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Crowdfunding 101

People working in the creative industries should be familiar with crowdfunding by now – and if you are not it´s time to step up your game! Crowdfunding is basically when an individual or a team of people put their project on a crowdfunding website to collect funds from regular Joes & Janes within a specific time frame. The amount is up to the funders, as is the amount on the pledge by each individual backer. The funder(s) of the project get the money if the goal is reached although some crowdfunding websites allow the funder to keep the money, regardless of if the goal is reached or not. The funders are expected to give something back to their backers in the form of rewards or recognition once the project/product is finished. The lowest sum of donation might give the backer a thank-you postcard from the funder whereas the highest contribution might be the donator’s name to be listed as executive producer on a film credit list.

There are many benefits to crowdfunding but it has to be said that not all projects are fit for crowdfunding. Also, those who think they can just start a project on a crowdfunding website and wait on their sofa for money to come rolling in – well, they can forget getting some. Some projects never get founded, either because lack of publicity/attention or because of limited interaction between founder and backers. In most cases you need more than just your friends and family to support your project and therefore you need to reach out to strangers for a support.

According to Jeanie Finlay, award-winning British artist and filmmaker, crowdfunding is first and foremost about engaging with the audience, giving as much as receiving. Finlay funded her film Sound it out on Indiegogo, a documentary about the last surviving vinyl record shop in Teesside, North East England. You should expect to use a lot of your time on social media during the pledge as well as afterwards when your goal has been reached to update your backers with information on how the project is getting on etc. In many cases, funders have more than one pledge for their project. F.ex. one could start a crowdfunding pledge for pe-production & filming of a documentary and then another one for post-production. If that´s the case, then engaging with your backers from day one is very important, if you want your backers to continue to support your project in latter stages. Check out previous post about a session at Sheffield Doc/Fest in June; More than just the Money: Unexpected Benefits of Crowd funding.

A Dollar can make a difference

In 2007, less than 100 crowdfunding platforms were available worldwide. In only five years that has changed dramatically and currently there are about 450 crowdfunding platforms in the world according to The Economist. Kickstarter has become one of the leading crowdfunding platforms and has grown stronger and bigger by every year since it´s launching in 2008, with over 27.000 projects launched at it´s site last year. Film (with $32.5m pledged) and music (with $19.8m) were the biggest categories last year. Crowdfunding has proven itself to be a serious business with a lot of people involved, funders & backers exchanging money in order to make things happen.

‘A report by Massolution, a research firm, forecasts that $2.8 billion will be raised worldwide this year, up from $1.5 billion in 2011 and only $530m in 2009’ according to an article in The Economist June 12th this year (more details at the end of this post).

Here are some crowdfunding websites and as one can see, terms & conditions vary.

Kickstarter

  • Creative projects only
  • Project needs reviewing of Kickstarter staff prior to launching to make sure it meets the company´s guidlines
  • A little less than 50% of Kickstarter projects are successfully funded
  • Project must reach its funding goal before time runs out or no money changes hands
  • Funder can raise more money than pledged
  • Average pledge is $71, and the most common pledge is $25
  • Kickstarter collects a 5% fee from the project’s funding total if and only if a project is successfully funded
  • Amazon (the payments processor) also charges credit card processing fees that generally work out to 3-5%
  • To start a project: You have to be an US resident and at least 18 years of age with a social security number (or EIN), an US bank account, US address, US state-issued ID (driver’s license), and major US credit or debit card
  • To fund a project: anyone, anywhere (with a major credit card) can pledge to Kickstarter projects

More info here.

Indigogo

The closest rival to Kickstarter according to the Economist. What mainly sets the two apart is what sort of projects they are open to and the access for funders, Kickstarters’ funders have to be US residents, Indigogo is open to anyone.

  • Open to all kinds of projects including for-profit ventures, creative ideas or personal needs
  • No application process for projects / reviewing of staff
  • Two funding options; Flexible Funding (you keep the money you raise, regardless of whether you meet your goal) – or Fixed Funding (if you don´t reach your goal, no money changes hands).
    • Costs for Flexible Funding: You reach your goal = Indigogo gets 4%
    • You don’t reach your goal: You keep what you earned but  Indigogo gets 9% of the amount pledged.
    • Costs for Fixed Funding: You reach your goal = Indigogo gets 4%
    • You don’t reach your goal: You don´t get anything if you do not reach your goal. No money exchanges hands and Indigogo does not charge anyone.
  • 3% fees for credit card processing + plus a $25 wire fee for non-U.S. campaigns (Currency exchange fees may also apply)
  • Anyone can start a campaign, everywhere in the world and you can collect money from any country in the world as long as you have a valid bank account

More info here and here.

Sponsume

Little more than two years old, Sponsume.com is a UK-based crowdfunding website.

  • Open to all creative and innovative ventures, big or small, in a wide variety of areas
  • Keep it all funding – you keep what you raise, regardless of if you reach your goal or not
  • 4% fee of money raised goes to Sponsume. However, Sponsume charges a 9% fee on campaigns with unmet funding goals
  • Creators can fund their project in Euros, Pounds, US or Australian Dollars
  • Open to funders worldwide, but Sponsume currently offers funding in either Pounds Sterling or Euros
  • It´s up to the funder how long the listing lasts but maximum of 90 days

More info here.

We Fund

We Fund, the first crowdfunding platform in the UK, launched in October 2010. It started as a pledge/reward crowd funding website, but soon they will be offering an equity based crowd funding service along side the former one.

  • Open creative projects in ‘all forms’
  • All projects are reviewed by We Fund prior to launching campaigns
  • Only projects that reach it´s goals gets funds
  • 5% fee to We Fund
  • PayPal charges fixed transaction fee (20 pence in the UK) and  a  variable percentage fee, ranging from 1.4%-3.4%
  • We Fund adds a 50 pence transaction fee to each Backer’s pledge which is passed direct to the Creator at the successful conclusion of the campaign to cover part of, or all of Paypal’s fees
  • More detailed terms and conditions can be found here.

Other noteworthy crowdfunding websites include Emphas.is and ManyMade.org. Emphas.is is for photojournalism projects only and the first crowdfunding platform specifically for photojournalism. ManyMade.org is a crowdfunding platform for Nordic artists and entrepreneurs and/or people doing projects in the Nordic countries. There are 8 categories for projects on ManyMade; visual arts, performing arts, literature, music, architecture, design, film and technology. Funders will need to reach their goal in order to get the funding and ManyMade takes 5% fees of successful funding.

The website will be launched August 10th but it opened for submission of projects today, and here you can find the guidelines for ManyMade projects. Also, check out their Facebook page which is updated frequently.

For more info on crowdfunding, check out the following:

Crowdfunding in action – posted on Docs & Film Festivals July 23rd. 2012.

The new thundering herd – Wanted: small sums of money to finance young companies. Click here to invest – The Economist, June 12th 2012.

 Crowdfunding – Micro no more – The Economist, January 22nd 2012.

Putting your money where your mouse is – The Economist, September 2nd 2010.

Various articles on crowdfunding related to My Reincarnation, a documentary by Jennifer Fox about a Tibetan master in exile and his relationship with his Italian born son. The project broke all records on Kickstarter, raising more than $150.000 or 300% of it´s goal.

7 Things You Need To Know Before Launching Your Crowdfunding Campaign – article on Sponsume.com.

The 7 Deadly Sins of Crowdfunding – article on Sponsume.com.

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