CROWDFUNDINGIEI TOOLBOX #1

Robert McNameeAssistant Professor & Academic Director

Crowdfunding? Follows bottom-up, crowd-driven, trends

Wisdom of Crowds – 2004 book (large crowd is smarter than a few smart people)

Prediction Markets – people invest / play game of predicting outcomes (can be very accurate)

Crowdsourcing – outsourcing task to distributed group of people / public

Open Innovation Challenges – ask world for ideas better ideas than few experts

CrowdfundingCollective effort of individuals who pool resources to

support efforts initiated by others

Equity Crowdfunding Funding of a company by selling small amounts of equity

to many investors.

US JOBS ActWider pool of small investors w/ less restrictionsSigned by President Obama on April 5, 2012SEC has 270 days to establish rules & guidelines

Hotly Contested / Rapidly Changing LandscapeSignificant risk of abuse wasted money / investors loss /

fraud / low quality companies (e.g., 2000 IPO craze)Distributes power / opportunity away from large investors

Allows “crowd” (stakeholders) to pick companies

Non-equity Crowdfunding Large group of people provide funding to help launch

companies or facilitate activities – no equity changes hands (but funders may receive something of value)

History1997 - British rock group Marillion (fans supported US Tour

w/ $60k donations raised via fan-based Internet campaign)2001 - ArtistShare (first crowdfunding website for music)

Sellaband (2006) RocketHub (2009) Sponsume (2010)

Indiegogo (2008) InvestedIn (2010) PleaseFund.Us (2011)

Pledge Music (2009) GoFundMe (2010) Peerbackers (2008)

Kickstarter (2009) Rock The Post (2011) Fundable (2012)

Kickstarter “Kickstarter is the world's largest funding platform for creative

projects. Every week, tens of thousands of amazing people pledge millions of dollars to projects from the worlds of music, film, art, technology, design, food, publishing and other creative fields.”

Purpose & Innovation are Equally Important

Some significant risks Failed projects = Funders lose money / Platform loses legitimacy Too much success + Poor cost estimates = Bankruptcy

Finding Your Purpose… This is about providing value to people and society

“Getting to Why” – Simon Sinek (Video) “Art of the Start” – Guy Kawasaki (Video)

Increase Quality of Life Innovative products can do this… Capture Clip / WindowsFarms

Right a Wrong Social impact can certainly do this… FoodPrints / Proof Sustainable Sunglasses

Prevent the End of Something Good Anything that brings back something retro that people miss

is pretty popular these days… Keep The Crescent / Preserve Chicago's Music

Broadening the idea of Purpose…What Values / Purpose comes through in these commercials / KS

projects?

Samuel Adams: http://www.youtube.com/watch?v=duisQgSfDHw Nike: http://www.youtube.com/watch?v=jlXRengzZoc Google: http://www.youtube.com/watch?v=sVf3UaZePC8 Foursquare: http://www.youtube.com/watch?v=W66Kmkh9sDQ Cisco (Just for fun): http://www.youtube.com/watch?v=cdYqmfv3VXE) Sustainable Longboards: http://www.firebirdlongboards.com/ BMW (Theo Jansen): http://www.youtube.com/watch?v=a7Ny5BYc-Fs E-Paper Watch:

http://www.kickstarter.com/projects/597507018/pebble-e-paper-watch-for-iphone-and-android?ref=discover_pop

DC Teaching Kitchen: http://www.kickstarter.com/projects/547484901/build-the-foodprints-kitchen-at-watkins-elementary-0?ref=most-funded

Total Successful Projects and Funding (US $ Millions) by Category

http://gigaom.com/2012/06/28/analyzing-kickstarter-what-succeeds-by-how-much-and-how-often/

Projects Counts & Success Rate by Category

Percentage Distribution of Successful Projects by Funding Size

http://gigaom.com/2012/06/28/analyzing-kickstarter-what-succeeds-by-how-much-and-how-often/

Unsuccessful Projects by Funding Threshold (“30% Rule”)

http://gigaom.com/2012/06/28/analyzing-kickstarter-what-succeeds-by-how-much-and-how-often/

Coming up with a Kickstarter project What are you passionate about / want to fix?

Adding purpose to a business can seem insincere Creating a business around a purpose is likely more genuine

Used forced association… Bridge / Connect: purpose <> business idea / business model

Don’t forget Kickstarter [implicit] constraints… How much money would you need to launch? (don’t forget more

projects fail when they ask for $20k+ / very few project in $100k+) What can you give a person for $20-$100? (if main value /

deliverable is offered at $1000 it shrinks your donor pool) What will motivate people to want to give you $$$? (same question

applies for any venture – what motivates people to be associated with you, work for you, buy from you, write about you)

Kickstarter Tips Leverage Your Social Network / PR Channels Update often – projects that get 31+ updates get 4x the

money as less frequently updated projects

Be creative with your reward levels (not just T-shirts)…

For now local is usually not good (e.g., new retail business unlikely to work)

As local communities grow may have hope…

Write a script – remember you are telling a story in 2 minutes Get to the point quick – say it before they click away… People don’t fund projects, they fund people – make your

video personal

Overall instructions / explanation for how it works: http://www.kickstarter.com/start

FAQ- All your questions will be answered: http://www.kickstarter.com/help/faq

Also here: http://www.kickstarter.com/help / http://www.kickstarter.com/blog

Kickstarter Schoolhttp://www.kickstarter.com/help/school/defining_your_project

Practicalities- creating a good video (lighting / audio matter): http://www.kickstarter.com/blog/creators-guide-to-video

Google: how to make a good video ;)http://www.kickstarter.com/help/school/making_your_video

FAQs & Helpful Guidelines