6:00AM GMT 04 Feb 2013
6:00AM GMT 04 Feb 2013
Kickstarter, the American website where artists and inventors can ask, Dragons’ Den style, for financial backing from investors, is now doing big business in Britain. Jessica Salter talks to five entrepreneurs who are reaping the rewards from crowd funding.
When Perry Chen, a musician, had to cancel a concert he was arranging for the New Orleans Jazz Festival in 2002 because he couldn’t raise the $20,000 he needed to host it, he started thinking about ways in which he could shoulder the risk with other like-minded fans. The idea simmered until a few years later he met Yancey Strickler, who was the editor-in-chief of eMusic, an online retailer. Together they discussed how it might be possible to bridge the gap between enthusiastic fans and cash-strapped artists, and how people could pay for creative ventures before they were even organised.
Together with a website designer, Charles Adler, they came up withKickstarter, a crowdfunding website where artists, filmmakers, musicians and inventors can pitch their idea on the website, outlining to potential investors exactly how much money they are looking for, and attract bids of anything from $1 to thousands – a sort of Dragons’ Den meets eBay. Kickstarter wasn’t the first crowdfunding platform (Artistshare, for musicians and their fans, launched in 2000), but it is now the biggest and most popular. Projects are vetted by the site – they can’t be for charity, they can’t break the law (no weapons or drugs), and some subjects are not allowed (such as self-help books). There is an element of jeopardy to keep everyone on their toes: if the creator of the project does not reach their funding target in its entirety within a set time limit (the maximum is 60 days), they don’t receive a penny and no money leaves the backers’ bank accounts. But if the creator raises what they asked for – or more – they are allowed to keep it all.
'We knew that we would love to have the opportunity to support artists that we loved,’ Strickler, 34, says on the phone from Kickstarter’s HQ in Brooklyn, 'so why wouldn’t other people? For fans it’s an opportunity to be part of a project and see it come to life. For creators you get a ready-made audience who are invested financially and emotionally in you from the beginning. It felt like the way art should be made, and in the future I think it will be the only way it’s made.’
The creators of each project keep complete intellectual control of their work and do not have to answer to their investors (unlike raising money through business angels and venture capitalists, who typically insist on a large equity stake and a say in how the business is run). Kickstarter investors do not own shares of any project or company – instead they are given incentives to pledge with offers of rewards, ranging from an advance CD of an album they are helping to fund, to film premiere tickets, to having a character in a video game named after them.
Kickstarter is also proving to be a good alternative to traditional grants for art projects (in Britain, the Arts Council will lose 30 per cent of its budget by 2014). But its founders are in it to make money too. In an industry where even companies such as Twitter struggle to turn a profit, Kickstarter takes five per cent commission on all the money raised.
With initial investment from online veterans such as Jack Dorsey, Zach Klein and Caterina Fake (the founders respectively of Twitter, Vimeo and Flickr) the Kickstarter site launched in April 2009 and very quickly became one of the hottest digital businesses in America. It has proved incredibly successful; the site has had more than 83,000 projects listed, over 35,000 of which have been successfully funded. It has taken $461 million in pledges and Kickstarter now employs 52 staff. In financial terms, the most successful Kickstarter project to date is the Pebble watch, a 'smart watch’ that can display data from a user’s mobile phone. Its 26-year-old creator, Eric Migicovsky, had asked for a total investment of $100,000 – a target he reached within two hours of going live on Kickstarter last April. A month later, more than 68,000 people had pledged $10 million (as a reward for pledging $125 backers were promised a Pebble in any colour), and the watch went into production last month.
Kickstarter (initially open only to creators with a US bank account)launched in Britain in October. In the first two weeks more than £2 million was pledged (about £48 per minute) and now there have been 150 successfully funded British projects (about 300 are currently live on the site), raising £4.9 million.
The success rate of projects that reach funding is high (42 per cent), but there are certain things that help would-be entrepreneurs. Niche creations tend to do the best on the site; pitches supported by video do about 20 per cent better than those without; and those that offer rewards to investors who pledge $20 or less succeed more often than those with rewards only for bigger investors. The average pledge is $70.
While Kickstarter encourages creators to stay true to their word, there is no guarantee that successfully funded projects will be completed (each pitch has to spell out specific risks and challenges), and no legal obligation for investor rewards to be fulfilled. According to a study by Ethan Mollick, a professor at the University of Pennsylvania, only a quarter of Kickstarter projects delivered their rewards on time. Amanda Palmer, an American musician, attracted scathing criticism after she raised more than $1 million through the site, then wrote in a blog that she had spent the money 'pay[ing] off the lovely debt – stacks of bills and loans and the like – associated with readying all of the stuff that had to happen before I brought this project to Kickstarter’. Kickstarter doesn’t get involved when projects fail and stress that theirs is not a shopping site and investment in new businesses is risky.
But it is compelling too. Strickler has personally backed about 700 projects. 'The more you expose yourself to the site, it becomes hard not to back people. The world is overflowing with great ideas and really passionate people and Kickstarter is a vessel for all of that; it’s a really great frame for people to display their dreams.’ kickstarter.com
BEST OF THE BRITISH KICKSTARTER PROJECTS
Emilie Holmes: Good and Proper Tea
When Kickstarter launched in Britain, one of the first projects its co-founder Yancey Strickler backed was Emilie Holmes’s pitch to convert her 1974 Citroën H van into a travelling tea shop. Her mission, she said, was to upgrade the quality of tea on the go, a revolution similar to the one coffee has undergone in the past decade.
Holmes, 27, who lives in south-west London, had been working for an advertising company four days a week, spending the rest of the week on her business plan and researching teas with the help of Jane Pettigrew, the head of the UK Tea Council (who spent hours with Holmes sampling hundreds of cups of tea). In September Holmes, who said she had been 'boring her friends for years’ with the idea, quit her job, bought the van and was working out how she could raise the £10,000 she needed to convert it. 'I was at my wits’ end, trying to think how I could raise the money, when I saw that Kickstarter was going to launch in the UK,’ she says. 'I knew I had to get my project listed on the first day for the best chance.’
She raised the money in a week: 'I got an email every time someone pledged; I couldn’t do anything that week because I spent hours writing back to everyone. But as well as money I had lots of other kind emails from strangers saying things like, “I’m a mechanic, let me know if you need any help with the van.”’ In total she raised £14,682 from 372 backers. 'Then I had the mammoth task of fulfilling my pledges,’ Holmes says. Almost all of her backers received at least one box of teas, which Holmes had to hand-pack and send off. It took her three weeks and £1,000 on postage and cardboard boxes.
Holmes’s van is now operational and she has started trading with 10 teas on the menu. She has a permanent pitch from Tuesday to Friday in King’s Cross, London, in an area popular with upmarket street vendors, and also works at events such as one for the online retailer Mr Porter during Men’s Fashion Week in London, where her green tea was a hit.
To break even Holmes has to sell 50 cups of tea per day. 'When I met with investors initially and told them my profit margins they wanted me to downgrade the tea quality to maximise profit, which I didn’t want to do. But by using Kickstarter, I have been able to do it my way.’
The product designer Benjamin Redford, 24, was rummaging on a market stall in London in August when he found an old Rollei P35 projector. 'I remember my grandparents showing us slides on their projector,’ he says. He bought it and started taking it apart. 'I’ve done that since I was a kid; my desk is full of objects I’ve dismantled.’
Redford works at Mint Digital, a digital agency based in east London that has recently branched out from creating websites and apps to making physical products, including turning Instagram photographs into fridge magnets. Redford’s idea was to create a tiny projector, with a little wheel of 35mm film containing customers’ Instagram photos. He mocked up a replica using a 3D printer and his bosses let him develop the idea in company time (Mint Digital now owns the copyright; 'I don’t have any interest in the business side of it,’ Redford says). But he needed funding. He had heard of Kickstarter – 'I’m a geek; I’ve been following them for ages’ – and listed his project on November 14, setting a goal of $18,000 to cover manufacturing costs. 'Most investors wouldn’t be interested in such a niche product, but with Kickstarter you distribute the risk,’ Redford says.
Rewards for investors ranged from pre-ordering Projecteo at a discounted price to a limited-edition device in P35 colours – grey, black and orange. Redford hit his target in 20 hours – 'I didn’t expect it to go as nuts as it did. I didn’t sleep all night; I stayed awake watching the money go up and up’ – and by mid-December, 2,789 backers had donated a total of $87,207.
The devices will be posted to customers at the end of February. Two of them have told Redford that they will be using their new Projecteos to propose to their girlfriends. 'I still can’t get my head around it,’ he says. 'I invented something six months ago and in a few weeks it’s going to be in people’s hands.’ getprojecteo.com
Jacqui Ma: Goodordering
Jacqui Ma, 36, had been deliberating about launching a range of bags – retro panniers for bicycles – for three years. She already had her designs and had saved £30,000, but needed a final £12,000. Then a colleague told her about Kickstarter. It wasn’t perfect timing – she was eight months pregnant (her son was born last month) – and she didn’t expect the amount of work she would have to put in. 'I thought I would just make a video explaining what the project was, go on maternity leave [from WGSN, a fashion trend forecasting company] and sit back and see the money come in,’ she says. In reality her pledges came in slowly and Ma, who lives in east London with her partner, had to distribute flyers in her local area with details of her Kickstarter project, badger friends and family, and use social media to beg for funds.
But by December 1, she had 156 Kickstarter backers who had pledged £12,621. Her incentives included the chance to pre-order multiple bags at a discount, and two people who pledged £1,000 were allowed to name a bag design. In total Ma sold about 400 bags through Kickstarter to her backers, which will be shipped out this month, along with another 600 which she hopes to sell via her website and selected retailers.
Ma says that an unexpected advantage of listing her business on Kickstarter was that her backers helped publicise her business. 'People become emotionally invested in the product when they invest money in it – they end up putting it on Facebook and Twitter and spreading the word further.’
As well as the financial aid, Ma says Kickstarter gave her a psychological boost. 'All these people have given me money and so I had to get it done – never mind that I have a newborn baby. It’s brilliant. I’ve been thinking about this for years; now I’m actually doing it.’goodordering.myshopify.com
David Braben Elite: Dangerous
David Braben, 49, built his first video game, Elite, a space trading game, in 1984 with a friend from Cambridge University. Its revolutionary wire-frame 3D graphics and open-ended gameplay (the player’s character travels across several galaxies in no particular order, trading commodities and encountering pirates and bounty hunters) made it unlike anything else on the nascent computer games market – the nearest competitor was Space Invaders, the 1978 two-dimensional fixed shooter game. For the first time players didn’t have 'lives’ and each game could last weeks, rather than minutes. Elite went on to become one of the biggest and most successful games of all time. Braben released two sequels, Frontier: Elite 2 in 1993 and Frontier: First Encounters in 1995, and his company has since produced a number of successful games.
But fans were begging for a new version of Elite, something Braben had been trying to do for years, but he needed money for development – today’s top video games can swallow the budget of a Hollywood film. 'Bank finance in the tech sector is virtually non-existent,’ Braben says. 'I’d been following Kickstarter for a while and when I heard it was launching in the UK I knew I had to try.’
On November 5 he listed the project (Elite: Dangerous) on Kickstarter and set a £1,250,000 goal ('the costs are significantly more than that – but that was what we needed to make it happen’). On January 2, his birthday, he reached his target. Two days later, when funding closed, he had raised £1,578,316 from 25,681 backers, becoming the eighth highest-ever funded project on Kickstarter (17 projects raised more than $1 million last year). The investor rewards ranged from an advance copy of the game (which will be ready in March next year) to naming rights for a planet in the game’s universe (100 backers pledged £750 for the privilege).
Last year Kickstarter investors pledged $83 million to games projects. Braben says the problem of getting funding through a games publisher is that they are risk-averse. The first version of Elite was initially turned down by a large publisher because it was too different from its rivals. 'Publishers stop people being new and innovative. Kickstarter is very democratic. The people who will play the game are the ones who put the money in.’ frontier.co.uk
David Bond:Project Wild Thing
Disturbed by the amount of time his five-year-old daughter was spending looking at a screen rather than playing outside, the filmmaker David Bond, 41, decided to make a documentary, with him acting as 'Marketing Director for Nature’. The film, Project Wild Thing, follows Bond’s attempt to understand why he and his family had become disconnected from the natural world.
He secured funding from the National Trust, Channel 4 and RSPB, but needed a final £30,000, so turned to Kickstarter. 'I’d heard about it because a few filmmakers in the US that I know had used it.’ In total more than $100 million has been pledged to film projects on Kickstarter, including two Oscar-nominated films: Sun Come Up and Incident in New Baghdad; 10 per cent of the films at Sundance are Kickstarter-funded projects.
Rewards for investors ranged from VIP tickets to an executive producer credit for £5,000 (which one person pledged). The money came in at a slow but steady rate until funding was finally achieved in December. 'It was a lot of hard work monitoring the emails and motivating people to pledge and I certainly wouldn’t use it to fund an entire film,’ Bond says. 'But what is absolutely brilliant is that we have 700 people who have dug into their pockets and who are really excited about the film. This network of people being interested is just as important as the money.’ He is now using his supporters to spread the word of the film and to pledge, on his website, to match the time they spend staring at screens with time spent outdoors. 'It’s carrying on from where the film leaves off,’ he says.projectwildthing.com
Ali Ganjavian: Ostrich pillow
A surprise Kickstarter hit has been the 'Ostrich pillow’, a bizarre padded balaclava-looking object that people can pull over their heads to take a nap. It has been backed by 1,846 people who have pledged $195,094, but Ali Ganjavian, who co-owns the studio based in London and Madrid that invented the pillow, admitted they they had no idea it would be this popular; he used Kickstarter to test the water.
'We thought that it would appeal to travellers,’ Ganjavian said, 'but we’ve had lots of emails from people in all different kinds of fields saying that they have found it useful, like a fireman who spends a lot of time waiting on call, or a mother who said that her autistic child likes it because he likes to be closed off from the world.’
The studio also had to design a machine to make the pillows themselves, rather than rely on a manufacturer who couldn’t cope with the greater than expected volume of orders. In three months since the listing finished in October they have sold 5,000 pillows, shipping them to 52 countries. Last month Selfridges started selling the pillows as part of their No Noise campaign. The company are currently in the process of manufacturing more; in the meantime waves of counterfeit Ostrich pillows have sprung up to meet demand.
'We’re designers so we get all kinds of crazy ideas all the time,’ Ganjavian said. 'Kickstarter provides a platform to share those ideas. If enough people around the world think they need it then it will become a reality.’ ostrich-pillow.com