As I was reading the Smithsonian.com’s Innovations blog about smart watches, I stopped cold when I came to this passage about the the newest, new, new thing, the Pebble.
“Even more impressive, though, is how Allerta, the company behind it, has used “crowd-funding” to go viral and, in the process, raise way, way more cash than it thought it could,” writes Columnist Randy Rieland.
The financing for Pebble was ramped up via Kickstarter, a website, used to get people to invest relatively tiny amounts in small tech projects or creative endeavors like music or video games. The goal was to raise $100,000.
On April 12th, the project’s Kickstarter page announced that in 28 hours, $1 million was kicked in via the fundraising platform. The minimum pledge was $1. As of April 30th, it has raised $7.1 million-plus from 48,100 backers with 18 days to go. “That’s serious money,” writes Rieland.
You can say that again.
A product like Pebble would typically be financed via the venture capitalist route. Founder Eric Migicovsky, however, “knew that investors can be skittish about throwing money into hardware, and would likely ask a lot of questions about models and market size,” writes Rieland. “So he took his smart watch to the people.” He made a video that shows what the Pebble was all about and offered to let folks pre-order models at a discounted price.
Maybe Kickstarter is all old news to you. It has been around since 2008. But seriously, it’s news to me.
I first heard about it just the other week when my friend’s sons, The Shields Brothers, launched a Kickstarter.com campaign to help finance the recording of a new rock and roll album. I donated $30 to help the cause. I love this duo’s talent, energy and confidence.
They were featured on this season’s The Voice reality competition on NBC and were picked for their short-lived adventure by Cee Lo Green for his team. I instantly wanted to help them reach their $4,000 goal. It was a small donation, I know, but it felt good to me.
Crowd-funding. What a dream, busking without a guitar case propped open at your feet, as you belt out a tune on a crowded street. Take that Glen Hansard and Once lovers.
Even better, it’s a hands-free way to tap your friends and family that doesn’t involve the awkward task of collecting the cash directly, or having to make a face-to-face pitch and risk rejection. Hitting people up for money is delicate even when you are passionate about your project or new business venture.
Helping the Shields Brothers, who are from tiny Rixeyville, VA, was easy. I agreed to donate, and the site clicked me over to Amazon to complete my transaction via credit card. You can donate anywhere from $1 to the skies the limit.
It’s not an investment. Although, they did say I could have my name listed as an associate producer, and they would send me a personal thank-you video. Plus, I will get a free download of the first single released.
Ultimately, they raised $8,255, and 215 people ponied up. Their goal was $4,000.
It’s a great concept if taken in the right spirit. Here’s how it works.
- It’s free to list your project.
- You simply post a description of what your project is with a video, a target dollar amount, and a deadline.
- You send out a mass e-mail to friends, family and colleagues and ask them to share your project and funding invitation with their friends and so on.
When you reach your goal, Kickstarter takes 5 percent, and you pay roughly 3 to 5 percent to Amazon.com’s credit card service. If you don’t raise the money by the deadline, the pledges are canceled. Your contributors aren’t charged for their donation, and Kickstarter takes nothing.
If you’re just getting your project or home business started, you might want to have a look at the D-I-Y e-grassroots financing method. The categories include music, film, art, design, food, publishing and technology. The projects seeking support might be recording a CD like the Shields Brothers, or developing a tech doodad. It might not be your cup of tea, but it could provide seed money to get an idea launched.
These “crowd-funding” sites have been cropping up like wildflowers in recent months. Some other sites to help you raise seed money online include Rock The Post (rockthepost.com), a free network that helps entrepreneurs meet professionals and investors who can help via funds, time or materials; Indiegogo.com and AngelList (angel.co) can link you up with angel investors. You post your company’s information, and the angels call you. I have not vetted these outfits, but they’re ones that popped up in my reporting, so they might be a good place to start your research.
Why should you care? As I wrote in this Second Verse post, recent research released by Civic Ventures shows that one in four Americans ages 44-70 are interested in starting businesses or nonprofit ventures in the next five to 10 years.
As you know, one, if not the biggest challenge for a start-up is funding. Of course, there are the more traditional methods-personal savings, low interest from relatives or friends, angel or venture capital investors, or a bank or credit union loan. To find a bank that offers SBA-guaranteed loans, check the “Local Resources” section of the agency’s website (www.sba.gov).
Raising funds takes chutzpah and hard work, but it can be creative. Check out The Shields Brothers singing their cover of The Bee Gees “How Deep is Your Love.”
by Kerry Hannon
More by this author on Forbes.com.