There comes a time in many a creative enterprise when an injection of cash can help get the ball rolling just a little faster.
Maybe your band has recorded a new CD, but you are short of the cash needed to package it for sale. Or you’re organizing a dance workshop and looking for funds to reserve space and promote the event. Perhaps you’ve designed and prototyped a new iPhone cover, but lack the resources to begin production.
Traditional sources of business finance for these types of creative endeavors are hard to come by in the best of times.
As an alternative, these and similar creative undertakings, including more than 90 here in Maine, have turned to the Internet to raise money for their projects. Kickstarter, a “funding platform for creative projects,” is part of the growing world of online tools that offer alternative ways to both finance and promote a new venture.
Websites like Kickstarter tap into social media to crowdsource pledges from as little as $1 to several thousands of dollars. Based on the amount of their contribution, online supporters are offered different levels of “rewards.” Successful Kickstarter campaigns reap financial rewards, but they also promote awareness among a community of potential future customers or consumers of their creation.
Roost House of Juice, a Portland artisan juice and smoothie bar specializing in organic, locally-sourced drinks and food, used the proceeds from their successful Kickstarter campaign last spring to complete the renovations on their new space. “Part of the mission of our business is to create a community space,” said Kathleen Flanagan, co-owner of the business with her partner, Jeanette Richelson.
They used their email list and Facebook account to reach out to friends and family, as well as friends of friends and family of friends. Kathleen continues to be amazed at the power of social networking they unleashed: A recent customer came to Maine from New Jersey specifically to visit their juice bar after reading about it online.
The Bath Freight Shed Alliance offers another example of a successful Kickstarter fundraiser.
The Alliance, a non-profit group working on renovating an unused property on Bath’s historic waterfront, raised slightly more than its target goal of $18,000 to help winterize the shed for the Bath Farmers Market. “We put together a team of social media savvy folks, all under 30,” said Wiebke Theodore, who spearheads the Alliance. “We sent the link to everyone we knew and asked them to send the link to their friends.” She admits it took “tons of time,” but the process also got lots of people involved. “People could be part of the project for as little as $1,” she said.While a short video is key to pitching your idea to online investors, other fundamentals remain the same. First, “do your research,” Wiebke said. Her own extensive research offered the following tips for a successful campaign:
1. Be clear about your goals
2. Figure out the cost to run the campaign — include your own time, the costs of producing and delivering “rewards” to supporters (this can be tricky – both of these successful kickstarters advise keeping it simple)
3. Identify rewards that appeal to your potential backers – who are they and what networks can be used to reach them
4. Test the waters before launching, work out any bugs in your message or social networking outreach
5. Once the campaign is launched, stay engaged
Kathleen and Jeanette’s campaign was grounded in their business plan, which was developed with support from business counselors at Women, Work, and Community and the Maine Small Business Development Center. They, too, researched other Kickstarter campaigns and advise keeping the pitch simple and short – their video is under two minutes.
As an online platform, the video is the all-important pitch that conveys who you are, what you are asking for, and why someone should care. In both of the above instances, professional videographers volunteered their services; but even if made in-house, the videos can be effective if concise, specific and engaging. Kathleen and Jeanette created some of their own props and wrote their own script to further reduce expenses.
Kickstarter offers an all-or-nothing approach to raising funds. If the project has a goal of raising $1,000 within 30 days and online pledges fall short of that amount, the project gets $0 – and the backers are not charged. According to Kickstarter’s website, however, 90 percent of projects that reach at least 30% of their goal are ultimately successful and it claims an overall 44 percent success rate.
Kickstarter supports projects — something that can be completed, as opposed to an on-going business activity – in a variety of creative fields: art, drama, dance, design and food, among others. Since it started in 2009, the platform has generated $350 million in pledges by 2.5 million people supporting 30,000 creative projects.
Eloise Vitelli is program director for Women, Work, and Community, a statewide organization that has provided training and assistance to start-up entrepreneurs since 1984. For another approach to crowd-funding, see Indiegogo.