When Jia Yuhao, the owner of a hostel, thought about furnishing his hostel last year, he posted a fund-raising advertisement on demohour.com.
Two months later, he received 146,000 yuan (23,725 U.S. dollars) from 3,000 people who he’s never met. In return, they all received membership cards for Jia’s hostel in Lhasa, capital of Tibet Autonomous Region in southwest China.
Jia is one of many Chinese entrepreneurs who are benefiting from crowd funding, an innovative way of raising money for their businesses.
Crowd funding projects are usually displayed on websites designated for the purpose, with a fundraising goal and deadline. People who like the project can pay to support it.
Project initiators must reach their funding goals to receive the money. Supporters are rewarded with service or products. The websites charge fees of up to 10 percent of the funds raised.
First introduced in the United States, crowd funding websites have become increasingly popular among business people in China.
“Crowd funding has made it easier for ordinary people without much money to start their own companies,” said Zhang You, co-founder of Demohour.
Launched in July 2011, Demohour is China’s first crowd funding website. It has been followed by dozens of others, including Musikid.com for music projects, Tmeng.cn for movie producers and Emielife.com for designers.
“I was inspired by the huge success of Kickstarter.com, the most influential crowd funding platform in the U.S. I think Chinese people also need such an opportunity to realize their dreams,” said Zhang.
For project initiators, crowd funding websites not only provide an alternative to gather money, but also allow business people to promote their products and gauge market interest.
“Supporters gave us so many wonderful suggestions. One of the ideas we adopted was selling lampshades with bulbs included,” said Jiang Zhaoning, a developer of intelligent light bulbs who received crowd funding to the tune of 40,000 yuan.
To Jiang’s surprise, several venture capital groups contacted him after Demohour displayed his project.
“Crowd funding websites are effective in promoting products. And they’re really cheap!” said Jiang.
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