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Does Crowdfunding Work?
Barence writes "Is it really practical to fund a business from hundreds of small donations harvested over the internet? With Kickstarter grabbing the headlines with some high-profile projects, it's all too easy to assume crowdfunding is great, the obvious solution for a business that needs investment. But just how feasible is it for most businesses? This article looks at several lower-profile examples and investigates the positives and negatives of this new way to raise money."
1. Famous douchebag X with a massive existing following does lame PR stunt Y to promote shitty retarded concept Z.
2. Everyone praises shitty retarded concept Z, ignoring lame PR stunt Y and giving famous douchebag X "credz" for opening our eyes to this magical new way that Changes Everything (TM).
3. Nobody grasps that shitty retarded concept Z only worked because famous douchebag X is famous douchebag X and that Mr. Nobody won't even get any freeloaders playing his game or listen to his song or whatever *for free*, much less pay/donate any money.
No, for most people and businesses it does not work. You have only to look at the other 99.9% of projects on kickstarter to see that.
Side note: anything that links to pc pro is probably *not* something we should consider news for nerds.
If the project is well thought out and the pitch is done reasonably well so that the the funder knows what they are getting into, then yes, it does work.
As a kickstarter myself (shameless plug: Ultra-Bot) I started out with a modest goal... and quickly achieved it with a product that I think was well thought out, had reasonably low expectations and offered the intended audience exactly what they wanted.
With that said, however, there are a few kickstarters that are way off the mark and haven't thought it out that well... usually because they have their emotions tied into the product and it really isn't as good as they think it is... which in that case, Kickstarter actually works as well... it allows you to know that your idea isn't so hot before you invest a billion bucks in it.
Bill
It's my Sig and you can't have it. Mine! All Mine!
Some people have it. Some people don't.
It is a matter of time as to whether or not a business prospers or dies out due to failed managing.
If you plan something right, you could start a business by single monetary donations from door-knockings.
But even with billions in money you can still screw your business up quite easily.
The person matters more than the money does.
Its a long winded article, the short TLDR is crowdfunding is the hip new term for the middle aged concert ticket business model which is based on the ancient business model of patronage. Some things like films work really well with a concert ticket / patronage model, almost everything else, not so well.
I've crowd funded a couple films. Mostly tech. Mostly tech documentaries directed by Jason Scott. I'm eagerly awaiting the release of 6502, for which I donated a healthy chunk of change. So I have some experience with this business model, and I like it.
I basically paid "an entire row of movie theater tickets" for a documentary I really want to see, done by a guy with a proven track record of decent tech documentaries. Needless to say the local theater is totally uninterested in taking a couple hundred bucks to put my taste of movie on instead of the bubblegum for the mind they specialize in. I literally cannot get the local movie theater to take my money. But via crowdfunding over the internet, I can finally get someone to take my money.
Crowdfunding really works best when there is no way to get "the locals" or the "established companies" to take my money. There are VERY FEW areas where this actually works. There are no shortage of pizza restaurants around here... crowdfunding a "pizza startup" isn't going to work. Or yet another web 2.0 company following existing trends.
Another thing you need is fanatics... Where mass industry collides with supply and demand. I'm more than willing to give away $15 for Stross's latest novel. Heck I'd give him $50. There is no known business model where I can give a book author $35 more than list price other than crowdfunding.
Finally crowdfunding works well in a gift economy. My wife got me a package deal with some custom signed artwork a couple years ago as a gift. Awesome, but out of pocket I would not have dropped that kind of dough for myself. Right now is prime gift giving time for Christmas, maybe even a little late, so you're going to see crowdfunding articles peak around this time of year.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
ObBettridge'sLawofHeadlines http://en.wikipedia.org/wiki/Betteridge's_Law_of_Headlines
I don't think the question should be can you raise money for your business (or idea) with crowd funding. I think the question should be, is crowd funding intelligent enough to pick winners and losers? Most popularity contests are won by the superficial as opposed to substance.
This comment is on the issue of the market solving the problem of government meddling with raising funds with this kickstarter project. I do not know if all companies can benefit from kickstarter, but surely some can. Today trying to get a business loan is an exercise in futility as the government crowds out all of the real credit, so none is available to the small firms, startups. The startups have to rely on VCs, friends, family, angel investors, but the rest of the market (almost all small time investors) are prevented from investing in companies while there is a potential for a real upside. The government regulations surrounding IPO prevent small investors from being able to get into businesses while there is actual upside, instead it is VCs (and underwriter banks) that mostly gain from IPOs and the IPO becomes a way to cash out instead of a way to try and grow a new business.
Kickstarter is a good first idea that allows people to invest into businesses before they could ever qualify for IPO money. Of-course there is risk in using kickstarter to try and invest, but there should be risk, people should be evaluating risks instead of blindly jumping into the casino that the inflation turned the stock market into.
MY OTHER COMMENTS
I got the impression that Kickstarter and friends were aimed more at individuals with ideas. Sometimes it leads to a business, but it's not supposed to be for investments in existing businesses.
http://www.kickstarter.com/projects/swimmingpoolqs/the-swimming-pool-qs-double-album-reissue-project
"The average reporter we talk to is 27 years old......They literally know nothing." - Ben Rhodes
I know several authors who will be happy to take your money on the old-school patronage model.
Seriously, if you have a few grand lying around, I know some authors who will take that instead of a traditional publisher's advanced royalty payment and use the money to live on as they finish the book.
By authors I'm speaking of people who have already published paper novel-sized works in regular - non-novelty-press - publishing houses.
If you are seriously interested in giving authors $35 or $3500 more than retail for a copy of their book, write the author you want to fund and enclose a check or money order. I'd be very surprised if he turned you down.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
At the risk of sounding like an "In Soviet Russia" meme, the question to ask is:
In 2012 America, will crowdsourcing fund YOU?
Or more to the point, is it the best way to achieve your funding and other goals. Remember, as a business startup, you may have other options that may be better for you even if crowdsourcing would work for you:
A few large-donor patrons or angel-investors, family-money support, a bank loan, personal money, or even buying the shell of an existing public company and offering a secondary public offering of stock might be better than crowdsourcing. Or maybe not. You have to look at your project, your goals, and your situation to decide what is best in your situation.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
Answer: Sometimes.
Here in Western Australia, Screenwest (The governing body of film funding in the state) now matches 2:1 any funding acquired by film makers from an Australian crowd funding platform (Pozible). This was brought in due to the success of a number of films that achieved their funding targets without any government assistance.
Crowd funding works! How many projects have been able to get off the ground and even become successful after applying for public funding. With crowd funding you get one major advantage and that is the ability to pitch your idea to much bigger group. When you try to make a pitch to a small group of investors your relying on a small group of people understanding and taking great interest in your idea, if they don't understand your idea it's almost doomed to fail. This is what crowd funding helps eliminate.
Well, maybe and exception, but for non-business projects, Kickstarter works great if the idea of the project can make the people feel they're part of it.
I know about a movie, of a new Director that already made a pair of good very-low-budget movies that wanted to make a new one but better produced. Depending on the amount of money one send, you can get a different benefit like a DVD of the film, a ticket for the movie premiere or at least, see your name in the credits.
Simple projects that you don't expect much in return, but that you think they're a nice idea.
I don't see myself backing a business project with lots of money waiting for a big thing in return.
El Regreso Movie (Spanish)
Kickstarter is a great idea, but I think it will soon become difficult to fund projects due to lack of quality control. I think there will be too many projects that get funded but fail to deliver (like this one), people will become wary about what they fund, and eventually it will be almost as difficult to get a Kickstarter funded as it is to just find an investor.
I think this DEVO App Kickstarter is a good illustration of the problem. As an iOS programmer and I can tell you that this project will almost certainly end in disappointment. He basically wants $15k to redo the graphic assets of his failed colorforms-like app, but I think it takes an expert to see this through the clever sales pitch.
Crowdfunding replaces a bank loan. It is interest-free lending for the Internet era. It is not investment. It has nothing to do with government or IPOs.
The problem with interest is that it is unsustainable.
Those who advocate genocide deserve every protection afforded by law, and none afforded by common human decency.
I've helped fund a lot of self published comic books, a painting series about the Wall Street Meltdown, and other artistic endeavors. Every one I have funded has so far resulted in a tangible product in my hands, usually signed by the artist (with extra sketches).
But I shy away from ones that are involved in things that are purely software oriented,or based on any technology higher than the iPod Nano wristwatch converter (with the exception of indie games from already established studios.) I'm still raising an eyebrow over how much money the Ouyo console managed to bring in, as I still remember the Phantom console (which turned out to be true to its name) from just last decade.
At this point, major hardware based endeavors, and large scale software endeavors from folks who aren't already in the industry, are just too iffy to bet on.
Occasionally living proof of the Ballmer peak.
Crowdfunding sounds a lot like publicly traded companies, except no stock is given.
The Dollyrots were able to record and produce their forth album on their own label with Kickstarter, and I'm so glad I got to be a part of it. They initially set a goal of $7500 and achieved it within a week, eventually getting more than $33,000. I chipped in $75, which got me an autographed copy of the album, an exclusive T-shirt with the new album art and my name on it, and a personalized video from lead singer and bassist Kelly Ogden teaching me how to play one of their songs. The Dollyrots were in Minneapolis last Sunday, and I got to hang out with them and watch them set up two hours before the show, then hang out and chat with them afterwards. They quickly shot up the charts to become one of my favorite bands, and it's all thanks to Kickstarter. They love making those personal connections to their fans, and Kickstarter was how they made it happen; it's awesome.
That article was remarkably free of actual numbers. I was hoping for some statistics. Speaking of which, here's an article about Kickstarter projects that I read a while back ( http://www.appsblogger.com/behind-kickstarter-crowdfunding-stats/ ). They included some actual numbers - for example: "Projects that are featured have a 89% chance of being successful, compared to 30% without." (I presume that means "featured on the Kickstarter homepage".) The downside to that statistic is that, as more projects appear on Kickstarter, the smaller percentage of them will be on the front page (because there's limited space). If that's true, it means the percentage of successful Kickstarter projects will decline as more projects appear on Kickstarter.
That's what stock certificates ARE. That's what the stock-market is FOR.
The only thing that kickstarter changes is the nature of the transaction. Instead of the wealthy investing in the company (or more accurately these days: investing in the likely future value of a piece of the company - which as it's own set of products) the future CUSTOMERS invest in a PRODUCT they want to buy.
If anything that is a MORE sustainable model than the old one, but the idea of crowdfunding a business isn't new. It was invented by the East India Company about 400 years ago. The kickstarter model just means that entrepeneurs can fund their vision without having to give away the actual fruits of their labour.
96% of business founders get fired within 3 years of going public. Funding a business via the "sell people bits of ownership" model of crowdfunding means you stop owning it - you can lose the company you created. With the kickstarter model - you instead are offering people the opportunity to fund the creation of a product they want to buy, a product they could not otherwise have bought. It is true consumer driven market - this probably does and SHOULD scare those whose livelihoods depend on the belief of entrepeneurs that the only way to fund their products is to sell ownership -but it's a good thing for both customers AND entrepeneurs.
Crowdfunding a business has a 400 year history of success. Crowdfunding a business while still being able ot make the product YOU envisioned, and that YOUR customers actually WANTED - now THAT is an improvement.
Unicode killed the ASCII-art *
Crowd funding will work when people believe in what is being funded.
Let me tell you the tale of the classic example of an Indian film called MANTHAN (http://www.imdb.com/title/tt0074858/). a 1976 movie.
It is based (only based) on the true life story of the founding of Amul Milk Co-operative. The then head of the co-operative who died recently at the age of 91 was asked to prepare a documentary about his project. Instead, of a documentary he and the director decided to make a full film fictionalised version. The question arose about funding.
It is known (not said to be but documented in interviews and in the "COMPANY CREDITS down in the IMDB page) that the "production co" was the co-operative milk federation and each of it's members contributed Rs.2/= (about 5 to 6 US cents at the then exchange rate) and this made up the bulk of the production cost.
see also
http://www.imdb.com/title/tt0074858/news
OK
If anyone ever finds a one-fits-all-system that works every single time on everything, pls to mail me the pdf, call stephen hawking and become a forex trader ... by then, well that which does not kill you makes you crazy, ask the man himself
i think, if you plan to man your own mission to mars crowdfunding aint gonna do it. If however you need a little less what's the harm in at least trying while keeping an eye open for any other option that arises? Is there a law that says you cant do both ? You could probably even convince a 'real' investor better if you can show it you got this hundreds or more ? (no idea what the average is) people willing to support you. Better than a petition, people who are willing to spend makes good impression on 'investors' i suppose.
the biggest sin in life is not to have tried. i cant even get a thought up since it would mean independent business and the law says i cant do that. motivation zero, even if i could, which i dont know i can, i think i'll be
psch, did i wind off-topic again? dont tell me i did it again oh nooo
beware he who denies you access to information for in his mind, he already deems himself to be your master (SMAC-ish)