How many times have you thought, “I would love to do this for my business, but I just don’t have the money!”
With bank loans hard to come by and credit cards with ridiculously high interests rates, funding your next creative venture can seem like a pipe dream.
But in the past year or so, several websites have sprouted that make it easy for you to fund your business through micro-donations.
The premise is simple – you identify a project, set a fundraising goal, and ask for donations. People interested in your project can donate a little or a lot, and you can provide incentives for certain funding levels. If your goal is reached, you get the money. If not, the donors get to keep their dollars.
Three of these websites that have caught my eye recently are Kickstarter, IndieGoGo, and United States Artists.
Kickstarter is the originator of this type of fundraising, and while it does have it’s limitations (you have to be based in the US and your project has to be approved), some these limitations can actually be a help when it comes to getting your project funded. Because the scope of projects is limited, and because they must be approved, there is a much smaller pool of projects to be funded. Kickstarter has also received a lot of media attention, which can pay off big for your project.
Kickstarter is aimed at funding creative projects, so technically you can’t use the money for general business expenses. But if you spend some time browsing the site, you’ll see that “creative projects” has a fairly broad scope. You could request funds to launch a new collection, bring a product to market, or research an idea or technique that you’ve been dreaming about.
IndieGoGo has a much broader scope than Kickstarter when it comes to the type of projects that can be funded. It’s also not limited to the US, which makes it the choice for international projects. The other key difference is that you get to keep the money you’ve raised regardless of whether you meet your funding goals or not. If you’ve got a smaller social network and are nervous about the possibility of not being fully funded, IndieGoGO may be a better bet, because you’ll likely walk away with some money after the funding period ends.
USA Projects is the smallest in scope, but it bears mentioning because of the quality of projects featured on the site. This is due to the fact that in order to seek funding through USA Projects, you must have previously received a grant or award from one of their partner organizations.
While some have derided this fundraising masquerading as charity model, I think it’s an excellent way for designers and makers to gauge interest in their ideas before bringing them to market. Besides the obvious bonus of getting your project funded, you get to find out in advance if people are willing to spend money on your idea. I’ve also seen numerous Kickstarter projects making the rounds in the blogosphere, which helps build buzz before the product is even available for sale.
The other aspect that I love about these crowd funding websites is the use of the souvenir as a way to encourage donations. Part of the enticement for donating (besides seeing a project you love come into existence) is the fact that you’ll receive something tangible from the project for your donation. At lower levels of funding, this could be as simple as a postcard, poster, or small token. But at higher donor levels, you could be the first to receive a new product, or have your name listed as a donor in the credits of an indie movie. The person in charge of the project creates the incentives, so choosing wisely can have a big impact on whether or not your project gets funded.
As these sites continue to grow, I think we’ll see the possibility for even more crowd funding around the web. I’d love to hear your thoughts – how do you feel about crowd funding, and have you ever used one of these sites to fund a project?
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Want to know more about growing (and funding) your business? I’ll be speaking tonight about Growing Your Arts Business as part of MICA/Etsy I Heart Art Baltimore collaboration. If you’re in Baltimore, the lecture starts at 7 PM in room 110 of the Main Building on the MICA Campus. (It’s free!) Or you can watch the lecture online (limited to the first 100 people). Hope you can join me!
We recently raised over $12,000 on Kickstarter for our publishing company after trying the traditional bank-based-loan route first. Banks seem to be terrified of anything related to knitting. Never mind crafts are a billion-dollar-plus industry, there are plenty of stories out there (my personal favorite in terms of sheer stupidity because the bank PUNISHED the company for being profitable and successful: http://bit.ly/jbIt9D).
The key to success on Kickstarter is having a clearly-defined purpose for the money (in our case, a new book series featuring designs by emerging designers) and offering appropriate rewards. It’s too early in this book series to do preorders, our other means of funding projects. We had rewards we could offer that would be valuable to backers, yet cost us very little to provide — in our case, copies of my own book as PDF, etc. I forgo the money I would have earned selling that many copies, which is itself a cost, but brought in money for the company itself.
And let’s not forget the added advantage of getting the word out (and buzz going!) about the series far in advance of publication. That was also a benefit to being on Kickstarter — exposure to other creative people who might not have known about our company otherwise.
The link you included to the site critical of crowdsourced funding seems to believe using Kickstarter et al is nothing more than charity. It’s not. It’s also giving our pre-existing customers a chance to voice an opinion on what projects we produce next. It allows us to refine other business ideas (after some blowback about the lack of crochet books in our lineup during the Kickstarter, we decided to move our similar crochet series farther up in the production schedule). It gives people a chance to be an “angel investor for a day” and learn more about who we are and what we do.
Here’s how it went with our bank. Their underwriters were hesitant to give us a $5000 loan. Why? “They don’t think it’s worth bothering if it’s under $10,000,” says our bank manager. Ok, fine, ask for ten. They won’t do ten, they don’t care if you’re profitable and 100% in the black, but they said they’d give you a credit card.
My dog can get a credit card, if I help her sign the forms!
I didn’t go the Kickstarter route because I wanted to avoid interest. I did it because I’m not an idiot. Paying “interest” to our backers in the form of rewards and Kickstarter/Amazon’s processing fees is probably even slightly more, percentage-wise, than a loan would have been, but without the positive social aspects I referenced above.
Thanks for this post, Megan. I’ve watched (and donated) as a couple of friends have successfully funded their creative projects via Kickstarter. and I’m hoping to get a big project of my own off the ground that way later this year. I think it’s a particularly great way to get funding to take a leap into larger, more elaborate projects than we, as small business owners, might be able to afford up front.
Is there protection for your ideas on these funding websites? For example, if I post a project can the idea be taken by someone else? Or is it protected by a copyright or trademark law?
Thank you in advance for any information.
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