‘Tis the holiday season, and this year the Internet offers a fascinating new aspect to holiday giving, through direct person-to-person support for things that you are passionate about — philanthropy for people in need through websites like GoFundMe and DonorsChoose, early funding for artists and entrepreneurs creating new works and products through sites like Kickstarter, Indiegogo, and RocketHub, or even directly sponsoring artists through sites like Patreon.
This “crowdfunding” model brings together creators on a mission with groups of individual contributors who provide small donations that add up to a new flowering of charity, artistic expression, and product invention. And this is serious business — there are multiple such sites that have raised billions of dollars from tens of millions of donors.
So let’s explore the possibilities for your holiday giving and your holiday shopping, and also see examples of local individuals and companies that have taken advantage of this new world.
Charity and Fundraising. Fundraising websites like GoFundMe and DonorsChoose have opened new avenues for charitable giving and fundraising by raising billions of dollars for personal and organizational needs, including medical expenses, emergencies, funerals and memorials, volunteer programs, classroom and education costs, youth sports, and even animals and pets.
I saw this personally when there was a house fire in my neighborhood. The volunteer fire departments responded magnificently, the neighbors banded together to provide support, and yet people wanted to do more, to raise money and show their support. But how can you organize impromptu fundraising? Do you go around door-to-door with a coffee can? Stand out on the street with a sign? Put up a flyer and ask people to mail in checks? Organize a car wash? Plan a big fund-raiser event for a month later?
Raising money is messy, even for a good cause. The logistics are daunting, hitting up people for money is unpleasant for all concerned, and people want to respond right way.
In my case, the neighbors were talking in the street and decided to use GoFundMe. I was delegated the task and set up an account. This included providing an E-mail address and a link to my Facebook page, which sort of proved that I was a real person. Then I created the fundraising page, but in a way that protected the privacy of the neighbors, since this was not the time to have a deep discussion about releasing personal information on the Internet.
The resulting page was very spare, with several sentences about neighbors collecting money after the house fire, with the name of the town (but not the street), and only one first name. I also added a generic town photo (which was later updated to a photo of the fire damage). The only real identification on the page was my name and the link to Facebook.
At this point in the process, you have one page on the Internet, with no way for others to search for it. (GoFundMe does a manual review to sanity check that your Facebook account looks legitimate, and after a day or two they do open the page for searching.) So once the page was set up, I sent out the link by E-mail to family and friends and neighbors, and they forwarded it on and posted it online.
And people responded. On the day of the fire, starting while emergency vehicles were still on the street, 35 people donated $2,300. After the second day, 70 people had donated $4,200, and by the end of the sixth day more than 90 people had donated $5,400, exceeding the $5,000 goal.
Imagine the devastation of having your house destroyed by fire — the emotional wear, dealing with the insurance company, worrying about spending extra money. But now you know that a hundred neighbors have your back, and there’s a reserve waiting for you. And when you visit the fundraising page you see that a third of the donors also have left you public messages of compassion and support.
How else could this amazing response have happened? It’s only the immediacy of the Internet, the electronic connections, and the simplicity of online payments that make this kind of quick response possible.
Yet from the point of view of donors, this process of handing over money to a Web page does look a little crazy. First, you receive an E-mail from a friend of a friend that says “click here” — which you know is not a great idea in general on the Internet. Then you go to a page on GoFundMe.com, which you may or may not know about, and have to trust them to properly charge your credit card. And by the way, you’re actually donating your money to the owner of the page — me! — whom you may or may not know, and so you will need to have faith that I will disburse the money as promised. Finally, you also need to hope that the money will be used as intended, and the recipient will not blow it all on parties and drugs.
So how can this work? There’s no charitable organization collecting money and doing screening. (This also means your donation is not tax deductible, since you’re just giving money to me — thanks!) Instead, this process is based on social trust — some personal references flowing through friends of friends, but more importantly based on my good name. If I do wrong about this, it’s a very public wrong, and my name will be mud — in my town, across the Internet on Facebook, affecting both my personal and family life. That’s a lot of motivation to do this right, a lot more powerful than signing some document of legalese.
So crowdfunding really works. There always will be scammers, but GoFundMe alone has raised more than $1 billion in the past year. Many are small requests for specific needs, like some 70,000 campaigns for service dogs, especially for veterans with PTSD. Other campaigns become much more public and larger scale, such as for people injured in school shootings or police killed on duty, which can raise hundreds of thousands of dollars.
Organizational Fundraising. Beyond personal needs, organizations also can take advantage of crowdfunding to off-load the messy logistics of a fundraising campaign. For example, the Birdhouse Center for the Arts in Lambertville was founded in 2012 by Bronwyn Bird and Justin Nawn, both graduates of the Berklee College of Music in Boston. They wanted to offer programs including music therapy, education, and performance, and had bought and renovated an old canal barn building on North Main Street.
However, they needed around $15,000 to complete the work and get the facility opened. Instead of trying to organize a fundraising committee, they ran a campaign on Kickstarter in May, 2013, and successfully raised almost $16,000. Their building is now complete, including running water and bathrooms and instruments.
DonorsChoose is another crowdfunding site, but focused on the needs of public school classrooms. Teachers submit proposals, on average for under $700 — and donors respond, with $376 million raised from 1.9 million supporters for some 650,000 projects.
Donors also get to see the results, with photos of the project and a final report on how the money was spent — and even thank-you notes from the students. DonorsChoose reports that 68 percent of public schools in America have at least one teacher who has posted a project on DonorsChoose.org, and that 81 percent of funded projects are from high poverty schools.
One issue with crowdfunded fundraising is the cost. GoFundMe has a flat platform fee of 5 percent, plus a bank processing fee of around 3 percent, which is deducted from the amount paid to the recipient. Generosity, a new spin-off of charitable projects from Indiegogo, waives the platform fee, but still has a payment processor fee of 3 percent plus 30 cents per donation. In comparison, donations to DonorsChoose are tax-deductible, although they suggest that donors pay an additional 15 percent to support the organization.
Musicians Creating Albums. Most charitable giving is focused on the needs of the recipients, so what the donors receive is warm feelings of goodwill. With artists and musicians, however, there also is the possibility of some tangible result from the passion to create. For example, recording an album allows musicians to capture and share their music, have a product to sell, and have a tangible result to give back to donors.
For example, Jack Furlong is a town TK-based saxophonist — performer, composer, and arranger — who plays gigs with his quartet and orchestra in central New Jersey and eastern Pennsylvania. He has used RocketHub several times to fund new albums, first raising $3,000 from 68 donors in 2011 to record “And That Happened,” featuring contemporary, cool jazz with the Jack Furlong Quartet. Then in 2013 he raised $4,000 from 82 donors to produce “Charity,” with popular Christian hymns in a jazz setting, performed with Sean Gough on piano.
“This was the only way to fund my projects,” says Furlong, “other than finding a sponsor to do it for me. But that would require me to give up some of the rights of the music and album, even if I just had to plaster a corporate logo on the cover. Further, crowdfunding allowed me to cut out the middle man in that process: the people who funded the album were those who would buy the album anyway.”
Furlong was pleased with the support from RocketHub, and would endorse them “wholeheartedly.” The process of running the campaign, however, can be stressful. In his experience, people either donate right away, or wait until the end to see if others have donated, which means there’s a “dead zone” in the middle with little progress. So you need to be a salesman and ask for money, which means “I’m sending E-mails each day to remind people to donate, and I feel like the biggest jerk in the world.” Even so, he would recommend this approach for people who are starting out.
This approach extends fundraising with reward tiers based on the donated amount, for example $10 for a digital download of the album, $20 for a physical CD, or more for personalized thanks or even a house concert. The result for the artist is a “real” album, which is available in digital or CD format from Amazon and other retailers. Furlong also is donating all the proceeds of the “Charity” album to three different charities.
Furlong also uses GoFundMe and Causes to run ongoing campaigns for his sports-related charitable organization, OSIP. For these campaigns there is no time limit: “We literally just set it up, promote it when and where we can with no stress, and collect money if it comes in. If it does, great. If it doesn’t, that’s okay too.”
Another musician who has crowdfunded a new album is Clipper Erickson, an internationally known pianist who teaches at Westminster Conservatory and Temple University. Erickson wanted to record the complete collection of piano works by R. Nathaniel Dett (1882-1943), a black composer, pianist, teacher, poet, and writer, whom Erickson describes as “the first American composer to fuse African American folk idioms with the European art music tradition in a sophisticated way.”
Erickson set up a two-month Kickstarter campaign through late June this year, and raised his target of $6,000 to fund the CD from 63 backers.
Erickson also would recommend crowdfunding and specifically Kickstarter. “The recording company that is releasing the CD recommended crowdfunding,” he says, “and suggested Indiegogo or Kickstarter. They gave me examples of successful previous campaigns on Kickstarter and I knew a couple of other musicians who had used it successfully.”
“I think it’s a wonderful opportunity to raise funds in this day of ever shrinking grant opportunities,” says Erickson. “It ended up being less intimidating and time consuming than putting together grant applications for faceless committees from whom you have little chance of getting anything. If you know there are people who are interested in what you do, it’s the way to go.”
And, he notes, it’s not just about raising funds — “For me it was basically advance sales, to help with the production costs.”
Patron of the Arts But what about other kinds of artists? While musicians and filmmakers and designers can produce a tangible product that can be shared with donors, what about painters or dancers? This is the situation addressed by Patreon, a site that solicits recurring funding for artists. Fans sign up for a monthly subscription to support artists doing work that they love.
For example, Shayla Maddox is a California artist who makes “Light Reactive Paintings” — using phosphorescent pigments combined with materials including acrylic, sand, crushed glass, garnet, quartz, sea shells, candle wax, cinnamon, and salt. The paintings respond to the lighting, changing appearance throughout the day, season, and year. They also are light reactive in UV and glow in the dark.
However, these paintings are hard work. Each piece takes many months to complete. So Maddox has set up a site on Patreon for her fans, and currently receives over $1,300 a month from more than 95 patrons.
Again, the artist sets reward levels for donations — $5 a month for access to monthly online conversations, $15 for one original watercolor, and $25 for monthly “art care-packages,” which may be working sketches, postcards, or a new painting cut into pieces for donors. Maddox also offers a $50 level for additional monthly “stuff” — “made with wonder and magic.” The top $100 tier is simply the statement, “I can’t thank you enough for your belief in me, but I vow that I will repay your encouragement with hard work and a fighting spirit.” That’s the true meaning of patronage!
Creative Projects. Fundraising is one element of crowdfunding, from charitable donations to supporting artists, where the focus is more on helping the people than on specific results. The other major element of crowdfunding is supporting entrepreneurs and artists who are driven to create new works and new products. This is rewards-based crowdfunding, where the focus is more on the cool new thing that is being produced — the reward. This can be a relatively small project like a book or a design, or it can become a major new product.
For example, consider the Cat Ear Headphones — yes, really. These are the creation of Victoria Hu and Wenqing Yan, recent graduates of the University of California at Berkeley who are also anime fans. They thought it would be cool to have cat-ear headphones with an anime look. Ten years ago, that would have been the end of it, because the logistics of raising money to develop a product would have been too daunting — whether mortgaging mom’s house, trying to explain cat ears to a banker for a loan, or giving away half of your fledgling company to venture investors.
But with crowdfunding, these two knew that there was a path to market if they could come up with a great product design, so it was worth their time and effort to do the work. They did the product design (aided by the Berkeley Innovation Lab), worked out the manufacturing, produced prototypes, and made a great video promoting their idea under their new business, AxentWear. Then they went to Indiegogo to try to raise the $250,000 they needed to get to market.
And it turned out people really liked the idea — AxentWear raised $720,000 in the first five days, and the funding period ended in November, 2014, with a final total of $3.4 million raised from 21,000 backers.
And note that these are not just 21,000 pre-orders. These are pre-paid orders — the pledges are collected at the end of the funding period and passed on to the project creators. As AxentWear moved to market, you would suspect that their discussions with manufacturing partners get a lot more serious when they could demonstrate this kind of validation.
But it gets better. Indiegogo then approached Brookstone, which signed up to bring the Cat Ear Headphones — and two other projects — to market for this holiday season. For Brookstone, this was already a pre-qualified product demonstrated by the interest on Indiegogo, and they saw continued interest when they offered it for pre-order on the Brookstone site and had to shut down again in less than a day from the onslaught of orders.
In this way, these crowdfunding sites have enabled interesting, passionate people to create some interesting and fun products, aided by often equally passionate supporters.
Kickstarter is the leader in this category of donation-based funding. It is the “world’s largest funding platform for creative projects” — with almost $2 billion pledged, by more than 9 million people, funding more than 90,000 successful projects.
Kickstarter’s biggest hit was the Pebble smartwatch, with $10 million raised from 69,000 backers in May, 2012, for the first product, and another $20 million raised from 78,000 backers in March, 2015, for the second generation. Pebble is focusing on making less expensive, less fancy smartwatches that people can use to experiment with the idea and see if this new kind of accessory is really useful.
Indiegogo has a more international focus, with 30 percent of campaigns starting outside of the U.S., across some 190 countries. It has 15 million visitors a month monitoring more than 7,000 campaigns active at a time.
Its biggest hits include the Flow Hive better beehive design ($12.4 million raised from 37,000 backers in 2015) and the Super Troopers 2 indie movie sequel ($4.7 million raised from 53,000 backers, also in 2015).
RocketHub also supports crowdfunding for a wide variety of creative projects. It has raised more than $400,000 and operates in around the world. It has developed relationships with television networks including Ovation TV — artists may be featured on TV and win $5,000 toward their project.
One difference between these sites is the fee structure. Kickstarter and Indiegogo have a 5 percent platform fee plus a payment processor fee of 3 to 5 percent. RocketHub has a 4 percent fee if you reach the funding goal, or 8 percent if you do not, plus a 4 percent payment processor fee.
Another key difference is how the pledges are collected. Kickstarter has “all-or-nothing” funding. Your pledges are paid once the campaign period is over — but only if the funding surpasses the goal. You are not charged if the project does not reach its goal. Kickstarter says this makes backers more likely to pledge (and not wait until the end), since they can be sure that their money will be committed only when the creator has the funding that they said was needed to do the job.
But, especially with artists, it is still possible to do some useful work even if you do not have full funding. For example, you could record fewer tracks on your CD, or make a shorter film. As a result, RocketHub uses “keep what you raise” funding, and Indiegogo offers the option for creators to choose “fixed” (all or nothing) or “flexible” (keep the pledges) funding.
Holiday Shopping. The result of this crowdfunding activity has been a wonderful flowering of artistic and entrepreneurial activity — Kickstarter alone has hosted more than 267,000 projects since 2009, with 6,200 currently active, representing $40 million in pledges.
These sites are a wonderful resource for your holiday giving — they are full of fun, odd, and interesting new product ideas, so you can not only find great gifts, you also can have the satisfaction of supporting their development. So whatever your passions — maybe great coffee, fashionable watches, new theater, or electric bicycles — you can find creators who are working on these kinds of ideas.
You also can find people who have had brainstorms for relatively simple ideas, and simply want to actually create a one-off book or game or photo collection or other playful product.
For example, the NoPhone is exactly that, a plain black plastic rectangle about the size of a smartphone that was created for people who are “addicted to rectangular devices.” It has a thin, light, and “completely wireless” design, and provides a “technology-free alternative to constant hand-to-phone contact,” so you can stay connected with the real world. It even comes with a “selfie upgrade” — a reflective mirror sticker.
This is the brainstorm of a group of friends from the United States and the Netherlands, reacting to the omnipresent glowing screens seen in any group of people. Their idea was that the NoPhone could provide the comforting feel of a phone shape in your hand, while encouraging “a life of direct eye contact and improved conversational skills.” And crowdfunding provided a path to make this idea a reality.
The first NoPhone campaign, for a rectangle with phone-like markings, was introduced on Kickstarter in September, 2014, for $12, in a campaign with a goal of $30,000. Even with good publicity, the campaign failed to reach its goal, even after raising $10,000 in pledges from 550 backers in 30 days. The NoPhone team then immediately re-introduced a new 15-day campaign with a lower goal of $5,000, and successfully raised more than $18,000 from 915 backers. They now sell the NoPhone from their online shop, with the selfie upgrade, and in larger bundles for families and business.
In September of this year NoPhone started a new campaign on Kickstarter for a new product, the NoPhone Zero — “the least advanced NoPhone ever,” with exactly zero features (yes, it’s just a plain black slab), offered for $5. With a minimal campaign goal of $500, this was basically a publicity campaign for the new product, and not about raising needed funding. The result was a success, with 130 backers pledging $1,200 — or pre-sales of some 240 units of a plain plastic rectangle. Both the creators and the supporters are clearly having fun with this.
Another area where individuals are driven to create a product is in literature, and especially children’s books. “Programming Languages ABC++” is, yes, a toddler’s ABC book with fun bug cartoons — that also features a different programming language for each letter, complete with sample code . (“C++” is one of the languages.) The book obviously is not intended to teach toddlers to write code, but it is a fun way for software developers to share a little of what they do with kids.
This is a fun outside-the-box project from Alex Papadimoulis, whose day job is running Inedo, a small software development company, and also hosts a popular software blog.
His first Kickstarter project was for “Release!”, a light card game with a software development theme. It was supposed to be a quick one-off project using crowdfunding to pay for a fun idea, but became quite popular. The Kickstarter project in June 2014 raised more than $50,000 from some 1,000 backers, blowing past the $2,500 goal and allowing Inedo to add additional features. The game is now available for $9.95 on Amazon, although Inedo also has made all the cards available to print for free.
The Kickstarter campaign for “ABC++” was held in June, and raised $21,000 from 890 backers. By exceeding the original $5,000 goal in two days, Inedo was able to add stretch goals including bug stickers, posters, and T-shirts. Since they were fairly confident of success, they were able to do the entire book design up front to illustrate the campaign, and then use Kickstarter as a promotional and order-taking tool. Again, Inedo also offers free versions of all the letter pages on its website.
Another recent book project on Kickstarter is “Australia to Zimbabwe,” a children’s A-Z book which is a “whirlwind romp around the globe.” This is the work of Ruth Fitts, who has a clear passion for geography and international travel and education. The book is an impressive 332 pages, covering 26 countries, each with 10 or more profusely illustrated pages, including rhyming introductions to the culture, scads of geographic and cultural notes, and fun activities including crafts, recipes, and games. There’s also an associated website with additional activity links, music, and movies.
“Australia to Zimbabwe” is a stunning labor of love, funded on Kickstarter by some 130 backers who pledged almost $8,000. The campaign just ended on November 17, but because it surpassed the $4,000 goal after only a week, Fitts was able to begin production early, so the book is already available.
Investment Crowdfunding. Crowdfunding also is coming to investing. For example, Lending Club not only offers personal and small business loans for borrowers, but it also packages bundles of loans for crowdfunding investors, in units of $25.
And CrowdFunder has brought crowdfunding to traditional equity investing. Founded in 2011, it provides a platform for early stage companies seeking seed funding. The deal can be private (shared only among a personal network), or public for anyone to review the investment proposal. CrowdFunder recommends a minimum investment of $5,000 to $25,000. For deals under $500,000, it charges a fee of $299 a month to share the proposed deal with its investor community, and $999 a month plus 7.9 percent of the funds for larger deals.
The result is a new path for growing a company. For example, music legend Neil Young’s PonoMusic startup developed a high-res music player using a $6.2 million project on Kickstarter in 2014, and then used CrowdFunder to raise $4 million in equity funding later that year.
The big new change for equity crowdfunding is that congress has completed implementation of the JOBS Act, which now permits anyone to invest in equity deals, not just “accredited investors.” Now you too can be part of the next great startup.
Personal Crowdfunding. Crowdfunding is great news for people with needs or passions or burning desires to create and invent. But it’s also a wonderful way to take action on your own passions — by providing direct support to people and organizations in need, or directly supporting individual artists, or acting as an angel investor to help entrepreneurs create new products. Giving has never been more interesting.
Douglas Dixon is an independent technology consultant. Visit www.manifest-tech.com