The crowdfunding craze is far from over.
Data issued in March by Los Angeles-based crowdsourcing research firm Massolution found 1,250 active crowdfunding platforms raised over $16.2 billion worldwide last year, a 167 percent increase compared to $6.1 billion raised in 2013. Next year, the number is expected to more than double, reaching nearly $35 billion.
However, only two of 13 Springfield-based projects currently live on one of the most well-known and popular crowdfunding sites, Kickstarter.com, have met their capital goals. The local projects might be casualties in the majority.
According to Kickstarter, the number of projects that have failed is roughly 60 percent, or 144,000 false starts. Since the website started in 2009 some $1.78 billion has been pledged to around 238,000 launched projects, with about $1.53 billion ultimately being awarded to companies that met funding goals.
Moncho Marquez, a Venezuelan novelist and filmmaker living in Springfield, has until July 1 to fund his project, Magic Soccer, a self-penned, feature-length family film. With about $375 pledged of his $800,000 budget, he already is planning his next step to secure funding for the film.
“If it doesn’t work with Kickstarter – and it doesn’t look too good – I’ll go another way,” Marquez said, adding the results haven’t discouraged him from pursuing the project. His new funding tactic: courting potential individual investors one-on-one.
“Anything you try is never a loss, because it’s all experience,” he added.
Other current local ventures, including recipe app Ingredients Now, open source literature project Infinity Press, youth summer art camp Outside The Lines and Monica’s Mexican Restaurant, have yet to raise any money on Kickstarter.
In a campaign on rival crowdfunding site IndieGoGo.com that ended June 16, Ozark-based iPhone case and accessory company Bodacious Cases LLC raised $600 of a $30,000 goal. Bodacious Cases also attempted a kickstarter campaign in2012, raising $1,617 of its $20,000 goal. Calls to Bodacious Cases were not returned by press time.
‘For bad or good’Ken Coleman had his doubts about the effectiveness of implementing a $50,000 Kickstarter campaign for his business. Coleman recently vacated his position as business development and marketing director for Killian Construction Co. to grow Tubular Signs LLC, which creates and sells collapsible yard signs.
“I have three of six kids with marketing backgrounds, and all three said it wouldn’t do well,” Coleman said, adding he and business partner Russell Smith canceled the campaign in May after raising only $478. “We knew within the first 10 days, it was not going to make it. There was no way.”
In 2013, Ryan Baker’s Purdy-based video game company in 2013 looked as though it would come up short of its $75,000 Kickstarter goal. But Pixelscopic LLC closed the fundraising gap within two weeks of deadline and brought in double the funding to further develop their game. It took an extra layer of creativity. With their backs against the wall, the developers decided to release a playable demo of the game. Baker said the gamble paid off after a review on a popular YouTube account and a brief mention on a video game website boosted Pixelscopic to just over $150,000 before closing day.
“That tells me backers for entertainment projects tend to be more altruistic, but also more interested in the creative aspect,” Baker said. “It’s about the experience of being along for the ride of that vision, for bad or good.”
Tubular Signs’ intention differed from the traditional crowdfunding goals. Rather than asking donors to back the business, Coleman said the company used the platform to take preorders for signs. He estimated sales from the fully funded campaign would have translated to over $10,000 in revenue.
“The reason we went that route is because we’re a product-driven company,” Coleman said, citing the gap between the median age of the real estate agent target demographic and that of the typical crowdfunding backer. “We knew 28-year-olds were not going to fund a product they didn’t care about.”
According to the National Association of Realtors, the average age of a Realtor is 56. Data from the American Dream Composite Index conducted in 2012 by Xavier University show the average age of a crowdfunding backer is between 24 and 35, with those age 45 and older pegged as being less likely to pledge.
For Baker, the recipe for successful crowdfunding has more to do with the novelty of a project than its accessibility by a target demographic.
“That’s why entertainment projects have the potential to make a lot of money, because people get excited about the prospect of this new thing that’s very different from what is out there already,” he said.
While the funding arrived quickly, the developers are 20 months past their original timeline, and the game has yet to be fully released.
Paying to playOne disadvantage for hopefuls using Kickstarter’s model is that if a project doesn’t meet its funding goal, the pledges are forfeit back to donors. IndieGoGo.com has a slightly different plan; projects failing to meet a goal can still take what was pledged and pay a fee equal to 9 percent of the total and charges 4 percent for projects that meet or exceed target amounts. If a Kickstarter campaign does realize its full amount, the platform takes 5 percent from the total funds collected, plus processing fees.
“The downside is if you don’t make it, it creates a negative vibe for your product,” Coleman said. “It becomes a historical track record that your product can’t make it.”
Still, Coleman said he got some of what he wanted out of the crowdfunding experiment. He said increased Web traffic to the company website and an interview scheduled for July with the National Association of Realtors wouldn’t have happened without the Kickstarter campaign.
“It’s sort of like going on ‘Shark Tank’ and not actually doing a deal,” Coleman said. “We used Kickstarter as a platform to expose the product to a lot of the country without having to (pay) anything.”
Pixelscopic’s campaign led to sister company Mighty Sharp LLC designing and launching a Kickstarter page for Kansas City-based fashion startup Covey. Baker thinks the clothing company’s advantage is that an easily understood product and premise mean backers know what to expect, but added that a saturated market has made it difficult for other video game upstarts to distinguish themselves.
“We kind of rode the crest of the Kickstarter wave, and I think at least in the video game scene people have become fairly disillusioned,” Baker said. “It’s much more competitive and people are more cautious now. I think if we launched our same campaign again today it would be difficult to reach the amount that we did.”[[In-content Ad]]
