Start Me Up
Crowdfunding sites like Kickstarter let everyman help entrepreneurs achieve their dreams, from food trucks to films.
Say you have this grand IDEA—a food truck, serving New York deli-style sandwiches. Knowing that the mobile food business is a trendy but risky proposition, where can you get the money right now?
Banks are notoriously tight, venture capitalists want big-ticket moneymakers, and sponsorship from nobility went out with the Borgias. These days, for musicians, artists, scientists and entrepreneurs, the road to funding means passing the cyber-hat.
It’s called crowdfunding, a term coined in 2006, where creative individuals ask their friends, family, fans and total strangers to contribute money online toward a goal. The big players in this new entrepreneurship have been on the scene for a relatively short time. Danae Ringelmann, a Wall Street analyst seeking financing for a play reading in 2008, started Indiegogo. Kickstarter began in 2009 as a traditional venture capitalist-backed company, obtaining $10 million from the old-school financiers of Twitter, Vimeo and Flickr. Ironically, many venture firms now use these new populist patronage sites to fund other companies.
The 10 most successful Kickstarter campaigns have raised more than $42 million from optimistic donors. A $99 video game console called Ouya attracted 63,000 backers and nearly $9 million — and nobody will see a working model until March. Indiegogo’s banner winner is the campaign for a museum dedicated to scientist Nicola Tesla, which raised almost $1.4 million.
For Orlando’s George Markward, the goal wasn’t quite that high. The 53-year-old former IT manager is the proud proprietor of the Pastrami Project food truck, funded by a successful 30-day, $10,000 Kickstarter campaign.
He was inspired by The Daily City’s first food truck event in 2011, where thousands of people jammed the parking lot of Discovery Church on South Orange Avenue. “I saw total strangers talking to each other, comparing food and standing in long lines, and the numbers guy in me just lit up—there’s a lot of money here.”
But first he needed a truck. “I didn’t have enough money myself,” he says, “and the crowdfunding thing seemed like a good idea.” To build a mobile New York deli, Markward set out to attract donors. “Leave your ego and pride at the door,” he says. “You have to ask people for money. Over and over.”
Kickstarter fundees use pitch videos, sweetened with gifts. The premiums are as important as the pitch; Kickstarter can reject a campaign for unimaginative incentives and will suggest improvements. Markward offered everything from a sandwich and drink to a catered party for 30 people, including music (three $1,000 backers took him up on that offer).
“I was determined not to be on the wall of shame,” Markward says. “I did my research, read as many of the success stories as I could, and the failures.”
The Truck’s video features pastrami being brined and people eating cheesecake and corned beef in Markward’s kitchen. “There’s a reason my video is amateurish; I made it myself.” Markward makes everything himself, from smoked meats and salmon, coleslaw and cheesecake, to the cabinets in the truck.
“There’s a feeling of ownership,” he says about the process. “I blogged daily; it became ‘our’ truck.” On his last day, he was so close to his goal he could smell the pastrami cooking. “I didn’t think I would make it … this taught me about who is a friend, what your connections with people are really about.”
In the end, 59 people contributed, supplying $136 more than his goal. Surprisingly, a campaign doesn’t end when a goal is reached, but after a time limit. For example, the computer game Double Fine Adventure was looking for $400,000, and it raised more than $3.3 million.
Pick your project
According to the Kickstarter stats page, more than 77,000 campaigns have been launched, with a total of $409 million in pledges. Fifteen campaigns have surpassed the $1 million mark. Music projects are the most successful; film and video proposals are both the second highest funded and have the most failures.
Projects on Kickstarter can’t be used for charities or causes, to fund a vacation or pay bills. There must be a tangible result, and there’s a long list of prohibited products, including pet supplies, porn, real estate, eyewear, cosmetics and weapons. But there are other, more flexible avenues.
The scientific community leans towards RocketHub (the “Put the USA Back in Space Today!” project wants $98 million to build an orbital spacecraft), and “fund my life” money is sought at GoFundMe (one couple wants $1,500 for their Disney World honeymoon). Ex-Google executive Dave Girouard formed Upstart to let new college graduates raise money in exchange for a share of their future income.
While alt rocker Amanda Palmer raised $1.2 million on Kickstarter, others, including already successful artists such as Martha Wainwright, rap group Public Enemy and 10,000 Maniacs gather support from their fans through ArtistShare, PledgeMusic and Sell A Band. Favorly, a startup based in Brooklyn, N.Y., lets artists, engineers and designers source manpower instead of money, requesting an audio engineer for a recording session, or cooks to test recipes. At Unbound, authors pitch ideas and supporters choose, with comments and dollars, which books get written.
Kickstarter is kind to Central Florida musicians. Vocalist Heather Friedman, blues artist Danny Jones, Native American duo Painted Raven, rock group Zap Dragon & The Attack and country artist Tayler Buono have all benefited from their online fans. Singer-songwriter Emily Kopp also used Kickstarter for her recent project.
“The plan was to record my first full-length album,” says the 22-year-old UCF student. “I didn’t want to be just another local band, but recording and touring takes a lot of money–which didn’t exist.” The record was actually her second campaign; the first, in 2011, was an unsuccessful bid to produce a music video. Second time was the charm: Kopp raised $12,385 for a recording set for a March release.
Performing at local venues like Backbooth and touring in Jacksonville, St. Louis and Memphis, Kopp has opened for artists such as Michelle Branch, Parachute and Brandi Carlile.
She began playing and writing two years ago, parlaying her experience working with bands at The Plaza Live.
“I drew up a marketing plan, wrote press releases to every outlet in Orlando before the campaign launch—it’s nerve wracking, thinking you could do all this work for nothing. You have to be mindful of how you’re asking for money. It’s very intense.”
Kopp says it’s possible but unlikely that she’ll try another campaign but has advice for those who do. “Plan ahead,” she says, “and have really low expectations.”
A worldwide movement
Funding by mob isn’t just an American phenomenon. There is Fondomat in the Czech Republic, the UK’s Peoplefund.it and Eppela in Italy ($12,000 to repair a neoclassical theater in Mantua). Add the Belgian music funding site SonicAngel, Witology in Russia, KissKissBankBank in France, Indonesia’s Wujudkan, the fashion-focused ZaoZao in Hong Kong, Kenyan technology hub m:lab (backed by Google), plus similar projects in Germany, Switzerland, Portugal, the Philippines, Brazil and Australia ($20,000 for a fleet of food carts via Pozible) and it’s clear that the crowd is a worldwide movement.
Or even an interplanetary, but not always successful, one.
Orlando-based Earthrise Space, Inc. has a vision, one that involves the moon. Part of the Google Lunar X Prize competition, Earthrise is one of 25 worldwide teams vying for $30 million for the first privately funded robot to land on the Moon. When the time came to transition their lunar rover from theoretical design to physical trials, the team of engineers and UCF students needed a high-tech computer numerical control (CNC) milling machine to create the parts, at the cost of $200,000.
Chief Operating Officer Joseph Palaia looked to the Internet. “There’s a time limit,” Palaia says. “This is a race to the moon, and Kickstarter seemed the fastest way to get outside money.”
Earthrise themed its rewards around the rover, including T-shirts and scale models. Contributors at the $50 level were promised a five-gallon bucket of duck sauce from the team’s favorite Chinese restaurant.
But nobody gets the duck sauce; no goal reached means backers don’t have to pay up, and they had pledged less than $3,000 before the campaign closed. “There’s a science to it,” says the rocket scientist, “and we didn’t hit the pattern dead on. But we did get exposure.” National magazines and cable networks covered the project, enough publicity to attract a private investor, allowing Earthrise to buy the needed machine. The team joined forces in October with former competitors Angelicvm Chile, in hopes of capturing the prize.
“Maybe we’ll do another campaign,” Palaia says. “The amount was too high, the barrier to success was too far away. We learned.”
A little more than half of all Kickstarter projects never leap that barrier; about 8,500 never received a single pledge. Superstar programmer Chris Crawford was in search of $150,000 for a new simulation game, but only attracted $13,000. The “world changing” XQ1 interactive restaurant guide wanted $250,000 this past November, ending up with pledges for just 80 bucks.
Perhaps they should have paid attention to Jacqueline Skelton. Having contributed to 109 projects as of November 2012, she is a backer extraordinaire who can probably spot a winner.
From films (The Happiest Place, Dear Mr. Watterson: A Calvin & Hobbes Documentary) to food trucks (Heartsong Cookies and Moo Truck, Markward’s Pastrami Project) to technology (including the aforementioned Ouya game console), Skelton searches for art projects and interesting, quirky ideas, and occasionally donates on a whim.
A techie at heart, she keeps a spreadsheet to track her successes. “Photos, books, movies — that banjo movie Steve Martin made. Food, herbs, cookies…”
The Winter Park resident says, “How did I find Kickstarter? I have no idea. It’s addictive, pretty dangerous, actually. I’ve done somewhere around $5,000 so far.”
“Some of them don’t make it,” says Skelton, a medical equipment engineer. “I’ve had a few that reached their goal but never came through with anything. A haiku lady in San Francisco, someone sewing stuffed animals (The Kitten Coin Initiative) and a kid making salsa in Chicago who nobody has heard from since last December. And there was the guy who had a thing that lights up when the International Space Station flies overhead. I know I’ll never see that one.”
Truth is, no crowdfunding site guarantees results; it is the funders who are at risk. As its site says, “Kickstarter doesn't issue refunds, as transactions are between backers and the creator.” There was no risk involved with Banks Helfrich’s successful campaign to fund his movie 7 lives of Chance: The independent filmmaker from Orlando has already self-financed five movies over the last 15 years. “The only thing holding me back is money,” he says, so for his latest venture he involved his potential audience.
The campaign ran for 37 days. The goal was $7,777 to complete his slightly surrealistic, oddly uplifting movie. (Kickstarter says the most successful “sweet spot” is a $10,000 campaign run for 30 days.) Helfrich, 49, is a graduate of the Ringling College of Art and Design (“clown school,” he calls it). Once he circulated email to fellow alumni, his coffers were flooded with contributions from jesters and joeys.
“These are clowns I didn’t even know,” he says with a straight face.
“Find your niche,” Helfrich suggests. “If you think that your project will attract lesbian bikers from Ontario, that’s the market you need to pitch.”
Ultimately, 164 backers pledged $8,417, over his goal but still below a production budget of $15,000, the balance of which came from private investors. “I never asked for money before; it is an art. I didn’t think I’d make 15k, and thought the $7,777 was a cute gimmick, considering the name of the film.”
Each backer received a credit on the movie, and depending on the level of contribution, a copy of the completed film, placement of a prop or art in the movie, or the chance to be an extra, name a character or yell “Action” on the set. One sponsor donated enough to earn an executive producer title on the film.
“My biggest advice,” Helfrich says, “is not to doomsday them. Never tell people that unless they contribute the project is over and you’ll have to sell your kidneys to make the film. The end result is always positive.”
Unusual Crowdfunding Successes
Riding the Lines: $4,079 to artist John Raux to ride the New York subways and draw people on an Etch-a-Sketch.
99 Shades of Grey: A book filled with pictures of every available greyscale shade, raised almost $10,000.
Detroit Needs A Statue of Robocop!: Exactly what it says; asked for $50,000, got more than $67,000.
Yellow Jacket iPhone case: The built-in 650,000-volt stun gun to keep phone thieves at bay raised $100,000.
Remee: an LED-loaded mask that “enhances lucid dreaming”; $572,891 and hopefully an explanation.
How the money works
Kickstarter projects hinge on a successful conclusion. Contributors supply a credit card number, and only if the campaign reaches its goal in the set time do cards get charged and the project gets the money. Kickstarter takes 5 percent of the funds raised. Amazon, which does the bookkeeping, charges an additional 3 to 5 percent. Indiegogo charges donors immediately, and offers two plans: a flexible setup (16 percent in total fees) where the recipient keeps whatever is donated, successful project or not; and fixed funding, which refunds the money to contributors if the goal isn’t met, and charges campaigners 7 percent only when goal is reached.