Earlier in 2015 I succumbed to my first crowdfunding plea.
An actor friend told me about a role that he was hoping to get in a local play.
The Dapto Chaser was an Australian comedy about desperation and dog racing, and its producer Dino Dimitriadis wanted to match the funds he was raising from other sources to pay his actors a good upfront fee. Dimitriadis posted his plea for the community to help on Pozible, an Australia-based crowdfunding website.
I went online and discovered that for $40 I could snap up a ticket to a preview, a supporters’ pack including a fridge magnet, and Dimitriadis’s “love and thanks”. Given my intention to see the play anyway, it seemed churlish not to sign up. I pressed the link and donated to the cause.
Had Dimitriadis failed to reach his target, my money would have been returned. In fact he comfortably exceeded it. Not all campaigns run quite so smoothly.
In June, British man Thom Feeney made headlines worldwide with a campaign on website Indiegogo aimed at raising €1.6 billion to bail out Greece. In just over a week 108,654 contributors pledged €1.9 million. But that was well short of the target so the money stayed in pledgers’ pockets. It was simply too big a target, Feeney conceded of his “all-or-nothing” approach, but then he launched a new crowdfunding initiative to generate a more modest €1m towards the country’s humanitarian crisis.
In 14 days Feeney’s second attempt netted €289,152 with the proviso this time that all cash raised would be invested to support people in need in Greece even if Feeney did not hit his target. “I realise now I should have done this on the first one,” he said online. “I can only apologise.”
Wikipedia defines crowdfunding as “the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet.” Online, it’s easy to reach a lot of people directly and very quickly, and so if you can make a pitch that grabs the right kind of attention, there’s a fair chance people will open their wallets in exchange for various rewards such as the finished product or equity.
The Pebble Time smartwatch, which raised US$20.3m in pre-orders earlier this year, and Exploding Kittens, a card game based on Russian Roulette, that pulled in US$8.7m, are just two recent stars of crowdfunding platforms.
In 2014, crowdfunding projects raised US$16.2b worldwide, more than one-and-a-half times the previous year’s total, according to a report from research and advisory firm Massolution. The prediction for 2015: a doubling of successful pledges to US$34.4b.
Crowdfunding may feel like a new phenomenon – the noun only made its way into the Oxford English Dictionary this year – but the idea that “lots of littles make a lot” is as old as the proverbial hills.
Back in the early 1600s, the eccentric English poet John Taylor funded his endeavours by proposing books, appealing for funders, and only printing them when his subscription target allowed it. Other early examples include the 19th century cooperative movement where local groups banded together to open stores, for example, that they would never have been able to bankroll alone.
We also have a crowdfunding campaign to thank for New York’s Statue of Liberty.
In the late 1800s, after the French people donated the enormous Liberty statue to New York, US Congress refused to bankroll construction of the pedestal, thus threatening the project’s completion. Fearful that another American city would snatch the monument away, publisher Joseph Pulitzer launched an appeal to raise $100,000 via a local newspaper.
Over 120,000 people responded, contributing an average of 83 cents each and the statue was erected. The rest, as they say, is history.
Today crowdfunding projects pepper the internet, with over 1200 sites specialising in everything from social causes to real estate. Earlier this year, a clever idea to simplify honey production changed the lives of an Australian father-and-son team, Stuart and Cedar Anderson. The pair turned to Indiegogo to seek funds to develop their revolutionary idea for a beehive with a built-in tap to extract the honey without disturbing the bees. The why-didn’t-we-think-of-that-before concept caught public imagination worldwide and overshot its US$70,000 target by a stunning 17,385%, netting the Andersons more than US$12m from buyers and investors to fast-track commercial development of Flow Hive and start manufacturing the beehives.
With entrepreneurs and wishful thinkers trying to bring virtually every imaginable venture to life, supporters are subsidising everything from movies (Veronica Mars fans pledged more than $5m to get a film adaptation of the TV show off the ground) and mid-life crisis tattoos to critical medical expenses. Campaigns are often mobilised when calamity strikes.
In Australia, the small Gippsland town of Buchan turned to crowd-funding to rebuild its historic hotel after a fire destroyed it in 2014. And, in Germany, a car owner who totalled his Ferrari 458 Italia launched the “Dead Ferrari” campaign in an attempt to entice strangers to bankroll its €210,000 repair – an “opportunity” which provoked as much derision as praise.
Yet there are limits. Zack Danger Brown, an Ohio man who jokingly launched a Kickerstarter campaign in 2014 for US$10 to make a potato salad, came away with US$55,492 after 6911 people backed his crazy plan. Even so, Kickstarter refused to host his next campaign aimed at grinding a jet ski into powder so he could send it to his donors. Undeterred, he announced he would take the scheme to a rival site.
Crowdfunding is also now moving into areas once the territory of governments, banks and investment professionals.
In August 2014, a Sydney scientist, Ben McNeil, founded thinkable.org, a website linking researchers with people who want to fund innovation.
After 17 years of researching oceans and climate change in the US and Australia, McNeil believed there must be a better way to fund the more speculative ideas that traditional sources of funds often shied away from but which just might change the world.
In its first 11 months, Thinkable raised $70,000 via prizes, competitions and direct public donations. “People are really fascinated with science,” he says. “We’re excited about connecting the world with the scientists themselves.”
In Australia crowdfunding itself is facing a transformation. Federal government plans to change current regulations so start-ups can offer shares via crowdfunding platforms, will bring it in line with places like the UK and New Zealand, and potentially release a vast stream of funding to innovative new businesses.
At the same time, investing in unproven, start-up businesses could leave many funders disappointed. In other words, buyer beware. US entrepreneurship specialist Cameron Kushman warns that when it comes to speculative ideas, “You might lose your shirt.” The most important thing to understand about crowdfunding, he wrote on forbes.com, “is that it is very risky, and you could, very easily, lose your entire investment.”
As crowdfunding has spread, so has its dark side. Criminals have attempted to use some platforms for money laundering and in June the US’s Federal Trade Commission targeted organisers of a crowdfunding campaign for the first time after a proposed board game, raised US$122,874 and failed to deliver.
A company that has been cited as a classic example of the risks is Kreyos, which raised over $1.5 million in 2013 to fund the production of a waterproof smartwatch with voice and gesture control. A year later, a few customers received a watch – which was nothing like the prototypes. But many others didn’t receive a single thing. Kreyos closed down at the end of last year.
But despite the risks, according to crowdfunding and digital strategist Anna Maguire, author of Crowdfund It!: “It is going to grow, grow, grow.”
In the last few years it has gone from being an oddity to a fully recognised form of funding, she says. “Like all booms there will be a correction. [But] it’s not a novelty, it’s not a gimmick and it’s not going away.”
When the night finally arrived to see The Dapto Chaser, my ticket was waiting for me at the theatre door. My name was printed boldly on the play’s programme along with another 91 crowdfunding supporters, and I could sense a rather special buzz in the air.
The play itself lived up to its hype. It proved to be fast, funny and poignant, and there was something special, in that warm fuzzy way, about knowing I had helped directly to make it happen. As the audience left the theatre, Dino Dimitriadis and the playwright personally thanked us for the support.
Crowdfunding may be a gamble but pick your project carefully and its bonuses can go far beyond the monetary. What my dalliance with it showed me was that, like the best things in life, it’s personal – and that makes potential rewards all the greater. Learning that felt like $40 well spent.