Crowd funding is often read about but few people recognize it when they encounter it … Tee Shirts is one of the great example.

Tee shirts have been the target of a lot of business models over the years,. Even 45 years ago i the UK you could order a 1-of custom shirt. I recall my now-husband’s fondness for a shirt he ordered carrying the slogan “Ban hanging, bring back underpants.”

But recently, shirt and computer technology met with social networking and Facebook advertising to create a crowd funding model. One result has been an explosion of tee shirts being advertised on Facebook. “Stay safe at night, sleep with a Fireman” being one popular one for example (well, it was popular with Firemen).

The way this model works is, the marketer — me, for example — comes up with a design and works with a Tee-shirt middle-man (TeeSpring) to create a sales page that features that design.

So far so good.

Now, I can promote it to the hungry masses who’ll “Oooh” and “Ahhh” over the subtle brilliance of my design, while with hands trembling with anticipation they take their credit cards out of their wallets.

But, there’s now a problem. The price of that tee shirt to the public depends on how many buy it. If only 1 person buys it, then the manufacturer of the shirt is going to charge quite a lot because it’s a 1-of. There are no savings from volume. But if 10 people buy it, the price can go down. If 100 buy it, it can go down a lot. And if 1000 buy it, it can be extremely inexpensive.

But, when the first visitor sees my ad on Facebook and rushed to buy … how does the middle-man or the manufacturer know how much to charge? They don’t know whether that visitor is the sole buyer or the first of a flood.

So, a new business model evolved. I commit to the middleman (TeeSpring) that I’ll sell (for example) 100 shirts. That sets the price I have to pay. so now I tag a profit margin on that and decide what price I’ll charge.

And, the first person now visits and gets the “100 unit volume” price. So does the 2nd, the 3rd, and so on.

BUT … here’s the twist. The money’s been handed over, based on 100 sales. But what if only 90 people buy? Ah, in that case — until recently — the middleman would refund all the money to the 90 unlucky buyers! They would NOT print the shirts until they hit the 100 target.

So, it took the whole crowd — of 100, in this case — to fund the purchase.

Crowd funding in action.

(These days, the shirt manufacturers have become far more flexible so the minimum number of shirts is just a couple, and if they don’t get the committed number of sales they’ll go ahead and print anyway and just charge me more per shirt.)