Let's say you have a great idea for a project. You want to make a movie or build an invention or put out an album, and you have it all planned out. The problem is, it costs money. Even taking the time off to work on something can cost you more than you can afford.
Until recently, securing funding for a project could be a full-time job in itself. Most people who lacked funding simply decided the time wasn't right and gave up, but so-called crowdfunding sites have created a newer, simpler way to fund projects that cost anywhere from a few thousand dollars to almost a million dollars.
Crowdfunding builds off of the concept of crowdsourcing; but instead of contributing ideas for a project, users contribute money to get a project or business off the ground. Such sites have helped ordinary people create some truly amazing things--be it a gadget, a film, a music album, or an idea for a small business.
Dozens of crowdfunding sites are out there trying to make a name for themselves, but the two largest are Kickstarter and IndieGoGo. Kickstarter and IndieGoGo (and most of their competitors) follow the same basic format: Each project gets its own page to set the funding goal, to explain what the idea is about and what donations go toward, and to describe the different rewards at set donation amounts. That's it.
Each crowdfunding site has its own variations on the theme. According to Yancey Strickler, cofounder of Kickstarter, the key feature that has made that site so successful is the "conditional trigger."
On Kickstarter, each project has a funding threshold, the absolute minimum level of money needed to make the project a reality. If the project exceeds the funding goal, then presumably there's enough interest to make the project a success; at that point, the donations are collected and the project moves forward. If the project doesn't meet its funding threshold, then the site returns all the donations to the contributors. Kickstarter believes that this all-or-nothing approach encourages donations, since Kickstarter funders know that their money will go only to projects that will see completion.
What Are People Doing With It?
The real measure of the power of crowdfunding is the projects it makes possible. "The ability to get the prototype out in the world and see how consumers would react, with virtually no risk, was very appealing," says designer Scott Wilson. After gadget companies rejected his pitch for an accessory that turned the iPod Nano into a watch, he took the idea to Kickstarter. His project, TikTok and LunaTik, was the most successful project ever on Kickstarter, raising over $940,000 in 30 days.
Kickstarter alone has fully funded over 7000 projects, but almost every crowdfunding site has its own exciting success stories. Slava Rubin, cofounder of IndieGoGo, recalls several favorites, including the XStylus Crayon--a touchscreen stylus for the Nintendo DS and 3DS--and the Star Accessory, a nifty little tripod for the iPhone that tracks your motion and follows you as you move around the room. If not for crowdfunding, both projects would have fallen into a funding dead zone--too expensive for the creators to fund themselves, but too small-scale to obtain traditional investment.
Of course, creators still have to find ways to encourage donations. One of the most important tasks is deciding on the values and gifts for the different donation tiers. "You want to identify your tiers very carefully," says Asif Siddiky, director of photography for 2 Player Productions. "I think that was key to our success." Siddiky and the group at 2 Player Productions used a Kickstarter campaign to fund their upcoming film Minecraft: The Story of Mojang, a feature-length documentary about last year's breakout game Minecraft and the game company it spawned.
The 2 Player Productions team created some of the most original donation rewards in Kickstarter history, from copies of the movie in a special "supporter edition" to a wind-up toy based on the game's Creeper enemy. These gifts helped drive the Kickstarter campaign to raise over $200,000 for the project.
Although the unique toys were important to the campaign, Siddiky also stresses the human element of the fundraising. "You have to maintain an interaction with [donors]. If people start to feel ignored, then the support for your project can languish," Siddiky says. "If you're responding to people quickly and honestly, they're more likely to feel like they're a part of it, and they're more likely to share it."
Scott Wilson agrees that the real power is in interaction. "Crowdsourcing and sites like Kickstarter allow artists and creators a platform on which they can pitch their work to an engaged community and potentially get instant global validation, which is pretty incredible," Wilson says.