well thought-out campaign that reaches the right target group. This brings success within reach and benefits both parties – developers and users.