Crowd-funding websites, like popular Kickstarter, give entrepreneurs a chance
By Julio Ojeda-Zapata Posted: 08/04/2012
Mechanical-watch restoration expert Leo Padron nurtured a dream to sell a timepiece of his own design but had little inkling of how he'd raise the money for it. Then the Minneapolis man heard about "crowd funding," which is exactly what it sounds like: a funding appeal to the masses, with modest cash donations from hundreds or thousands of "backers" adding up to big bucks. For his crowd-funding campaign, Padron used Kickstarter. It is one of several online services for hosting such efforts and giving them the visibility they need to draw pledges from those who like what they see. Roughly half of such Kickstarter campaigns fall short of predetermined cash objectives by set deadlines. When that happens, the campaigns are classified as failed, the pledges are nullified, and campaign organizers walk away with nothing.
Padron's Kickstarter worked. The Venezuela native asked for $20,000 during his two-month campaign and got $98,022 in pledges from 264 supporters for the "Vuelta," a "reboot of the gentleman's mechanical-wind timepiece" with a waterproof leather strap and a transparent bottom for watching the internal mechanism in motion. ("Vuelta" means "turn" or "turnaround" in Spanish.) In fact, Padron met his funding goal in two days, assuring him money -minus the 5-percent Kickstarter cut for successful campaigns -regardless of what happened afterward. His campaign didn't become a superstar pulling in millions (as a number of others have), but Padron is thrilled. "I am humbled," said the watch expert, who notes that feedback from his Kickstarter backers have led him to make Vuelta-design improvements. The watch, in two variations, ships later this year. Though tech-related crowd-funding pitches often get the most publicity, these run the gamut from food-related, fine-arts and publishing efforts to scientific research, disaster relief and grassroots journalism. Those contributing to such campaigns are typically moved to do so because they admire the projects, and because the campaigns offer perks or incentives that give backers an elite status. Such incentives get pricier, fancier or just-plain-cooler the more moolah is contributed. The designer of a tech gadget might offer samples of the device to those contributing the largest sums of money, for instance, but only a Web thank-you or a T-shirt to those chipping in small amounts.
On Kickstarter, the service approves which campaigns can go forward, and about 75 percent do. The campaign creators set the dollar targets -- a decision fraught with uncertainty and angst since it can be anyone's guess whether the amounts ultimately prove too steep for success. WILLING TO PAY Kickstarter is the best-known crowd-funding site, but other such services are getting visibility as this style of fundraising hits the mainstream. When an elderly Greece, N.Y., school-bus monitor recently became famous for being taunted by children, with the incident shown on a Web video that went viral, a campaign via Kickstarter rival Indiegogo raised more than $700,000 to allow the woman to retire. Indiegogo differs from Kickstarter in that campaign creators get whatever amount is pledged. St. Paul chiropractor Susan Clarke had raised less than $3,000 on Indiegogo as of last week to self-publish her book, "Clarke's Dictionary of Transactional Analysis." This is far short of her goal to raise $15,000, but it puts her in a better financial position than an earlier Kickstarter campaign that didn't hit its $30,000 target and therefore yielded her nary a dime. What's more, an out-of-the-blue order for 20 copies of the book got her an extra $1,400.
Clarke credits her crowd-funding visibility for this: "There's potential there for finding people in your niche who are willing to pay." Figuring out why some crowd-funding campaigns succeed and others fall flat can be difficult. An in-development iPhone game called "Bumpin' Uglies" got star billing on major technology sites like Mashable yet fell far short of its $65,000 goal. (Twin Cities developers are forging ahead with the project regardless.) Yet, virtually unknown developer Don James of Burnsville was successful in a recent campaign (following an earlier, failed effort), raising $1,023 for his "Core of Innocence" adventure game for the PC, with a goal of $400. He'll use the cash to get hardware and software for his team. Elements of successful Kickstarter campaigns include doggedness, creativity and chutzpah. A RABBI INVENTOR Saying "no" to Moshe Weiss, an irrepressible, infectiously enthusiastic St. Paul rabbi, would seem impossible.
But Weiss' first Kickstarter campaign, focused on an iPad audio accessory dubbed the SoundBender, fell far short of its $7,500 target in late 2011. So, Weiss just tried again. For his second Kickstarter campaign, also focused on the clip-on plastic doodad that amplifies the sound coming out of an iPad speaker, he knocked his goal down to $4,500 and increased the campaign's duration from four to six weeks. He also lavished more attention on the design of his Kickstarter page. And if donors canceled their pledges, Weiss would chase them down and ask them to please, please reconsider. "What's up?" he'd say. "I want you back. What can I do to get you back?" A majority of the dropouts re-pledged, he said. "Kickstarter is an amazing experience -- if you utilize it properly," Weiss said. "It is amazing the connections you build with people. Your backers become your friends." Weiss is in the thick of a third Kickstarter campaign to fund a revised SoundBender tailored to the third-generation iPad but, as of last week, had already exceeded his $4,500 funding goal. Weiss also has completed a couple of successful campaigns via crowdsourcing site Kicktraq. IT'S A JOKE, BUT... April Fool's Day is traditionally replete with gag announcements from tech companies about products and services that will never see the light
of day ... except sometimes they eventually do via crowd-funding campaigns. The Littlest Black Book from Minneapolis-based Pad & Quill is one such product. It's a device case that looks like a fine leather-bound book when closed. But, unlike other P & Q cases that protect such large gadgets as the iPad and the MacBook Air, the Littlest Black Book encases Apple's super-small iPod Nano music player. "It was, at first, a total farce," said Pad & Quill founder Brian Holmes, who initially made only a handful of the things for giggles. "I did not know if anybody would want to buy a case like this, but let's make a video, let's make it funny and put it up on Kickstarter" to see what happens. The month-long campaign, launched March 31, asked for $4,500 and got $7,211. The Littlest Black Book is now available for $34.99. It's hardly one of the company's leading sellers, Holmes said, but it has been priceless for publicity. He has Kickstarter to thank for that.