CROWDFUNDING Story and photos by Sean Previl Illustration by Kaitlyn Divnich
Passing the hat to fund a big idea or community project isn’t new; as far back as the 17th century, publishers were gathering financial pledges, or subscriptions, to support book projects and periodicals. More recently – if you can call a century ago recently – the building of the pedestal for the Satue of Liberty was financed by more than 100,000 people, many of whom contributed less than a dollar. Like so many things in the 21st century, we’ve taken an old idea, given it a new name, and turned to the Internet to make it happen. From the $5 million Veronica Mars movie to raising more than $300,000 for country singer Steve Grand’s album, crowdfunding is accessible to anyone who has an idea.
How To Get Started Kickstarter and Indiegogo are two well-known crowdfunding websites, but they’re not the only ones. You can also check out: Rocket Hub Fund Razr Crowdfunder Moola Hoop You can also check out the National Crowdfunding Association of Canada for more information
Know the lingo Ad Swap: when projects promote each other by swapping ad space Barker: someone who uses social networking sites to promote a project Creator: the person who runs a crowdfunded project Patron: someone who contribute money to a crowdfunded project
Finding its online start in the infancy stage of the Internet, crowdfunding was used as early as 1997 to raise money to fund a British rock band’s reunion tour. Shortly after, in 2000, ArtistShare became the first crowdfunding website. Since then the industry has grown dramatically. The revenue from this form of fundraising has risen from $530 million in 2009 to $1.5 billion in 2011. The reasons to crowdfund are limited only by imagination and desire. Several projects, especially those geared toward urban renewal, have found success in economically-ravaged Detroit. At press time, more than $2500 had been raised to transform an alley into a “green alley” in midtown Detroit. Past and present projects include helping Detroit students afford prom clothing, business projects, restoration ideas, documentaries and books. Locally, crowdfunding made headlines recently when student Amanda Vojvodin started an Indiegogo campaign to raise money for the $40,000 tuition that a master’s in international arts management will cost. “I was hoping through this campaign to raise awareness about the arts and the value of the arts and what I can bring back to the community,” says Vojvodin, who recently completed her second undergraduate degree at the University of Ottawa. The 23-year-old Windsor native likes crowdfunding because of the exposure. Between June 7 and June 15, her campaign had already seen almost 400 views. While most of these views did not result in donations, Vojvodin has already raised $265 from six backers of the project. Alice Hewitt used crowdfunding on her 23rd birthday by asking her friends and family to give money to the Brain Tumour Foundation in place of giving her gifts. “I reached out through Twitter, Facebook and other social media (to fundraise),” said Hewitt, now 25. “I received quite a few anonymous donations which I found really touching.” Crowdfunding, such as in Hewitt’s case, is often used to fundraise for third-party causes. It’s raised money for charitable foundations and political campaigns. Even institutions are getting in on the act; Carleton University in Ottawa has jumped on the crowdfunding bandwagon. “Futurefunder” as its called, targets alumni, allowing them to direct their donations towards school projects that appeal to them. “It’s right there on the Internet and that’s where people go to every second of their lives,” said Hewitt. “You can pitch it in so many ways through
Facebook and Twitter and Instagram. It’s always out there and people are always noticing it and you get such a wide variety of audience. If I put it in the newspaper, maybe only a hundred people will read that ad and donate, but if I put it on Facebook, millions of people can share it and keep on sharing it.” Starting a campaign is an easy process; most related websites give guides on how to create and manage your crowdfundung. Once you have an idea and know what website you want to use, you create your campaign. Most advise creating a video for the “pitch.” Jeremy Ing, of Windsor, says communication from the campaign maker can be a deciding factor for donors. The more professionally a campaign is run and the more value his donation will get him, the more he’s likely to donate. Ing has donated more than $800 to six different campaigns on Kickstarter. “(I donated) if they offered a good cost vs. rewards value (and were from) companies known for quality, ” says Ing. Crowdunding could be the secret Crowdfunding can be sorted into four basic types, each with its own to increasing alumnae donations terms and standards. Donation-based crowdfunding, like Hewitt’s fundraiser, sees money raised by the crowd with no expectation of reward. Reward-based funding is formed when various rewards are given for different amounts raised and is considered by Fundable.com to be the most common type of crowdfunding. Lending is frequently used by entrepreneurs to raise funds by receiving loans from supporters that will be returned within a set time. And equity-based funding is the most recent type of crowdfunding to develop; often the time period to donate is longer than the other three. In this type, people are buying equity in a private company. Most campaign websites allow a campaign to last for up to 60 days, but do recommend no more than 40 days. The longer a campaign lasts, the more difficult it is to keep the audience engaged. Shorter campaigns also reduce the time commitment necessary for the person who created the campaign. There are various opinions about the equity based and rewards based funding because some believe, like Hewitt, that people should be able to donate without the need for a reward. “You should feel great about giving just a couple bucks without winning a prize,” says Hewitt. “But (rewards) provide a really good incentive, so if it Many crowdfunding projects works, it works.” focus on community and urban Jason Tang, who has donated to three Kickstarter campaigns, said he renewal might donate more if the reward is worth it.
Crowdfunding by the numbers Individuals ages 24 to 35 are most likely to donate to campaigns Men are more likely than women to fund unknown startups Those who earn more than $100k per year are most likely to invest in startups through crowdfunding As of 2012, there were almost 600 active crowdfunding platforms July 2014 - The HUB 13
19th century crowdfunding
It’s not Lady Liberty, but the City of Detroit’s Robocop statue, slated to be unveiled later in 2014, was financed through crowdfunding. More than $60,000 was raised in just six days for the project that started with an offhanded tweet.
“If I can have a way better version of the product or get more items with it, I will likely donate the extra 20 dollars or even 50 dollars to get more,” said Tang. Vojvodin, who is running a reward campaign, says rewards can give more incentive to donate but depending on the campaign, some people may have to be more creative with their rewards. “I don’t have any materials to give back and can’t physically say, ‘If you donate this, I’ll give you this,’ so that’s why I went another route,” says Vojvodin. “So I said, ‘If you donate such and such, I’ll be happy to go into whatever organization donated or school or the community wherever it is and speak to the people in that area about my story; about how I made it here... about how the arts are thriving in Windsor-Essex and how they can make it in the arts.” Crowdfunding campaigns aren’t a perfect art and there are some negatives that can create reservations. Donors and fundraisers alike may have an issue with websites that take a percentage from the funds raised if the campaign is a success, usually five to 10 per cent. Others say a big issue is the lack of connection between the fundraiser and their backers. “They are a little impersonal,” says Hewitt. “Fundraisers can be great community events and you miss out on that when you fundraise online, but there’s added bonuses and cons to everything.” This is often where the pitches come in. By talking to your audience, it can give a person the ability to connect with you and believe in your pitch just as much as you do. According to Indiegogo, videos used in campaigns often result in 115 per cent more money raised. Kickstarter also says it helps “make potential backers see your commitment to see it through.” 14 The HUB - July 2014
21st century crowdfunding
To achieve your goal however, it’s more than the initial pitch, it’s keeping in touch. Updating backers of the project spreads the word. “It’s word of mouth,” says Vojvodin. “But it’s word of mouth in a new technological sense where it’s not only meeting up with somebody over coffee to talk about it but it’s as quick as, ‘I’m going to send this over to someone on Facebook,’ or ‘I’m going to like it’ and then somebody else will see that they liked it and they’ll like it.” Many projects who kept their backers updated were ones that raised large amounts of money. The Veronica Mars movie project updated donors 23 times leading up to the end of the funding period and another 74 times afterwards. The campaign eventually raised more than $5.7 million from 91,000 backers. Not all campaigns have fans from a previous TV show but still see large donations; the video game Star Citizen had 470,000 backers and raised $46 million, making it the highest funded crowdfund campaign since the industry started. Crowdfunding has become a creative way of fundraising because of its easy-to-use methods. Through it people are able to reach a wide variety of people who may be intrigued by their project or by the person themselves and in turn donate. While these campaigns may not always work out, the added benefit of not having to pay unless the campaign succeeds prompts more people to donate because there is no risk if the crowdfund fails. Crowdfunding isn’t a magic bullet – the idea still has to be good, and you still have to connect with the right people. But with more crowdfunding websites getting in on the game, any idea has potential.