As we start off a new year, now’s a good time to focus on those burning ideas and entrepreneurial endeavors you’ve been putting off. But with the state of the economy, venture capital and angel investment money have all but dried up.
That means you need to be resourceful to make your dream a reality.
People have always come up with clever ways to accomplish a financial goal. During the Depression, there would be what were called “rent parties”. You’d break out the punch bowl, put together some cheap hors d' oeuvres and invite people over with an admission charge at the door. That’s how you would pay your rent that month.
Fast forward to the 21st Century and thanks to the Internet, raising needed monies is a whole lot easier. Now, more than ever, there are ways to be the next Steve Jobs or Steven Spielberg. If you have that book you want to publish, a documentary you’d like to produce, a CD you’d like to record or a techy gadget prototype you’d like to make, you can bypass the big banks or Wall Street or your immediate family to make that happen.
This source of financial backing is called crowd funding or crowd sourcing. Long the staple of charity fundraising, it has now morphed into individuals raising the backing they need to fund a personal project. With the advent of social media, online communities and micro-payment technology, the sky’s the limit. You can raise the needed capital from countless sources in small, medium or large amounts, making your goal much more attainable.
Independent musician, Eve Selis, financed her 2011 CD, Family Tree, solely with crowd funds from more than 200 backers from around the world. Pulling from her established fan base and utilizing crowd funding sites Kickstarter and PledgeMusic as well as social media, she raised over $25,000 in two months. This enabled her to work with a Grammy® Award winning producer as well as top-tier musicians.
Kicking It
Kickstarter is arguably the best known crowd fund site. Founded in 2009, it is the go-to-site for DIY (Do It Yourself) projects. In 2011, they launched 27,000 projects with about a 46% success rate with close to $100 million dollars pledged.
One of the best success stories is start-up Kogeto that recently displayed its 360° camera lens for the iPhone at CES 2012. Launching in May 2011 on Kickstarter, they raised $120,000 within two months. That sparked a meeting invite from Apple and the rest is history, as they say. You can read more on this at Inc.com.
To use Kickstarter, you submit your project, state how much you need to raise, decide how long you’re going to run your campaign (up to 60 days) and what incentives you’re going to offer potential backers. Once you’re approved, it’s up to you to market your project and raise money.
Kickstarter encourages you to post a video about your project to encourage backers to support you. You can record a simple explanation of what you’re trying to accomplish and why they should support you with your camcorder or you can take it to the next level with clever editing and special effects. Check out Kickstarter’s favorite videos from 2011 here.
While some backers may be happy just to support your endeavor, most will be expecting some sort of incentive for their pledge. In the case of the above-mentioned musician, everyone received a copy of her new CD plus other perks depending upon how much they contributed to the project within a range of $10 to $3,500. For example, $200 got you an “Apple iPod Shuffle 4th Generation 2GB MP3 Digital Music Player containing the entire Eve Selis catalogue plus rare demos and a personal message. Your name in the special thanks in the liner notes plus signed advance copy of the new CD.” You can be as creative as you want, it’s entirely up to you as long as it is actually something you can deliver.
Nothing is as easy as it always seems and if you don’t raise your goal amount, you receive nothing - nada - zero - zilch; so be realistic. And of course, this doesn’t come free, but is actually quite reasonable. Kickstarter will take 5% as their fee and since they fund through Amazon, there’s an additional 3-5% charge. If you don’t raise your goal, there is no charge. Once your allotted time has ended and you’ve reached your goal, you’ll receive your money minus the fees, two weeks later.
For the Music Lover
If your goal is a music project, there’s also PledgeMusic which works basically the same but allows you to choose a charity to receive 10% of funds raised. The fee is slightly higher than Kickstarter at a flat 15% and again, if you don’t reach your goal, you receive nothing and there is no charge. Their payout schedule is a little different than Kickstarter so be sure to do a site comparison. One major difference is that PledgeMusic will not release the remaining balance in your account until you have fulfilled all the incentives and they’ve received no complaints from your backers.
Going Indie
If you’re not as confident about how much you can raise, you might consider IndieGoGo which allows you to keep whatever you raise, regardless of your goal, with just an increase in their fee from 4% to 9% if you don’t reach it. IndieGoGo prides itself on supporting Coffee Roasters, Rock Bands, Dancers, Roller Skaters, Computer Programmers, Designers, Globe Trekkers, Crafters, Inventors, Community Builders, Dog Trainers and so much more.
Chipping In
If you don’t want to or can’t go the route of Kickstarter et al, there are other tools available. One example would be Chipin.com. All they ask is:
· What's the purpose of your ChipIn?
· How much money do you need to collect?
· When do you need the money by?
· How would you like to collect your money?
Chipin doesn’t charge a fee like the other sites but they fund through PayPal so you will incur that fee. For that matter, you can set up a PayPal donation button on your web site or blog but you lose the viral marketing support and other tools these sites can offer. So unless you’re an Internet marketing guru in your own right, you may want to go the more established forms of crowd funding.
Caveats:
If your product involves a potential patent or idea, consult with a legal resource regarding protecting your rights. Crowd funding sites are not responsible if someone ‘steals” your idea.
Also, this isn’t “free” money; the IRS will consider it income. Financing through Kickstarter will garner you a 1099 form from Amazon if you raise over $600.
The Last Word
Don’t let your dream slip away because you believe that you can’t afford to make it a reality. Anything is possible if you’re passionate about it. Filmmakers have showcased their movies at the prestigious Sundance Film Festival that were financed by Kickstarter supporters.
If you don’t have a creative project in mind, why not explore these sites and help make someone else’s dream come true. You never know what you might find and the reward could be yours as well.
