Tech City Crowdfunded Campaign Raises 360% of Goal – Shoreditch Village Hall Kickstarter campaign reaches £90,000

INNOVATION

by Made in Shoreditch  |  on June 13th, 2013  |  

Shoreditch Works, a coworking space for startups in Tech City, has been running a Kickstarter campaign to open the ‘Shoreditch Village Hall’. The original goal of £25,000 was intended to turn the ground floor and basement of a disused 1950s warehouse on Shoreditch High St into a hub for the community. This project, the first of its kind, has been hugely successful on Kickstarter with companies such as IBM, Facebook, BasePS, the Open Data Institute, Twilio and VMWare getting involved.

The space will include a 200 person event space in the basement with 20% of events held there free to groups who can’t afford to pay like hack days, after school coding, meetups and more. With so much support from the community, they smashed through the £25,000 goal within 21 days. They then created the stretch goal of £50,000, with that money four full time desk memberships would be given away for free for a year to a needy startup voted in by the Kickstarter backers. That goal was reached in less than a week. Next, a £75,000 stretch goal. With the additional funds raised, the team could put together a Community Management Apprenticeship with Hackney UTC (University Technical College). This goal was smashed within a day, and the campaign went on to raise £90,000.

Girish Patangay – engineer at Facebook said “We started our engineering office in London a little over 8 months ago and have grown a lot. We want to get better at being involved in the tech community and this seemed like a perfect opportunity to do that.” While Ben Nunney of Twilio, tweeted “Just in awe of the Shoreditch Works project to open the Shoreditch Village Hall for the local community.”

This building has been empty for almost two years. The transformation is going to be incredible and the individuals and companies who have been involved from the beginning are going to be a massive part of making it a success.

It's Kickstarter meets works of art!

Raj Agrawal is the founder and CEO of YourArtBay                    

YourArtBay is an online platform linking the buyers and sellers

of art.

Guardian Thursday 11 April 2013 16.02 BST 

Name: YourArtBay

City: London

Website: http://www.yourartbay.com/

YourArtBay is an online platform linking the buyers and sellers of art. It connects sellers of art with a crowd of buyers who contribute small amounts of funding for collective equity in artwork for both short and long-term asset building opportunities. It is a people's platform to buy and sell shares in art and antiques.

Our business model in itself is efficient: we're completely online, so art lovers don't have to physically visit anywhere or collect the artwork. They can see detailed information about the art, artist, pictures, videos and independent valuation of the art on our site. Being online is also more efficient for us as we have far fewer overheads.

What has made us really efficient is the market research we undertook before starting YourArtBay. From our long survey into the current art market, we found that the major hassle for people and businesses is visiting the galleries and auction houses. It costs extra time and money; we also found that people were concerned about the affordability of the art and commission charges they could end up paying. So we came up with the idea to provide an online platform to trade shares in art and antiques.

Because of this market research we have an insight into the art world and have benefited greatly in positioning our service offerings and added value to our customers.

We also outsourced the valuation and authenticity check of the artworks on our site, which frees us to concentrate on our core area of business.

Raj Agrawal is the founder and CEO of YourArtBay

Take 5: Investing in start-ups through crowdfunding

New online platforms are making venture capital easier than ever. This week MM guides you through the steps to success

By Geordie Clarke | Published May 17, 2013 |

A brace of crowdfunding platforms have launched in the past year that make investing in start-up companies and enterprise investment schemes (EIS) more accessible than ever. With just £10 needed to invest in fledgling companies through websites like Abundance Generation, CrowdBnk, Crowdcube and Seedrs, suddenly anyone can say they are backing start-up companies. But while these platforms have brought venture capital to the masses, there are plenty of risks involved and care is needed when committing any amount of money to a project. Here are our top tips for getting started.

1. Make sure it is right for the client. Like any asset class, the first thing to do is ensure it is suitable for the client. EIS and seed EIS (SEIS) investments are by their nature very risky assets to hold, so the client needs to have both the appetite for risk and the desire to invest in start-ups for this to be the right choice for them. Most start-up companies are expected to fail at some point, so this is a point that needs to be made clear from the start.

2. Choose a platform. Today there is no shortage of crowdfunding websites. With the exception of Abundance Generation, which involves investing in debentures tied to renewable energy projects, the major platforms out there – CrowdBnk, Crowdcube and Seedrs – involve investing in the equity of fledgling small businesses. Some platforms, such as Seedrs, hold the company shares on a nominee basis, while others simply act as an intermediary and the investor’s relationship with the company is direct. Either situation works, but the legal structure is different and one might be more advantageous than the other.

3. Select investments based on the client’s interests. The old saying “invest in what you know” certainly holds true with start-up firms, so too the adage that it is best to invest in your passions. Look for companies in a market the client understands; this will make it much easier to project a company’s potential success.

4. Diversify. The advantage of a crowdfunding platform is the ability to spread small amounts of money across a wide range of companies. Traditionally EIS required thousands of pounds just to commit to one investment. Crowdfunding makes it possible to pledge £10 to one company. If £1,000 is spread across a wide range of companies, it increases the chances of finding a winning company and mitigates losses when one of them fails.

5. Be patient. Just because it is easy to invest in start-ups through a crowdfunding platform does not mean returns come any quicker. EIS and SEIS investments can take years to produce results and it is necessary to hold shares for a minimum of three years for them to be exempt from capital gains tax. This is by no means a short-term investment.

Crowd Source Capital buys domain crowdfundcapital.com for an undisclosed sum.

"Crowd Source Capital Limited (UK) http://www.crowdsourcecapital.co.uk has purchased the USA domain http://www.crowdfundcapital.com and http://www.crowdfundcapital.co.uk for an undisclosed sum and now has a footprint in the United States as well as Europe. Its directors believe in crowd sourcing as a 2013 trend and beyond. It can only trend upwards and as social media proliferates, crowd sourcing and crowd funding has gained acceptance in more and more traditional financial sectors says James de Rin a director and USA consultant for C.S.C. United Kingdom. The disruption of raising capital has compounded since CSC was first created in 2009.

Bitcoin: the Berlin streets where you can shop with virtual money

The digital currency is rising in popularity among traders in the rebellious Kreuzberg area of Germany's capital Kate Connolly and Guy Grandjean in Berlin guardian.co.uk, Friday 26 April 2013 11.08 BST In Kreuzberg, Berlin, Bitcoin has expanded off the internet into the local economy. Link to video: Bitcoin: world's fastest growing currency migrates off the internet Nadim Chebli remembers well the first of his customers who decided to pay for the records they bought with virtual currency rather than cash or credit cards. "I'd only just agreed to accept Bitcoins," said the 36-year-old owner of the Long Player record shop, "and the first sales I made in it came pretty quickly, from a guy about my age who bought Tom Waits's The Big Time and a young woman who bought a Beatles compilation from 1967." In the few months since Chebli signed up to the peer-to-peer electronic cash system, he finds it hard to come up with definitive characteristics for the "typical" Bitcoin user who walks off the street into what he describes as his "vinyl living room". "There's no typical age group, or sex, just, well, regular folk," he said. Florentina Martens has had the same experience since opening her Parisian-style cafe Floor's two months ago just a couple of streets away. "There is not a prototype Bitcoin payer," she said. "It's random people. Not only nerds, let me put it that way." Like Chebli, Martens, whose Kersenvlaai (cherry cake) from her native Maastricht is rated as one of the best culinary offerings of the area, says she decided to accept Bitcoins because of the ease, cheapness and transparency of its payment system. "It's an easier way of digital payment than credit cards, which cost me a lot of money as a business and to which I'm forced to sign up for years," she says. These two tradespeople are among around a dozen in the Graefekiez, a cosy neighbourhood established in the 19th century in the southern Berlin district of Kreuzberg, which currently boasts the highest density of businesses accepting the currency in the world. Its growing list of Bitcoin establishments includes a restaurant, a printing shop, a bar and boutique. Community leaders believe that Bitcoin's ethos is embedded in a similar political consciousness to that of Kreuzberg. The payments system, which has been viewed with scepticism elsewhere, arguably fits in well with the district's rebellious, critical, leftwing history, not least its residents' willingness to protest against the rising influence of capitalism, in particular the creeping gentrification that is threatening to envelop the district as Berlin undergoes a property boom. "Kreuzberg is traditionally an area in which people are very politically aware, critical towards existing systems and are constantly discussing and looking for alternatives to them, which makes it the perfect breeding ground for Bitcoin," says Joerg Patzer, a staunch Bitcoin advocate who roams the neighbourhood with a missionary zeal in search of new recruits. Patzer, 47, who typically trades by night and sleeps by day, is also the owner of Room 77, a popular bar in the Graefekiez, which has become a magnet for Bitcoin enthusiasts in the German capital. On a recent Tuesday evening with a jazz trio providing the music, law student Jeff Gallas, the owner of a few thousand euros' worth of Bitcoins, was tucking into a beefburger. "Bitcoin is the first global money we have," he says, when asked to explain his enthusiasm for a currency that has been criticised for the ease with which drug and child porn dealers can use it and which many economists have called nothing but a craze, comparable to the Dutch tulip bubble of the 1600s. "It could be from a science fiction novel, but the fact is we have it in the here and the now," Gallas said, listing the items he has bought with Bitcoins, including "honey from Thailand, historic flags from the United States, gold and silver, concert tickets", and of course, his beer and burgers. He taps the amount he owes Room 77 into the virtual Bitcoin wallet on his Android phone and, aligning it with a code on the bar's device, presses a button to process the payment. A theatrical "kerching" sound follows and Gallas is grinning from ear to ear. "It could hardly be easier," he insisted. Heidi Leyton, a British tour guide who takes business people around Berlin, said she was first drawn to the currency when two Spanish friends demonstrated their trust in it by deciding to use their entire inheritance to purchase Bitcoins. "They were very worried about the way the economy was going in Spain and so decided to invest their €30,000 inheritance in Bitcoins. I was really shocked, thinking what a gamble it was," Leyton admits. "But that was about three and a half years ago and their 30,000 has grown to 600,000, so they did very well. On the back of her friends' experience, she too decided to buy into the currency and to accept fees for her tours in Bitcoins. "Looking at the way the economy is going and the way we're dealing with it, particularly after what's just happened in Cyprus, I don't really trust having my money in the banks," she said. As with any currency, trust and the willingness of users to accept it is vital to Bitcoin's success or failure, and that mechanism is arguably clearer to see in a small community like the Graefekiez than anywhere else. Patzer buys the beer for Room 77 from the nearby Rollberg brewery, owned and run by qualified brew and malt meister Wilko Bereit. He pays for the barrels with Bitcoins and, while Bereit says he doesn't fully understand the workings of the payment system, he is willing to trust it. "There is no middle man involved," he said, talking in his hop-scented brewing parlour with its gleaming copper kettles, and casually dropping into the conversation that the German president is among his customers. "It's just a deal between Joerg and me and after I've opened my Easy Wallet, which is easier than sending an email, we have a beer together." Bereit recently followed events as Bitcoin's value halved in less than six hours as a result of recent panic buying. But he remains unperturbed. "As my grandmother would say, it's only money, and it won't kill me if it doesn't work," he said. "The truth is, I really want to believe in it. And I like the fact that Bitcoin scares people in suits, because if this thing were to really take off, it would bankrupt a lot of bankers." Crypto-currency experts meeting Patzer at a recent Bitcoin soiree in the back of Floor's cafe prefer to talk of the recent dip as a correction rather than a crash, which has brought Bitcoin back to a realistic price while it has retained its underlying value. "I would look at these spikes and corrections as the birth pangs of an entirely new system," said Mike Gogulski, a Bitcoin developer. "It represents an opportunity to transform the way we deal with the flows of wealth and human energy."

$33,876 and going up! Scientists Crowdfund NASA Trailer For Star Trek Premiere

ANDY CHALK | 28 MARCH 2013 8:40 PM
The Aerospace Industries Association is hoping to place a 30-second NASA trailer entitled We Are the Explorers ahead of the premiere of Star Trek Into Darkness in theaters across the U.S. In February 2012, NASA put out We Are the Explorers, a short video that looks at "the tradition of reaching for things just beyond our grasp." Narrated by Peter Cullen, better known to most of us as Optimus Prime, it's inspirational rather than instructional, but it's also a great reminder that the whole wide universe is out there, waiting to be discovered. "We don't know what new discoveries lie ahead," Cullen intones. "But this is the very reason we must go." It's goose-pimply kind of stuff. It's a message the Aerospace Industries Association would like to expose it to a much wider audience, and thus it has whipped up a rather clever plan to crowdfund the purchase of space for a 30-second edit of the video to run in "major movie markets" ahead of the premiere of Star Trek Into Darkness. If the goal of $33,000 is reached, the ad will run in more than 50 theaters for eight weeks; additional funds will be used to buy slots in more theaters across the U.S. But beyond simple fundraising, the Indiegogo campaign is also intended to be a demonstration of support for space exploration programs. "By donating to this campaign, you're making a very powerful statement about the widespread enthusiam that exists for space programs," the campaign states. "A crowdfunding campaign is the best vehicle to deliver this message. By reaching our goal, we not only enable a first-of-its-kind ad campaign, we also demonstrate that countless people support a strong space program that's in development." "Perks" for supporting the campaign are relatively thin and expensive, but unlike videogame crowdfunding, the We Are the Explorers campaign is more about kicking in a few bucks to support a really cool and worthwhile cause. It's going pretty well so far, raising more than half of its $33,000 goal with 34 days left on the clock, and with Wil Wheaton giving it a push on Twitter, I suspect it will have no problem crossing the finish line.
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Kickstarter entrepreneurs doing big business in the UK

By Jessica Salter - Daily Telegraph

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

Crowdfunding for Real Estate: Buy a Slice of a Skyscraper

Photo illustration by Alis Atwel
Written by Max Raskin Bloomberg
 From the pyramids to the Empire State Building, the world’s largest structures have typically been financed by the superrich. New York-based Prodigy Network, best known for marketing the Trump SoHo hotel condominium, is now trying a different model: It’s bringing crowdfunding to real estate, soliciting thousands of investors to buy slices of a skyscraper in exchange for a share of rents and property appreciation. “The big difference from traditional real estate is that instead of buying into a fund with a pool of assets, people invest in a single asset,” says Rodrigo Niño, Prodigy’s founder and chief executive officer. “It lets them control the risk.” Prodigy has wanted to try crowdfunding almost since its founding seven years ago but didn’t get a chance until it stumbled on the derecho fiducario, a little-known financial instrument in Niño’s native Colombia that allows individual investment in isolated real estate projects. In Colombia, Prodigy has crowdfunded a building called BD Bacatá that will be the nation’s tallest. About 3,100 investors kicked in $171.8 million (COP308 billion) of the $239 million needed to build the 66-story skyscraper in downtown Bogotá. Investors can also buy and sell shares through a resale program, which functions like a secondary market. Prodigy is currently under contract to buy 84 William Street in downtown Manhattan for $58 million. It plans to invest an additional $32 million. Prodigy says it intends to raise some $26 million in equity from individual investors in 11 countries. FTI Consulting (FCN), based in West Palm Beach, Fla., will ensure that Prodigy complies with the U.S. tax code, as well as anti-money-laundering laws, when accepting money from outside the country. “Instead of buying crappy condos in South Florida, this allows international investors to invest in real markets like New York and in assets that actually make sense,” says Niño, who was raised in Colombia and studied economics in Switzerland. Prodigy says William Street investors will see returns of 15 percent, compared with 21 percent for investors in BD Bacatá. The company’s investors don’t yet include Americans because the U.S. allows only accredited investors—generally those who have assets of more than $1 million—to buy equity in private firms. That will soon change: The Jumpstart Our Business Startups Act, signed into law last April, allows anyone to invest as much as $2,000 or 5 percent of their income or net worth, whichever is greater, in closely held ventures. The Securities and Exchange Commission is still working on rules for investor safeguards required by the act. SEC guarantees may not be enough for leery U.S. investors, says Dan Fasulo, a managing director at Real Capital Analytics. “It’s hard enough to develop a property down the block,” Fasulo says. “How are you going to do it sitting 3,000 miles away?” Gustavo Gonzalez, a Colombian civil engineer who bought two shares of BD Bacatá in 2010 for 101 million pesos ($57,178), says the returns speak for themselves. Since his purchase, based on an advertisement he read in a local newspaper, the shares have appreciated by about 43 percent. “I like the idea that this is going to be the highest building in the country,” he says. Just as important, “I thought it was going to go up a lot, and that’s what happened.” The bottom line: Once the SEC finalizes its safeguards, ordinary American investors will be able to buy a slice of individual properties.

Crowdfunding Pubs 135 investors at a time...

Photo: Daniel Jones

The villagers who clubbed together to save their pub

A campaign to save the pub brought the village of Shottisham together.

Raise a glass to raising funds: the Sorrel Horse was saved from closure by the Shottisham community

 By Ian Evans11:29AM GMT 14 Jan 2013

 Buying your local and drinking the profits has long been a guffawing topic of conversation in pubs across the country. But when the Sorrel Horse in the Suffolk village of Shottisham was threatened with closure, the locals did just that and bought the 16th-century, picture-postcard hostelry, ensuring its survival for future generations. With an estimated 18 pubs closing every week according to the Campaign for Real Ale, villagers from the surrounding area bucked the national trend by raising the £350,000 asking price to buy the pub and, so far, nearly all the additional £100,000 for taxes, rethatching and other costs. One of the seven directors of the newly created Sorrel Horse Shottisham Ltd, Paul Venediger, said: “It started off as a chat among a few people and then grew from there. I think there was a feeling that we didn’t want to lose the pub because there isn’t much else in the village.” Unlike many threatened pubs, the Sorrel Horse was not owned by a brewer or pub chain but by a local businessman who had wanted to build seven houses on adjoining land and spend some of the profit renovating the timber-framed, Grade II listed building, including adding a conservatory. Fellow director Philip Bouscarle said: “There was a general feeling that it just wouldn’t happen, trade would go down and the pub would close and be converted into housing. We just didn’t want that to happen.” After initial meetings of an unofficial steering group in April and May 2011, they approached the owner and offered £350,000; he accepted by email within 24 hours. “He was very good throughout and is now a shareholder,” said Philip. “Once he accepted, we arranged a public meeting in the pub and sent out leaflets explaining what we wanted to do.” Around 70 people attended the first meeting in a village of around 160 people, some of whom use the properties as second homes. “People were asking about the price and how we’d make money,” said Paul. “We thought it was important that it should be a commercial venture and aim to make a profit because without that incentive, it won’t work. “We thought that without the pub, property values could fall £20,000 to £30,000 because Shottisham would just become a 'drive-through’ village,” he said. An official steering group was voted in to carry on the project. At the end of June 2011, banners were erected in the village, a website established and an off-the-shelf company created with five directors which would buy the pub. It was decided that shares would cost £500 each with a maximum individual investment of 45 shares with the added attraction of Enterprise Investment Scheme tax relief of 30 per cent for investors. By August 2011, the group had enough to buy the pub with 135 investors. In October last year, the pub held its first AGM and in early November published its first set of accounts. To date, 71 per cent of the 200 investors own two or less shares with most coming from local communities, but some as far away as Oman and Australia. Just three shares remain. Single shareholders and regulars Diana and Greville Bickerton, who live in nearby Sutton, were willing investors. “We didn’t buy shares for profit, it was for the sense of community – we didn’t want to lose the pub,” said Diana. Greville added: “There’s nothing here apart from the church and the village hall. “I’ve lived around here for 25 years and I’ve probably met more people in the last year through buying the pub that I’ve done before. “There’s been a real sense of community and people wanting to get involved. There’s a real feeling the pub is theirs and they want to come here and enjoy it.” The board of directors oversee the running of the pub which employs a full-time manager, two chefs and three part-time bar staff. They hold open meetings once every two months and aim to pay dividends, although none have been paid so far. However, buying the pub hadn’t been without contention. “There were some people who were against it and suspicious of our intentions,” said Philip. “Even now we get comments from a minority that we treat it like a personal fiefdom which is frustrating. But I think the majority of people are happy that the pub’s been saved.”

135 Investors put in an average of 2,592.00 pounds each.

Unlocking the global trillion-dollar crowdfunding market

Written by Kevin Lawton

Now here is the one percent you do want to hear about!  

The world is on the precipice of creating a trillion-dollar crowdfunding market. In Australia, the ASSOB has offered a crowdfunding investment portal since 2005. In the UK, equity crowdfunding is already in progress, with investment platforms such as Crowdcube andSeedups. And in the Netherlands, crowdfunding is ramping up with Symbid.  The crowdfunding components of the American JOBS Act and the Italian Decreto Crescita are now in the process of finalizing the attendant regulation before securities crowdfunding goes live.  Industry associations are popping up everywhere, including in India, Europe, Canada, and the U.S. (CFIRA, CfPA).  If you want to get an idea where things are headed, look at the travel list of the leading crowdfunding advisory team, Crowfund Capital Advisors. Recently, they’ve visited Colombia, Canada, Mexico, Italy, Turkey, Sweden, and Dubai, with upcoming visits to Singapore, Malaysia, Hong Kong, and Sydney. They’ve also secured a relationship with the World Bank to study crowdfunding as a way to unlock innovation in developing countries.

Think about the implications of shifting just one percent of long-term investments to small business via crowdfunding. In American alone, that would create a $300 billion market for crowdfunding (10 times the venture capital invested in all of 2011).  Indicating where things are headed, for accredited investors there is IRAvest, the Internet’s first equity-based crowdfunding portal specifically created for self-directed IRAs.  

Now imagine the general public investing in crowdfunded small businesses through fund vehicles (as I blogged about in the 2010 three-part series, “The New Face of Venture Capital”) or individual investments. That’s a huge transformation in the small business financing landscape.  At the one-percent mark, globally this translates to more than a trillion dollar market. And how big is one percent? The average volatility of the S&P 500 was 0.62 percent from its inception in 1957 through 2010. We now have a material amount of real data in crowdfunding.  

As it turns out, the fear, uncertainty, and doubt was hot air. The transparency and social networking dynamics of crowdfunding have been excellent at keeping fraud near zero, to the point where heavy regulation will work against this new economic machine.  It’s not just the crowdfunding platform founders and bloggers taking this position. Legendary venture capitalisst Tim Draper (who created MeVC, an early crowdfunding-style investment vehicle that he says was regulated out of existence) said recently at Techonomy Detroit, “I think we should just sunset all the laws and just move forward.” We’ve seen a number of other members of the venture community getting behind the crowdfunding trend, such as Fred Wilson of Union Square Ventures speaking at Grind in NY and Manu Kumar of K9 Ventures, who said to the Venture Capital Journal Feb. 2012, “Having companies that have been proven out using crowdfunding will only create better pickings for the venture capital industry to come in and scale those startups.” To get to this point in crowdfunding history has taken some heroic efforts on the part of so many people. But as this space expands, we need even more leaders, from every continent to rise up and voice your support.

To Learn More Click Here

Funding Circle get £20m boost from Government for SME lending

The UK Government has announced plans to lend to small businesses through Funding Circle. Earlier in the year, the Chancellor George Osborne revealed that £100 million would be allocated to non-bank groups to help ease the problems of low SME lending.

It has been revealed that Funding Circle will be one such vehicle and the Government will be working with them to lend £20m. Funding Circle crowdsources loans for small businesses. While bank lending has dropped, Funding Circle has grown rapidly. In two years since launch, thousands of British people have helped to lend £65 million to more than 1,300 businesses. In Novemeber 2012 alone, investors lent £7m to British businesses.

Everyone will be well aware of the problems that small businesses have had in recent years when it come to getting loans from traditional sources such as the banks. So this looks like a clever and innovative way to approach that problem. It is hoped that the scheme will come into action early in 2013.

Funding Circle makes minimum loans of £5k with a maximum loan of £500k. Investors can lend out from as little as £20 and the gross yield is 9.1%. To find out more about Funding Circle’s loan terms, visit their site.

How will it work?

The Government plans to lend £20 million to British businesses through Funding Circle over the next 12- 24 months. This is subject to parliamentary approval and agreement of legal terms and conditions.

The current proposal is that the Government will lend on every loan that comes on to the marketplace and fund up to 20% of each loan at the average rate. The remaining 80% of a loan will be funded by investors in the normal way, so your investment experience will remain exactly the same. Once the auction has closed and the average interest rate has been set for the remaining 80%, the Government will fund 20% at the same interest rate as the rest of the loan.

You can find out more on the Funding Circle site.

To Learn More Click Here 

CrowdSource raises $12.5M from Highland Capital to help businesses use scalable labor

22nd October 2012 by KEN YEUNG thenextweb.com

CrowdSource, the enterprise-level service that helps business accomplish tasks at scale, has just raised $12.5 million from Highland Capital in its Series A round of funding. With more than 200 customers, it caters towards medium-to-large companies that have business problems that recur at scale. With this new infusion of cash, it will further grow the team and expand to other verticals, while also improving its product.

Launched last summer, CrowdSource has amassed 500,000 workers in its database to help businesses complete labor-intensive tasks. But unlike a typical temp agency, it specializes in specific areas like with online retailers and publishing companies dealing with lots of scalable work.

To Learn More Click Here

Why Crowdfunding Will Explode In 2013

Written by Devin Thorpe, Contributor Forbes.com

Yes, that headline used to have three exclamation points. I took some out. The world of entrepreneurial finance is changing rapidly; we are at a tipping point that will make what seems like a vibrant part of our global economy today seem small in one year’s hindsight. Whether you are a service provider, social entrepreneur, angel investor, venture capitalist, or one of the millions of people ready to become a small-scale start up financier, it is time to pay attention.

 Estimates for annual crowdfunding transactions go as high as $500 billion annually compared to 2011’s $1.5 billion (anticipated to be $3 billion in 2012). If crowdfunding even begins to approach that scale, it will completely change the landscape for start-up financing. Jason Best and Sherwood Neiss helped lead the successful effort to get crowdfunding approved in the JOBS Act passed earlier this year. Niess explained that the folks as the SEC described themselves as “a reactive and not a proactive organization.”

 The SEC explained that they needed direction from Congress before they could do anything about crowdfunding equity. “We delivered an act of Congress. They weren’t expecting that.” The Act gives rulemaking authority to the SEC and FINRA; Best and Neiss are now meeting regularly with regulators to help define the shape of these rules—which could determine the success or failure of the Act. According to Neiss, regulators approach novelty with a focus on preventing fraud—it’s what they deal with every day. 

They aren’t in the business of creating jobs—even though that is the legislation’s intent. Neiss explained that he and Best have helped to organize two groups to help frame the regulation and involve the people who will be most impacted by it: the Crowdfunding Professionals Association and the Crowdfund Intermediary Regulatory Advocates.

Neiss and Best recently wrote a piece for Venturebeat that explains the real issues that need to be resolved in the regulation. It is well worth the read. WeSparkt founder Jonathan Blanchard explained WeSparkt’s focus on social entrepreneurship. Their new crowdfunding platform is designed specifically to take advantage of the JOBS Act to allow social entrepreneurs focusing on a double bottom line (profit and social good) to raise equity. Blanchard sites a Monitor study suggesting that crowdfunding will grow to $500 billion annually.His site will target impact investors hoping to create social change. To Learn More Click Here

Backed By Google And eBay's Founder, Crowd Funding Takes Off In Africa

By SARAH RUNDELL
August 16, 2012 6:24 AM EDT


Africa is not the first place that comes to mind when thinking about innovative forms of raising capital. Yet Kenya's m:lab, a technology hub funded by the World Bank specializing in mobile innovation that has become one of the cradles of East Africa's growing high-tech sector, is doing precisely that, using crowd funding, a form of financing in which entrepreneurs, small businesses, artists and even journalists attract funding from the Internet

M:lab is part of Nairobi's iHub, an open innovation space used by tech companies and investors and backed by, among others, Google (Nasdaq: GOOG) and Omidyar Network, the investment firm created by Pierre Omidyar, the billionaire founder of eBay (Nasdaq: EBAY). Now It has teamed up with international crowd funding platform GrowVC to raise money from online supporters for its budding mobile app developers. M:lab hopes crowd funding will help its startups scale up into sustainable businesses. That is sorely needed; today even the region's best ideas can wither on the vine because bank loans and venture capital are hard to come by in East Africa.

Crowd funding has taken off in developing markets, but the U.S. still leads the way. In America, a platform like Kickstarter could raise around $3.2 billion this year from online communities for its member entrepreneurs, whose projects range from documentaries to one-off technological innovations. Now, new legislation in the U.S. allowing equity-based investments from online investors for the first time may boost the sector even more. Other crowd funding platforms include FundBreak in Australia, Startnext.de in Germany and My Major Company in France.

Now Africa is getting in on the act, and countries long considered at the periphery of the world economy are benefiting. "We want to get Africans into the crowd funding space to invest in Africa's own start-ups," said Munyaradzi Chiura, head of GrowVC's Africa operations in Harare, Zimbabwe. "Crowd funding is particularly suited to the African context because the amounts are small, thereby reducing the risk, and investors are not going it alone." Projects in which "anyone can invest" could receive backing from outside Africa, although Chiura believes most investment will flow from local supporters, initially.

The overall sums involved are small by Western standards. App creators who have grown their ideas beyond prototype require between $5,000 and $10,000, says m:lab's John Kieti. "These developers could raise funds elsewhere if they were after more money. At this stage they don't want the typical venture firm investment of $100,000. Crowd funding is about attracting small amounts of finance from local investors persuaded of the merits of our technology start-ups," he says. In the long term, interest from the crowd should spur follow-on interest from professional investors including U.S. or European venture capital funds eyeing Africa, Kieti said.

For its pilot project, m:lab has selected a handful of its best mobile developers to try and raise funds via the GrowVC platform. One of the startups aims to streamline mobile payments made to schools via m-pesa (from the Swahili term for "money", it's a form of mobile payment common in Kenya), texting reminders to parents in arrears; another helps users find the nearest fuel station.

The continent's largest and most developed economy, South Africa, is also pushing the idea, with its first crowd funding platform, Crowdinvest. Investing with the businesses it backs may allow unusual rewards: investors in a film, for example, would get walk-on roles or on-screen credits. On the other hand, it also offers more conventional schemes, with investors in small firms and startups getting a share of the profits or of the company's ownership. It runs checks on any business wanting to register: "It's not open to anyone to upload a pitch," said CEO and founder Anton Breytenbach. Crowdinvest returns the funds to users if the full amount sought isn't raised, after which the project will shut down. Breytenbach pitches the platform as directed to young working professionals, active on social media communities, who want to build an investment portfolio, but have a limited income.

Crowd funding in Africa has a long way to go. One challenge is how to take payments from the investing public: PayPal and credit cards are the norm in developed markets, but Africa's online investors prefer mobile money networks such as m-pesa. And entrepreneurs need to do more to polish their business plans and proactively interact with the crowd to attract investment. Then there's a legislative problem: although the GrowVC platform allows investors to take equity stakes in the startups they back, Kenya has no legislation regarding this kind of investing. The continent's pioneers are adopting best practices for now, said Chiura: "We want to let crowd funding work and then we'll legislate." "We hope that the government doesn't get in the way of innovation here," Keiti added.

Scams are another concern. "There have been incidents of crowd funding campaigns for companies that don't actually exist," warned Mike Lebus, director of South Africa's Angel Investment Network. "It's hard for investors to carry out due diligence on crowdfunding platforms; you don't get to meet the management team before investing. Nor do the investors always understand the risks of investing in startups. But that's not to say crowd funding couldn't be successful." It's still the wild, early days, but raising investment from strangers online could be the solution to funding Africa's brightest ideas.

To Learn More Click Here

fundabrand.com coming soon

Make a video of your own at Animoto.

President Obama signed the Jumpstart Our Business Startups Act -- and the provisions within it to legalize crowdfunding for equity in the United States -- at around 2:40 PM EDT on April 5, 2012

"Crowdfunding" | #WeCantWait to Pass the Entrepreneur Access to Capital Act | H.R. 2930

What is Crowdfunding?The basic idea is to raise money through relatively small contributions from a large number of people - combining the best of microfinance and crowdsourcing.

Why is it necessary?

• Entrepreneurs, startups, and small businesses are overlooked by conventional lenders (local banks or venture capitalists, angel investors) and have a hard time accessing credit in today's marketplace.  As a result, United States capital formation and entrepreneurs suffer.
• Today in the United States, internet-based crowdfunding is utilized to raise millions of dollars for charitable organizations and non-profits.
• Other nations - such as Great Britain, Hong Kong, and the Netherlands - already offer equity-based crowdfunding opportunities to investors and startups to spur capital formation.
• Entrepreneurs and investors in the United States that communicate through internet-based platforms and offer securities are subject to costly SEC registration requirements.
• Compliance with each individual state's securities laws and rules - known as "Blue Sky Laws" - is prohibitively costly if companies are seeking to raise only small amounts of money.
• The SEC's general solicitation ban restricts companies from using modern communications to inform and connect to investors.

The Entrepreneur Access to Capital Act (H.R. 2930):

• Creates a crowdfunding exemption from SEC regulations for firms raising $1 million or $2 million if the issuer provides potential investors with audited financial statements.
• Individual investments limited to $10,000 or 10 percent of an investor's annual income, whichever is lesser.
• Preempt Blue Sky Laws and eliminate the application of the ban on general solicitation for issuers relying on the crowdfunding exemption.
• Excludes crowdfunding investors from counting as shareholders for the purposes of calculating the 499-shareholder cap under 12(g) of the Securities Exchange Act.

What They're Saying:

• "Pennies From Many" (op-ed) - The New York Times, September 25, 2011
• "House Panel Approves Startup Bills, Paving Way for Floor Votes" - The Wall Street Journal, October 26, 2011
• "Is crowdfunding startups a solution, or just another problem?" - GigaOM, November 1, 2011
• "Three Cheers for Cong. Patrick McHenry (R-NC)" - The Yorktown Patriot, November 2, 2011
• "JOBS Act will boost small business" - The Examiner, February, 23, 2012

Crowdfunding Revolution: Should I Do This?

 

Posted by Don Lehman |  6 Feb 2012  |  Comments (5)

By Hannes Grobe (Own work) via Wikimedia Commons

Is crowdfunding right for your project?

From my introductory essay, you can already get the sense that I'm pro-crowdfunding. But let's be honest with ourselves, in an ideal world where everyone has access to easy, no-strings attached money, no one would look for outside funding. Just like seeking out loans or investors, there are pros and cons to crowdfunding your project. Here are the two big questions you should ask yourself prior to committing.

1) Do I have the time to make this commitment?

If you are funded, do you have the flexibility in your schedule, or at the very least, the willingness to forgo sleep for the several months it will take to get your project done in a timely matter? Once you get funded, you are on the hook to produce. Your Backers aren't just backing your idea, they're backing you—financially and emotionally. There really is a bond that Backers feel towards the projects they support and they want nothing but success for you and your idea. Real delays and setbacks can be tolerated, but you harm that trust by stopping because you get too busy or lose interest. Moreover, you risk not only damaging your reputation, but you give your Backers a reason to think twice before supporting other crowdfunding projects.

I suppose the real question to ask yourself is, "Do I believe in this idea so strongy that I am compelled to see it through, no matter what?" If the answer is yes, then...

2) Do I want to develop this publicly?

Developing something out in the open for people who have already pre-ordered your idea is THE major difference between a traditional product development process and one done through Crowdfunding. It's not for everyone or every project.

Let's start by thinking about the process of how things get made. Take this fairly typical, over-simplified development process timeline. Many design consultancies have some of variation of this on their websites, minus the dollar signs.

A chart like this looks fairly innocuous until you start thinking of the pain points in the process. I have highlighted those in red. For designers, the easy stuff is in the blue region. You have an idea, then you do some sketches and a 3D rendering. But any fool can have an idea and 3D rendering. At some point you pass the rubicon of moving from a concept to proving that your concept works. It's that process of turning nothing into something that's the real trick. If we're truly honest with ourselves...

...the timeline looks more like this. More heavily weighted on making the idea become a real thing than it is coming up with the idea and design. This is why it's so hard to manufacture stuff for lone designers and new companies. It takes lots of money, lots of time and it has lots of potential for costly mistakes.

In a conventional product development timeline, you don't sell the product until almost the end of the process. All of the fear, self-doubt and shouting at the moon in frustration has been mostly worked out and it just sort of magically appears on the marketplace. You have the luxury of being able to fail and iterate in private while maintaining the element of surprise with your competitors. Traditionally, the risk is after investing all this time and money, you don't really know for sure if people will buy it or not. How many products have you seen or worked on where the people involved in its creation were certain of its success, only to see it fall flat?

Now compare this with a Crowdfunding timeline:

This is where it gets interesting. Any point between having a "Proof of Concept" prototype and needing to start manufacturing can be a viable time to look into crowdfunding. Of course what this means is you are selling an unfinished idea (a risk to be sure) and potential competitors get to know your plans before you are ready to fully act on them.

You may lose the element of surprise and the luxury of being able to make mistakes in private, but what you gain is access to capital and confirmation that your idea may have legs in the market. I actually think that this part of crowdfunding, the "Let's see if it sells, before we make it" part is going to become attractive to not only small independent designers, but even small to midsize companies who need confirmation before they bet the farm on a new product.

The public aspect of crowdfunding development means that you need to keep your Backers in the loop of your progress. This can be alternately amazing and incredibly stressful. You're not only dealing with the ups and downs of getting something made, but you have a large group of people invested in your success, watching and critiquing your progress in real time. Basically it turns the design process into real time performance art. Most will be fully supportive of you, but an extreme minority will be highly critical of every misstep (SPOILER ALERT: You will have missteps.) in a very public way. To put it more succinctly, its the absolute best parts of the Internet, mixed with a dash of the absolute worst parts of the Internet.

Here is a good test for yourself to see if you can deal with this: Start out by reading the comments to posts on swiss-miss.com. Most everyone is super excited and just happy to be there. That will be like what 95% of the feedback you get will be like. Nice! Now go read the comments on any tech blog and imagine instead of flaming Apple or Android, they are talking about you and your idea. If you can stomach reading more than 10 minutes and not question humanity: Congratulations! You are an ideal candidate for crowdfunding!

To be a little more serious, I loved sharing my process and keeping my Backers in the loop of progress being made. In fact, this was one of my favorite parts of my project. Posting a video of a CNC lathe machining my product and seeing the lightbulbs go off for people who had never been exposed to manufacturing before was so freaking cool. There were the occasional nights when it was better to just shut off my laptop and go to bed than to confront the crazies, but overall it was a very positive experience. This open nature of the crowdfunding process is so unique, that I will devote an entire article on how I think you can do this effectively.

Lenny and Edwin of Teale setting up the Stylus Cap production.

At this point I should mention, it's incredibly important to have at least some past experience in bringing a design all the way through to market before starting a crowdfunded project. If you don't have that background, then at least make sure one of your partners or an outside advisor is available to provide expertise. The idea of "easy" money to fund something is really alluring to anyone with a brilliant concept, but when the going gets tough, you have to know how to navigate through development issues and be able to speak to your Backers with clarity and authority on where you are in the process.

The bottom line is this: The premise of crowdfunding projects implies that you feel very certain you can get your idea produced, as long as you can secure money from Backers. If you are confident in your experience and ability to manufacture something, plus are willing to be open about your progress with your Backers, while having a thick skin when things get bumpy, then you should consider crowdfunding.

What sites should I look at for crowdfunding my product design project?

Notice that I threw in the words "product design project." While there are many sites that are devoted to crowdfunding, and a couple that are interesting from a designer's perspective, the only one I would pursue in February 2012 for product design is Kickstarter. It has the traffic, the reputation and the track record of success that none of the other sites can come close to. I will go over a couple sites that will be interesting to designers, but then go into further detail about Kickstarter.

IndieGoGo

Where as Kickstarter only allows "creative projects" that it prescreens, IndieGoGo allows pretty much anything. Have a foundation or cause you want to start? Go to IndieGoGo. Want to get money to start your company? Go to IndieGoGo. Want money to get in vitro fertilization treatment? No seriously, go to IndieGoGo. Pretty much anything goes on IndieGoGo and that's part of the problem for designers: It's hard for someone to weed through everything to find your project. For some types of projects it's absolutely great, but for product design, it's difficult to get the same visibility (i.e. funding) you have on Kickstarter.

There are some interesting things about IndieGoGo. For one, you don't need to hit a funding minimum to get money. So if your goal is $15,000, but you only get $10,000, you still get the $10,000. On Kickstarter, you either reach your goal and get funded or you miss it and get nothing.

The other difference is IndieGoGo accepts all projects, where as Kickstarter screens and selects projects that will be allows to launch. If you get rejected by Kickstarter or are worried that you won't make your funding goal, IndieGoGo, could be the right place for your project.

A few additional facts: right now Kickstarter only supports campaigns that are based in the United States, whereas IndieGoGo allows over 200 countries to participate. Kickstarter also limits the amount of days your project can seek funding to 60, while IndieGoGo allows for 120 days. Kickstarter charges a higher percentage fee (5%) than IndieGoGo does (4%), and the 3rd party fees (charged by credit card processors) are also higher on Kickstarter (3-5%) than on IndieGoGo (2.9%).

In many ways IndieGoGo is to Kickstarter, what Android is to iOS. One has more options, one is more focused. Since I am more of the iOS mindset, my preference is for Kickstarter, however I could see why many others would be more interested in IndieGoGo.

Quirky

Quirky isn't really a crowdfunding site, but if you have an idea, but not the know-how to get it made, it could be for you.

It works like this: for $10 you can submit an idea that gets reviewed and "influenced" by the community. People can comment on it and make suggestions on how to improve it. If it gets selected by both the Quirky community and internal team to be produced, you can earn 12 cents of every dollar the product makes from sales on quirky.com and 4 cents of every dollar at retail. Not a bad deal when you consider that Quirky is shouldering all of the development cost and risk.

Kickstarter

This is where the action is for product designers. 2011 was a MAJOR year for design on Kickstarter. To give you a small sense of the crazy velocity Kickstarter is on, when my Stylus Cap project closed in March 2011, it finished #14 all time for funding dollars compared to every project up to that point. Now? It's #37 in just the Design category. All time, it probably doesn't even crack the top 200.

In 2010, there were only 235 projects launched under the Design category on Kickstarter. In 2011, there were 1,060 launched. Of those 1,060 projects, 319 were successfully funded, making a cumulative $9.1 million dollars.

To put that $9.1 million into context, in April 2011, Kickstarter celebrated it's second birthday. At that time, they reported that in 2 years, the design category had raised $3.6 million. (Of that $3.6 million, nearly a million of that was Scott Wilson's LunaTik iPod Nano Watch Kit in 2010, still the most funded project in crowdfunding history.) From $3.6 million in two years to $9.1 million in just one is pretty nutty. Let's compare Design, the #3 overall category on Kickstarter to the Film (#1) and Music (#2) categories.

Film and Music dwarf Design, but Design had a major jump in 2011. At the rate its growing, I would expect it to be much closer to Music's overall funding total in 2012.

What's really interesting is I think the total for Design could be a lot higher, depending on how you classify certain projects. There is another category on Kickstarter called Technology. Some of those projects are pretty geeky and meant for people to hack around with, but some of the projects seem indistinguishable to me from what I would call a Product Design project.

Back to Film and Music, I think a big reason why those categories have been so successful on Kickstarter early on, and will continue to be, is that if you are a filmmaker or a musician, you're much more predisposed to being scrappy when it comes to tracking down money to fund your projects. Designers tend to do more work for others than for ourselves, so we haven't had as much experience hustling for our pet projects, which makes this a new phenomenon for us and yet another reason why its so exciting.

Now as far as the reasons to why Kickstarter is such a success, there are a few small things that it does really well:

1) Kickstarter filters what projects get posted.

This is important because it keeps Kickstarter projects feeling like they are part of a conscious effort to curate the site and keep it interesting.

The first filter is that all Kickstarter projects need to be "creative" in nature. So: no causes, no humanitarian aid, no business startup cash, etc. Projects must produce something that can be shared in some way with the world and Backers: albums, films, artwork, plays, technology, games, products, etc.

The second filter is more subjective which means its a little harder to know exactly what it is, but I will do my best to try and guess: Projects get further reviewed by Kickstarter to see if they are worthy of being on Kickstarter. Meaning: Does the project creator seem to know what they are doing? Does the project fit the vibe of Kickstarter? It may not seem fair if you get rejected, but Kickstarter gives you reasons why you were rejected and encourages you to improve your proposal and resubmit. This is a good thing.

2) You only get funded if you meet a money threshold you set prior to launching your project.

For example: If you set your funding goal at $10,000, and you get $9,999 and below, you get nothing. The main reason for this is to prevent someone who wanted to raise $10k, but only got $5k, from doing a $10 project on a $5k budget. It also has the side effect of getting Backers invested in spreading the word out to their friends about the project to make sure they get their rewards.

However, you get to keep anything over your goal as well. So if you make $15,000, you get to keep that extra $5,000. Nice.

3) It's really easy to find and back projects.

Kickstarter has really perfected the experience of contributing money to projects. The layout is clean. Every project's main elements (the video, the pledge button, updates, comments) are in the same easy to find places. Moreover, it's friendly and non-threatening.

4) It's success has made it more successful.

Much in the same way Facebook hit a tipping point for becoming the de facto social network, Kickstarter is starting to hit that tipping point as well. As more projects get funded and are successful, even more projects get funded and successful.

5) It's not about the money.

I know I listed out all those fancy charts and numbers above and its true they all came directly from Kickstarter's site. They are consciously building a business and from everything I have gathered, its seems that they are turning a respectable profit (5% of every successful project goes to Kickstarter).

However, I don't get the sense from Kickstarter that money is what motivates them. If it was, they would have invited much larger companies to post projects long ago and been much more active in promoting projects that have the potential to make a lot of money. They seem genuinely interested in having every project succeed, big and small, because the journey is what matters to them. That ethos goes a long way towards giving them the trust that is necessary for both Creator and Backer involvement. There is a lot of Internet goodwill and trust built up for Kickstarter and that's a major reason why it's the only solid first choice to start with when you look into crowdfunding.

Next time: Preparing for Launch.

About Don Lehman

Don Lehman is an designer based in Chicago. In 2011, he founded More/Real and developed it's first product, Stylus Caps, which turn pens and markers into touchscreen styluses that work with the iPad. Stylus Caps launched on Kickstarter, reached 488% of its funding goal in just 30 days, and are now in production. Don has a BFA in Industrial Design from the Rochester Institute of Technology.