Crowdfunding

Kickstart Your Project with Crowdfunding

Securing funding for a cutting-edge project isn't as simple as walking down to the corner bank-especially in today's economy.

Joseph Schlesinger, for example, thought he had a pretty solid project plan to design, develop and mass-produce an inexpensive, easy-to-build robot. But he discovered coming up with the concept was just the beginning. To get the project off the ground, he needed US$13 000. It wasn't a huge budget, so rather than navigate the complicated and often cut-throat world of venture capitalists, he turned to Kickstarter.

This "crowdfunding" site lets budding entrepreneurs take their pitch to the masses, who then decide whether to invest. The amounts are often small, but they can add up to be enough for Schlesinger and others to achieve their project vision, while still maintaining complete control of it.

A report from research firm Massolution predicts that US$2,8 billion will be raised through crowdfunding worldwide this year, up from US$1,5 billion in 2011 and US$530 million in 2009. Led by Kickstarter and Indiegogo, there are 450-plus crowdfunding platforms, more than quadruple the number in 2007.

The model is fairly straightforward. Creators showcase their project ideas on the site, choose a funding goal and deadline, and post a video describing how they will execute the idea. Finally, they offer rewards for investors who ante up a certain amount of money. For example, people who invested US$200 in Mr. Schlesinger's project received a robot kit.

Since Kickstarter launched in April 2009, more than 25 000 projects have been successfully funded, to the tune of US$223 million recently. And Kickstarter and other crowdfunding sites may soon reach a tipping point.

"This year marks the year that we've seen Kickstarter enter the real world in a number of ways," said Perry Chen, one of its founders, to The New York Times. "At Tribeca Film Fest, there are a dozen different Kickstarter-backed films, there's an installation at the Whitney Biennial [art exhibition] that was a Kickstarter project, and we just had our birthday party at a Kickstarter-funded restaurant."

Crowdfunding is now officially making a play for big budgets and big projects. One user recently raised more than US$10 million, the largest budget in Kickstarter's history, for a wristwatch that links to the user's iPhone.

Along with providing a virtually limitless pool of potential investors, crowdfunding exposes entrepreneurs to experts in a variety of areas who can contribute ideas.

"The amount of information I received from people who invested in my project was amazing," says Schlesinger, founder of ArcBotics, a robotics company in Boston, Massachusetts, USA. "I received advice on everything from adding Bluetooth as a feature,which I did, to ideas on marketing the site to which analytics software to use on my site."

And because Kickstarter and other crowdfunders attract innovation-minded users, the sites themselves can act as a powerful marketing tool. "One of the great things about Kickstarter is that it allows for discovery," says Schlesinger. "People go on the site looking for the next cool thing, and probably 60 percent of my sales have come from people who just went on Kickstarter and were looking for that." ArcBotics accomplished its funding goal in one day and raised more than 12 times its original plan, allowing ArcBotics to increase production.

"As a single-person operation, I don't know where my company would be without Kickstarter," says Schlesinger. "It helped turn this idea into an actual product."

The rise of kickstarter

 

2010

2011

Launched Projects

11,130

27,086

Successful Projects

3,910

11,836

Dollars Pledged in US$

$27,638,318

$99,344,382

Rewards Selected

322,526

1,150,461

Total Visitors

8,294,183

30,590,342

Project Success Rate

43%

46%

 

 

 

 

Source: PM Network - Keith Jackson

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