Crowd Funding – The Basics – Part 1

For a few months now I’ve been saving links (in the not so old days it would have been news clipping slowly yellowing in a folder) about crowd funding and on Kickstarter in particular. I have enough material (and opinions) at this point to start a series. And you guessed right: here’s a (mini) series on the general topic of crowd funding. I’ve known about Kickstarter and its counterpart IndieGoGo since 2009 and I have used IndieGoGo for a distribution outreach for my film Abraham’s Children with mixed results. 
Both online platforms have gotten press of late with new investors for IndieGoGo and the announcement that Kickstarter was chosen by the World Economic Forum as one of the technology pioneers of 2012. For the WEF report click here.
To set crowd funding into context, Bill Clark (@austinbillc) wrote a recap of the history of crowd funding on Mashable‘s, September 15th, 2011 issue. I highly recommend reading this short article.
Yesterday Kickstarter announced on their blog that they have as of last week 1 million backers and Mashable announced today that Kickstarter surpassed $100 million in pledges. To put this into context the fiscal year 2011 budget for the National Endowment of the Arts is $154 million. At the current pace of more than $2 million in pledges each week, Kickstarter backers are pledging more than $100 million a year!
Let me give an example for those who are not following and are about to bounce off: on either website you can choose to support any project you like. Most likely you’re there because someone sent you a heart throbbing email asking for your support. Let’s say you choose to support an independent documentary with $25 that gives you in return a DVD of the film once it’s finished. The film (project) is looking to raise $10,000 to pay for music licensing rights and has a fundraising deadline of January 24th, 2012. Your credit card only gets charged after the deadline passes and if the project has raised at least its proclaimed goal of $10K by the deadline. Otherwise your pledge goes uncollected (and the project does not get made and you do not get the DVD). Each project has different levels of support. It can be $1 for your name to be listed as a supporter on the project’s website, to $5,000 for a cameo in the film or a singing part on a music album. The sky is the limit. 
The statistics that Kickstarter put out yesterday are very interesting: most notably that the biggest contributions happen in the $11 -$25 range (nearly half of the 100 million raised to date – 30 months since inception). The number that really interested me however is how many projects were successful. Note: on Kickstarter (unlike IndieGoGo of the old days) your fundraising has a time limit set to it, which seemed counterintuitive to me at first and was the reason why I chose IndieGoGo over Kickstarter in 2009 for Abrahams’ Children – but, the urgency that a time limit creates is of great value when raising funds (this for all the procrastinators out there). Of $100 million pledged, about $84 million where successful and about $12 million failed and $5 million where given “live” meaning off line. Unfortunately there are no stats on how many actual projects that translates into.
This fund raising model does two things, it a creates the above mentioned urgency and secondly protects a supporter from giving money to a project that will never happen for lack of having reached a fundraising goal. The challenge for the filmmaker in our example is to make sure that the limit set for the raising of funds is realistic but not so low that several campaigns are needed to deliver on the goods promised to backers. And this is the biggest challenge with films; documentary or fiction: our budgets are not in the single digit “K” range, but mostly in the 100K plus range. How much do we rely or have to rely on crowd funding?
Do we fundraise in many different steps and run the risk of stressing our welcome with friends, fans and followers, or do we run the risk of setting our goal too high and not reaching it by the deadline? Not to speak of the fact, that these campaigns are a huge amount of work. Uploading your project on either Kickstarter or IndieGoGo does not mean anybody is going to support it. There are entire social media outreach strategies behind these campaigns in conjunction with old fashioned ways of communicating, like email, and – yikes – phone calling. You need to produce at least one pledge video and a plethora of ancillary graphic, writing and other creative materials – which are all fun to create but can cost money and definitely will add the ‘time sink’ called independent movie making.
What is your experience? Care to share?
Next: reaching out to those backers of yours.