Utilizing websites like Kickstarter, creative projects can be tested without risk and dreams can be funded with a little help from your friends…and other supporters.
At a time when the collective power of social media is transforming the business world, it is also transforming the way we put together and finance projects. Investing is no longer just for those with fat pockets and extensive portfolios—it, too, has gone social. Today, anyone can help produce an album, create a fashion line, film a documentary or publish a book through the process of crowdfunding.
What is Crowdfunding?
Crowdfunding is a spin-off of crowdsourcing, whereby businesses and other organizations seek ideas, creative contributions and the like from the general public. At its basic level, the model allows people to pledge small amounts of money to projects they care about in return for rewards related to the project’s success. It’s not a loan to pay back, nor a true investment to gain large profits; it is simply a way for those who are passionate about a common project to raise funds by giving just a little.
While the word itself was coined in 2006, the crowdfunding idea got its start in the music industry all the way back in 1997, when a U.S. tour by the British band Marillion was underwritten by its American fans.
Crowdfunding has launched finance into the social realm via websites like SellaBand, Catwalkgenius, IndieGogo, and, most famously, Kickstarter. To start the crowdfunding process, you must first have an idea. Then, you must have a crowd, or at least a few friends, to help get the word out and fund your idea through pledges. Founded in 2009 by Perry Chen, Yancey Strickler and Charles Adler, Kickstarter is a venue for entrepreneurs, starving artists and creative types to showcase their ideas, making crowdfunding a breeze.
Kickstart Your Project
Kickstarter only accepts U.S. project proposals, which go through a review process before they are posted to ensure they fit the guidelines established by the organization. Once the project is approved, its creators can post images, video and other information about their proposal to help drive pledges generated through the creator’s family, friends and social media.
Anyone can pledge money with a credit card via Amazon’s Flexible Payment Service. If the fundraising goal is met, the project creator receives the funds, minus Kickstarter’s five-percent cut and a small percentage to Amazon for credit card processing fees and other services. If the goal is not met within the allotted timeframe—the maximum is 90 days—the creator does not receive the funds, and donors are not charged. This is called “all or nothing funding” or a “threshold pledge system.”
Tangible rewards—such as products, experiences and other benefits—are required and set up by the project creator as an incentive to donate. Project creators retain all rights and keep 100 percent of any profits from their ventures. By not distributing the funds unless the goal is met, Kickstarter keeps project creators accountable to their pledges. The rewards requirement also ensures that they follow through with the project once funds are raised.
» The Kickstarter Process
- It starts with an idea. A creative project is submitted to the Kickstarter team.
- Categorize. Once a project is approved, it must fit into one of 15 categories. Then a project page is created.
- Raise money. Set a monetary goal and a time limit to reach that goal. No goal = no money.
- Set rewards. As an incentive for pledging, donors are rewarded. The more money pledged, the better the reward.
- Show off. Create a video to showcase yourself and your project.
- Launch. The project enters the Kickstarter community.
- Update. Keep donors updated on your progress.
- Cash out. If your monetary goal is met or exceeded within the allotted time frame, you get the cash to make your dream come true.
Many of the projects on Kickstarter have been quite successful, even receiving funds well beyond the initial goal. In Illinois, there are currently more than 300 Chicago-area projects posted on the site, with 13 projects in Champaign-Urbana, two projects each in DeKalb and Carbondale, and one in Springfield. It is a diverse range of projects, from gaming accessories and comic book publishing to album production and documentary film-making.
One successful project close to home is the short film Sardines, which was shot and set in Ottawa. Marc Wilkinson, a student filmmaker from Chicago, posted the project and received full funding last May. The film featured students from Columbia College, Illinois Valley Community College, Ottawa High School and others among the cast and crew. Rewards for funding the project included various levels of screen credit, copies of the film on DVD, and an invitation to the local screening.
While Kickstarter is the 800-pound gorilla in the industry, other similar sites have popped up as well. SellaBand.com is an online community in which artists can raise money for their music projects by crowdfunding from their fans, or “Believers,” as the site calls them. Artists set a “part price,” and their Believers can purchase as many “parts” of the artist as they wish. They are then rewarded with CDs, downloads, t-shirts, studio visits and other items based on what they contribute. If the artist’s goal is not met, Believers can move their purchased parts to another artist.
At Catwalkgenius.com, fashion designers are using crowdfunding to finance new fashion lines. Although you have to live in the United Kingdom or Ireland to back a designer’s line, you don’t have to live there to purchase the fashions from the dozens of designers on the site.
IndieGogo.com is a self-described “collaborative way to fund ideas.” The site assists in creating a campaign for a creative project in order to raise funds. Unlike Kickstarter, IndieGogo offers marketing outlets for projects through social media and press. Creators have 120 days to meet their funding goals, and anyone can fund a project. The list of projects is quite diverse, including dog training, themed coffee shops and community causes.
Crowdfunding has emerged as a way for people of like interests to become an integral part of the success of a creative project from its inception. Now that finance has gone social, these websites offer a venue for the do-it-yourselfers, starving artists and entrepreneurs to take control, market and raise money for creative projects that would otherwise remain unattainable due to lack of funding. These days, while money is tighter than ever, the powerful combination of social networking and finance is making many of these dreams a reality. iBi