Published in the Democrat and Chronicle, May 27, 2012
By JEFFREY BLACKWELL/STAFF WRITER
Got an idea for a new gizmo, mobile app or business, a movie to make or an artistic talent that needs exposure to the world and the only hurdle in front of you is the cash to do it?
Well, the kind of freethinking minds that brought us the world of social media are now getting into the fundraising business for all those projects, innovations and artistic endeavors that can’t seem to get financed through banks, venture capital and other more traditional means.
With social funding sites such as Kickstarter, Indiegogo, AngelList and Crowdfunder, thousands of projects are seeking cash to support ideas, dreams and new businesses.
Scott Steinberg, CEO and lead analyst of Seattle-based TechSavvy Global, has penned a book on the subject called The Crowdfunding Bible: How to Raise Money for Any Startup, Video Game, or Project. He said people are turning to these funding sites because of the hassle of going to traditional institutions and the real possibility of losing creative or business control to backers if you do get support.
“Usually you need to have access to fairly influential or wealthy individuals to begin with, and even if you do, you have to have a very detailed business plan and quite a cohesive vision, and that can be very hard,” Steinberg said. “Essentially, what happens is that a fairly small group of tastemakers will ultimately decide which projects come to fruition.”
These social funding sites are doing just the opposite. They are opening a public stage for the vetting and cultivating of new ideas that otherwise might never see the light of day. In April, President Barack Obama signed the JOBS (Jumpstart Our Business Startups) Act into law, making it easier for startups and small businesses to raise money through crowd funding.
There are variations on the theme of this service, which couples projects with likeminded supporters with cash. But basically the idea works like this: You have a project that needs money. You create a proposal and multimedia presentation outlining the project. You post how much money you are seeking, a deadline for the drive and any incentives for donations.
The catch is that it is an all-or-nothing deal. Donors on Kickstarter make pledges through Amazon for a small fee, and if you make your goal, you get the money for your project. Kickstarter takes five percent of the proceeds as a fee, and it is all taxable income.
If you don’t make your goal, you have to walk away without any cash.
Shannon Roxborough of Rochester is working to launch a magazine focused on vintage and retro clothing, homes, housewares, decorating and other subjects. The publication is called Vintage Living Magazine.
He is seeking $15,000 on Kickstarter. With fewer than 20 days to go in the campaign, he has raised $151 from seven backers.
“A lot of people have had success with Kickstarter and I have been watching the site for several months — and even supporting projects myself,” said Roxborough. “I thought this would be a good place to start, and if it works it does, and if it doesn’t it doesn’t.”
Genesee Pottery in Rochester is seeking $18,000 on Kickstarter for a new gas kiln. With three days to go, the nonprofit had raised almost $16,000 from 174 backers and was hoping for a rush of donations to hit the goal.
“The kiln project is an $18,000 project, so it would be difficult to raise that money,” said Janice Gouldthorpe, executive director of the Genesee Center for the Arts and Education. “For a medium-sized organization in the city of Rochester, that is a lot of money, so we needed a far reach, and Kickstarter is able to do that using social media.”
Since 2009, nearly 50,000 projects have sought funding through Kickstarter and, as of April, more than $200 million has been pledged to those projects. More than 60 projects have been successful in the Rochester area since 2010, including independent film productions, a magazine venture, backing for art shows, book and photography projects, and the production of musical compact discs.
“If you go with crowd funding, you go directly to the general public,” Steinberg said. “So those ideas that may have otherwise stagnated in a venture capitalist’s inbox, ignored or completely untouched — suddenly now you can go directly to end users, and all ideas are gauged on their own merit. The market and masses are able to judge for themselves and vote with their wallets.”
A few months ago, local photographer and curator Nick Marshall of Rochester was looking for a way to fund the dream of curating an art exposition. The exposition is called “My Apocalypse,” a collection of works by local artists and visual artists across the country and around the world that deal with an end or erasure of civilization.
Marshall, a graduate of Rochester Institute of Technology, needed about $600 to finance the show in June. After talking with friends and fellow artists, he decided to try Kickstarter. By the end of a month-long campaign, he raised at least $1,000 from 30 backers.
His incentives to donors are prints, show booklets and recordings from the sound artists featured at the exhibition.
“I was actually a little hesitant to go with Kickstarter at first because I really didn’t know much about it,” Marshall said. “I definitely changed my mind very quickly because I think this is the best route to take for this. There are grants and other ways of funding, but those usually take a long time, there are not a lot of them, and I had a lot of momentum going and did not want to wait.”
Several local entrepreneurs are starting their own crowd-funding site to help cultivate commercially promising research coming from the nation’s colleges and universities. “Innovocracy,” as it is called, is open to college students and faculty.
Alex Zapesochny, executive director of the site, said it is in beta testing but is promoting its second project from the University of Rochester. A group of students is developing the Mono-Mano, a bicycle handlebar attachment that allows a rider who has suffered a stroke or amputation to control a recumbent tricycle with one arm.
The project took second in the university’s recent Mark Ain Business Model Competition. The team is hoping to raise $6,000 by the end of June.
“What folks can do is come to the site and support projects that speak to them,” Zapesochny said. “It could be health care or alternative energy, and they can choose to put forth small amounts of money. That money gets aggregated and becomes a substantial sum that a researcher can do something with to get them to the next step.”
Successfully paying for a project through a crowd-funding site isn’t easy. Less than half (46 percent) of the projects listed on Kickstarter last year were successful in reaching goals. Failing to reach a goal can be humiliating, cause a loss of brand image and make your venture look less viable.
Steinberg said a successful campaign asks for the least amount of money needed, requires planning that includes a useful presentation and social networking with friends, family, customers, patrons and other potential supporters.
When you talk about successful projects, it’s hard not to mention Pebble, a customizable e-paper watch for iPhones and Android phones with downloadable watch faces and Bluetooth connection to your smartphone.The developers were seeking $100,000 on Kickstarter and ended up raising nearly$10.3 million from 68,929 backers. The incentive for donating was a Pebble.
“Essentially, what this does is democratize and Darwinize the investment industry,”Steinberg said. “Theoretically, it’s a better system and you are not giving up any equity,so at the end of the day you retain full control of how you interact with customers, whatthe project or product looks like and how you execute your vision.”