Ann Arbor Area Business Monthly
Small Business and the Internet

Crowd Funding

April 2016

By Mike Gould

I’m in with the in crowd…
    Written by Billy Page, performed by Dobie Gray 1964

I read with delight that my buddy Donald Harrison received funding via KickStarter for his upcoming documentary film about Ann Arbor’s Community High School (Commie High: The Film). Donald and I have worked on a couple of videos together and it is great to see him making progress on producing this project. A link to his now-completed Kickstarter effort is below. He raised $53,694 over the course of a 30-day campaign, attracting 452 backers.

Two’s Company, Many’s a Crowd
Crowd funding (CF) is a means of raising capital for a project by public investment. Instead of going to a bank and borrowing, say, $50K for a business startup, you go to Kickstarter (KS) and say: “Look, folks, I need backers for my project. If you help me out I will give you things related to the project”. The things, called “rewards”, can consist of tangibles like postcards, tchotchkes, or copies of the thing being made, such as a DVD of a movie, music album, book, or whatever. Or a backer can be thanked in a movie credit roll, CD liner notes, or a plaque on the wall of a new business.

The nice thing about this is that many, many, people can contribute small sums and if there are enough backers, these all add up to enough front money to do the deal/deed/doohickey. Everybody takes part, and everybody shares in the satisfaction when the project is funded. If there is not sufficient interest in raising the project’s financial goals, maybe the project needs to be reconsidered, or maybe a better effort needs to be made to publicize the fundraising campaign.

Kickin’ It
Kickstarter (KS) is what everyone thinks of when you say “Crowd Funding”. April 2016 is Kickstarter’s 5th anniversary, and as five years is about a century in internet time, we’re talking about a serious, solid, and established company here. There are now others offering similar services: Patreon, ZipCap (used by one of the businesswomen below), Patronicity, and the like. All have advantages and disadvantages over KS.

My wife, for instance, is assisting a disabled friend in the UK to raise funds via gofundme.com. This site is aimed more at the non-profit/scholarship/social services end of the spectrum, while KS is business-oriented. Here there are no deadlines or limits – if you don’t make your goal, you can still collect the money you have raised.

One advantage/disadvantage of KS is its all-or-nothing approach: if you don’t make your goal, you get nothing. According to Donald, this is an advantage in that it forces you to be really, really focused on your campaign.

Theater of Operations
And by campaign, think military campaign: tactics, strategy, logistics. You can’t just hang out your KS welcome mat and expect the internet to beat a path to your door. Expect an intensive, other-things-on-hold sort of operation. You have to do all the other things involved in raising money: hit up friends and relatives, spend hours on email, go and talk to people, and above all, leverage your other social media.

Advertise your ask on the front page of your website, Facebook page, twitter feed, and any other media you have access to. If you don’t have the above, create it NOW, well in advance of your crowd funding. Several of those I spoke to advised hiring a student intern from a college communications class, if you are not super web-savvy. Even if you are, a recent grad or senior probably knows way more than you do about these mission-critical matters.

Donald also recommended hiring a KS expert to advise and guide your efforts. He found one by word of mouth and said it made all the difference. Several others echoed this.

The Fund Print
Which brings us to some of the nitty-gritty details that one must consider before taking this route. In researching this, I attended a seminar at Washtenaw Community College’s Entrepreneurship Center called “Investment Crowdfunding for Entrepreneurs”. There three businesswomen described their experience with raising funding via CF. The projects included capital improvements to a café, a startup theater group, and a community coffeehouse. All reached their goals, which enabled their business plans to go forward.

In their talks, the above speakers shared common experiences, which were echoed in my interview with Donald. Here are some highlights and lowlights:

Tilt-a-Whirl
It’s an emotional roller coaster. Expect (in the case of KS) thirty days or whatever of bipolar behaviors. You have your big open, backers pour in for a week or so, then things taper off. A another week goes by – no response. You fight off Crippling Self Doubt and utter despair, pick up your phone, and hit up everyone you know. Things pick up, you float around for a couple of days, then another dip. You email everyone you’ve ever corresponded with, and start finding the addresses of third cousins. You go door to door around your neighborhood. Lather, rinse, repeat. Remember that you are only asking for a few bucks here and there. Everybody can spare $5 for a good cause, right?

Timing is critical. You don’t want to be contacting people in August; everyone is on vacation. Ditto the holidays, everybody’s too busy. Spring and early Fall are recommended.

KS gets a cut; they aren’t in this for their health. The usual cut is between 5 – 8%, I’m told.

Taxes and legal matters are to be considered. This is income, it has to be reported. And there are a bunch of other legal issues: a lawyer buddy of mine recommends talking to an attorney before getting in too deep.

Video is crucial: you need to have a coherent, cogent, and compelling story to tell in print, but you need to back it up with a video that features you telling your tale, accompanied by product shots, video or music clips, etc.. Everyone I spoke to stressed this. And you need to do it right: hire a pro.

And be aware that there is a lot of help out there from local agencies like SPARK, the Small Business Development Center, and WCC’s Entrepreneurship Center, URLs below.

Kickstarter:
https://www.kickstarter.com
https://www.kickstarter.com/projects/2049159625/commie-high-the-film
http://www.nytimes.com/2016/02/03/arts/music/kickstarter-as-a-path-to-grammy-nominations-far-beyond-the-indie-scene.html

gofundme:
https://www.gofundme.com
https://www.gofundme.com/pxx33n59

Zipcap:
https://www.zipcap.com

Patreon:
https://www.patreon.com

Patronicity:
https://www.patronicity.com

WCC’s Entrepreneurship Center
http://ec.wccnet.edu

SPARK:
http://www.annarborusa.org

Small Business Development Center:
http://sbdcmichigan.org

Mike Gould did a lot of research for this article, was a mouse wrangler for the U of M for 20 years, runs the MondoDyne Web Works/Macintosh Training/Digital Photography mega-mall, is a laser artist, performs with the Illuminatus 3.0 Laser Lightshow, and welcomes comments addressed to mgould@mondodyne.com.

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