Another Source of Small Business Funding

Crowdfunding seems to still be popular despite mixed reviews on how successful (or unsuccessful) it was for many funds-seekers.

However, to me, there always seemed to be a pattern develop within each of the peer lending sites, that favored “creative” or “social” projects far better than other kinds of new business ideas.

Perhaps, that explains the apparent success of Kickstarter, a crowdfunding site just for creative projects—and only for creative projects. Kickstarter was founded in 2009 as an online funding source for filmmakers, designers, musicians, and other types of artists.

Interestingly, the people who provide funding for these projects are actually “contributors” rather than “investors,” because they receive no return on their investment or equity in a project. However, they are usually promised some token award—a personal phone call thanking them, a copy of a CD, a T-shirt, dinner with the artist, or some other token related to the project.

Some filmmakers offer contributors over a certain threshold a “credit” in their film as “Executive Producer.” One filmmaker promised to make a personal call to anyone contributing $10 or more. He is still working on his list of over 3,000 names.

The amounts sought after range from a few hundred dollars up into six figures for Indie films. Filmmaking and music seem to be the big attractions with over 3,000 films being funded. Of these, several have passed the $100,000 level, with one film raising over $345,000 (they were only seeking $125,000).

Here are some statistics about the success ratios of project requests after only two years of operation (all statistics are current as of July 17, 2011):

• The 10,000^th successful project was funded on July 6, 2011.
• Total number of Project Requests = 26,620.
• Total number of Successful (funded) Projects = 10,388.
• Total number of Unsuccessful (not funded) Projects = 13,113.
• Live Projects = 3,119
• Success Rate = 44%
• The number of projects funded in Kickstarter’s first year is exactly the same as the number funded in the MONTH of June 2011 (1,044).
• Music topped the list of successful projects with 3,110, and Filmmaking was second with 3,048. (Music and filmmaking dominate with 60% of all successful projects.)
• There are 13 categories of projects with Fashion being no. 13 at 119 projects.
• Total dollars pledged since inception = $75 million.
• Dollars collected (successful projects) = $60 million.
• Dollars uncollected (unsuccessful projects) = $9 million.
• Live dollars (currently funding projects) = $6 million.
• Total number of backers = 793,362
• Number of Repeat backers = 118,308. Repeat backers make up 13% of the total number, but 28% of the total dollars pledged.
• The Staff of Kickstarter also back projects, and as of July have backed 2,168 projects. It seems the people at Kickstarter believe in their own products.

There are obviously people out there who want to support the arts and are willing to contribute money to do so. This is likely why Kickstarter has succeeded where other crowdfunding sources have failed—or somewhat failed.

The funding process works by the artist creating a short video pitch, posting it on the Kickstarter website, and setting a fundraising target and time frame. It is an all or nothing arrangement. A project must reach its funding goal within the time specified by the artist, or no money changes hands. When goals are met, the money is collected from the contributors, Kickstarter keeps 5% plus credit card merchant fees (through Amazon) of around 3-5%, and the rest is passed on to the project creator.

So, if you are the creative type of small-business person looking for funding for your project, you just might want to consider Kickstarter. Who knows, there may be a patron out there somewhere who is taken by your passionate presentation and starts the ball rolling on funding your project. Just remember that it will be the quality and content of your video that attracts the patrons.

You can visit Kickstarter.com to find all the information you need to get started. It is worth the visit to the site just to see some of the videos that people have sent in requesting funding—some of them are very good. Check ‘em out and let me know what you think.

Note: I have no connection whatsoever with Kickstarter.com. This article is information for small-business owners, snd is provided as a service only.

*

Comments