Kickstarter is one of the oldest and best known of the new “crowdfunding” sites, where folks with bright ideas and projects in need of funding and capitalization can go and attempt to raise money from hundreds if not thousands or tens of thousands of contributors and supporters. There are dozens and dozens of other crowdfunding sites besides Kickstarter – Indiegogo, Pozible, Bolstr, and Fundable among others.
Prior to crowdfunding, if you were an entrepreneur with an idea for a new product or an artist with an idea for a new project, you went to look for venture capital, angel investors, you borrowed money from your parents, you got a fourth mortgage on your house, and so on. Whatever it took to get the cash you needed to get your company or project started.
With the internet, it’s now possible to ask for a little bit of money from each of a lot of people instead of a lot of money from just a few people. Some of your supporters will be friends and relatives, but many of them will be total strangers. You get your funding from the crowd by convincing them that you have a really great idea. “Crowdfunding!”
In return, you offer your supporters the promise of something in return for their contribution. Generally you offer a menu of options, where $1 or $5 gets you something trivial and $1,000 gets you something huge, with lots of options in between.
It’s easiest to demonstrate this by looking at an example – take a peek at the Hero-U Kickstarter project which funded last November. This project was put together by Corey Cole and his wife Lori, both of whom are friends of mine from when I first got into science fiction fandom in the late 1970’s. Corey and Lori have worked for years designing some legendary games and wanted to create an old-style, turn based, role playing game for today’s personal computers.
In order to do this (pay artists, programmers, designers, write the user manuals, etc) they came up with a business plan where they needed $400,000 in funding. The put together their proposal, made a video about their project, and ran their Kickstarter campaign for 32 days late last year. The got $409,150 pledged, exceeding their goal, so their project was successfully funded.
Looking at the column on the right side of their Kickstarter page you can see the menu of available “rewards”. $5 gets you listed as a Friend of the project on the web site, a token contribution. $20 gets you a downloaded copy of the game when it comes out. $35 gets you a copy of the game, a copy of the sound track, and a PDF copy of the art book. And so on up the ladder until $1,000 gets a character in the game with your name and likeness and $2,500 gets all of that and a visit to the studio to hang out with Corey and Lori.
Just about anything can get funded by a crowdfunding project these days, and different sites have different rules and support different types of projects. Kickstarter is for “creative” projects, so there are lots of small films, books, plays, games, inventions, art pieces, and so on there. (Browse the site at will, some of this stuff is just freakin’ amazing!) Other sites are for scientific or technical projects, while others are for charitable projects.
Kickstarter (or any of the other sites) do not create the projects, nor do they own them when they get funded. They’re just glorified middle men who give some structure to the process, give a platform for the creators to tell people about their projects and why potential supporters should be as passionate about them as they are, and facilitate the payment and collection process. (Yes, they take a small cut when projects fund.)
Too good to be true? Well, there are thorns in with the roses.
Some sites (including Kickstarter) require you to meet or exceed your goal by your deadline (typically 30 days or less) or you don’t get a penny. Others (such as Indiegogo) will pay on a partially funded project. And no matter where you go, a successful campaign is a hell of a lot of time and effort, good marketing, networking, and hundreds and hundreds of hours laying the groundwork prior to your campaign.
These are NOT a source of “free money”. You don’t just roll out of bed one day and sign up and have people send in cash.
As a contributor or supporter, you MUST realize up front that nothing is guaranteed. Let’s say your cousin or friend from college has a really neat idea. You pledge $1,000, spread the word about how great it is, get a lot of your friends in also kick in a few bucks. Your cousin or friend gets funded – but then they screw up badly or just take the money and run. You have no recourse or way to get your money back.
At the other extreme, if the project is for some kind of invention and you help get them off the ground (usually in return for getting one of the first of the new gizmos) and the project owners become multi-bazillionaires, you will NOT be getting a share of their profits. You’ll just get whatever you were promised for your pledge.
You are not an investor in a company – you are making a charitable donation to a project in return for a promise of some kind of reward. This is how this kind of fundraising gets around a ton of securities and exchange regulations and very complex laws concerning investing.
There is a movement toward allowing this “equity crowdfunding” for commercial and corporate investing on a very limited basis. The law has actually been changed by Congress to allow this (the JOBS Act of 2012), but the regulations from the Securities and Exchange Commission are taking a long time to be drafted and changed.
Once those changes finally happen you’ll be able to go raise up to a million dollars in investment equity to start a bakery, or to buy a handful of trucks for a delivery service, or to buy an office building as an investment, or whatever. The process and the requirements will be somewhere out there between the incredibly complex procedures for doing an IPO and the relatively easy procedures for doing something like Kickstarter. But don’t hold your breath waiting for the SEC to get this done any time soon.
But “equity crowdfunding” is the commercial big brother of crowdfunding that’s off on the horizon. For now, crowdfunding is a relatively simple process that has given birth to some amazing things. It’s a really good way for you to get involved with some outstanding creative projects and to help see them come to fruition.
Check out some of the campaigns going on now at the different sites and look at some of the best of the older projects. Here are some of my favorites:
- Amanda Palmer’s project for her “Theatre Is Evil” album and tour
- The Pebble, a Bluetooth watch that talks to your smart phone
- Donations to rebuild the new Joplin, MO mosque that was burned down in a suspicious fire on August 6, 2012
- A new and improved, re-invented bicycle bell
- A Petzval portrait lens for modern Nikon and Canon camera
- The Tile, to start shipping later this year after funding with Selfstarter
- Theft-resistant bicycle light
- A project to build a Tesla Museum
- Kim Boekbinder’s SPACE! Album
- Hugo Award winning artist John Picacio’s 2013 calendar
So, that’s what Kickstarter is!
Did I mention why I wanted you to know?
(Correction – in the fifth paragraph, I originally referred to Corey Coles’ wife as “Lisa”. Her name is Lori. I have sisters named Lisa, Lynn, and Lori, and my sister Lori’s married name is “Coles”, so it doesn’t take much of a brain fart to get it mixed up.)