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Kickstart This: How Crowd-Funding Websites Are Helping Creators Bypass Tradition
03/28/12 at 09:42 PM by Thomas Nassiff
Kickstart This: Crowd-Funding Websites Help Creators
Bypass Traditional Forms of Investment

Words by: Thomas Nassiff
Charts and tables by Thomas Nassiff with data taken from Kickstarter.com

Satchel Raye is in a tight spot.

Owner of legendary Gainesville, Fla., eatery Satchel’s Pizza, Raye is usually an easygoing guy. He runs his family-owned business the way he wants, with about 50 employees and an assortment of hearty pizza pies. His menu warns that his calzones may be addicting, and featured in his outdoor seating area is a signature blue van transformed into a table for six. Customers wait hours to sit in that van. He doesn’t take any credit cards, instead providing an in-house ATM for patrons to withdraw cash. The $1 fee from each ATM transaction? Donated to charity.

But on the evening of Feb. 28, Raye was testing his motor. After receiving a distressed call from his general manager, he ran to his kitchen to see it slowly filling with smoke. Long after the quickly evacuated customers had gone home, Raye discovered details of a fire that had spread through the walls of his restaurant.

The ovens were too hot. They gradually dried out the studs in the kitchen’s walls, and the 500-degree inferno finally sparked a fire. Initially, Raye thought he would have to close Satchel’s for 4-6 weeks. After learning more, it turned into a three-month shutdown.

Before considering which new ovens he would buy to replace the current ones, or turning his attention to rebuilding a wall in the kitchen, Raye focused on finding a way to aid his employees in weathering the storm of three months without work. He knew from the overwhelming text messages, emails, phone calls and Facebook posts that the community wanted to help however it could – he just had to find a way to turn Gainesville’s sincere well wishes into tangible relief for his workers.

“I didn’t know what they could do, I was telling everybody to just come back and buy food when we opened back up,” Raye said. “But then my wife had the idea of a Kickstarter-type project so I said, ‘Okay, Wade [McMullen, general manger], go and do the research, see if we can do this.’ And we figured out Kickstarter was for more creative types so we decided on this IndieGoGo page.”

Crowd funding, as it has become popular in today’s economy, is society’s way of taking interest from the public at large and turning that interest into funding for creators. Crowd funding has grown massively as the Internet has provided the tools to connect people. While websites like ArtistShare, Kickstarter, IndieGoGo, and many others offer their own twist on the model of crowd funding, they all provide more or less the same service.

These websites utilize a donation-based approach where one person or group creates a webpage for a project that needs funding. Anyone can use a crowd funding website – independent bands, struggling artists, aspiring technology creators, an entrepreneur looking to start his first company, or a young person looking to document a trip around the world. Those interested pledge a certain amount of money to the project, and usually receive a reward for their donation.

The creator of the project provides the rewards. For giving $1, a donor might receive “a virtual high-five.” Varying prices well into the thousand-dollar range could buy a donator a private living room show by their favorite band or executive producer credit on a completed film.

Three days after the fire, Raye and his employees set up the “Satchel’s Pizza Employee Relief Fund” on IndieGoGo.com. With a goal of raising $20,000 over the course of 14 days to help his employees, Satchel recorded a video explaining the situation, launched his project, and hoped to raise a fraction of that number.

“It was just the fastest thing ever,” Raye said. “Every time I refreshed the page, there was more money going into there and in 24 hours there was $20,000. I’ve never seen anything like it – I couldn’t believe it.”

Satchel's outdoor seating area now has a new sign next to its signature blue van.

After the project’s two weeks runtime, it had raised $37,696, donated in varying amounts by 695 different people, who in return for their donations received rewards. For $8, they got a magnet and a bumper sticker. For $500, three donors get to write their own story on the back of the Satchel’s menu.

“It was completely amazing to us that people wanted to help that much,” Raye said. “I think people like this place a lot more than I realized.”

Crowd-funding websites are bypassing traditional alleyways of investment and allowing innovative, aspiring people the chance to accomplish a project or create a product with funding provided by people who want to see it done. Some projects call for raising hundreds of thousands of dollars to produce a video game, and these projects might be funded by 100,000 people. Others call for raising a couple hundred dollars to finance a citizen journalism endeavor that may only see friends and family donating.

Although only established in 2009, Kickstarter.com has become the most popular crowd funding website on the Internet. Geared toward the funding of creative projects, Kickstarter has helped finance thousands of bands, filmmakers, video game makers, technology creators and many other types of independent people and companies. The growth of the website has been a particularly nice boon to the independent music and filmmaking industries.

The Narrative, an indie-pop, two-piece outfit from New York, turned to Kickstarter to raise funds for a spring tour in 2011. The band, fronted by vocalist/pianist Suzie Zeldin and vocalist/guitarist Jesse Gabriel, has released one EP and one full-length record, and although music writers have critically lauded both releases, The Narrative hasn’t managed to land a spot on a record label.

In early 2011, Texas-based indie band Eisley asked The Narrative to go on tour with them. A spring tour opening up for a well-known band like Eisley was the perfect opportunity for The Narrative to build some buzz of its own, but there was one big roadblock: It wasn’t a paid gig, and there was no record label funding to fall back on.

“[The tour] was an unpaid opening slot. For our band, at the time, it wasn’t actually feasible to front the money we needed,” said Zeldin, a 28-year-old resident of Brooklyn, N.Y. “Since we’re a small band, we weren’t sure our merch sales would cover all of our expenses.”

A screenshot from The Narrative's video that accompanied its Kickstarter.

Zeldin and Gabriel determined they needed about $8,000 to $10,000 to pay for gas, food and the occasional hotel room – to “tour comfortably” in their van. The duo decided to turn to Kickstarter with a goal to raise $5,000 “…just to cover gas. If our fans can pay for gas, we can definitely do the rest,” Zeldin said. In just four days, The Narrative reached its goal.

Matthew Barber donated $100 – that’s more than most – and got an exclusive t-shirt, autographed copies of the band’s music, a handwritten sheet of song lyrics and, most special to Barber, a private, three-song acoustic session with the band via Skype.

“I picked a couple of my favorite songs and let them pick the third,” said Barber, a 26-year-old network and systems manager at a college in upstate New York. “It was like getting an acoustic YouTube performance of whatever songs I wanted. And we chatted and joked a bit too. It was a very unique thing for me – I don't expect to get a chance like that with another band any time soon.”

The Narrative did what many independent bands do on Kickstarter – give away rewards that don’t necessarily cost them a lot of money to produce, but are worth a lot to big-time fans. Meanwhile, Barber’s reward of having a completely unique experience with the band is what drives people to crowd fund.

Even though The Narrative chose to use Kickstarter to fund a tour, many bands and solo artists have funded entire records through crowd-funding models. In these cases, artists will ask for money to fund the entire record-release cycle, from the studio time to the cost of the producer to the money spent on advertising. Artists have even taken to Kickstarter to fund the pressing of an existing album on vinyl.

In some ways, Kickstarter has become, from a band's perspective, a record label of the people. Bands are funding album releases in ways that were once reserved for groups on a label, but instead, the people funding it are those who actually want to buy the album. It's a way for a struggling industry to support itself - a fan who wants to see his favorite band survive to put out another record can help make it happen himself. His incentive? Not only might he get a unique reward, like Barber did, but more importantly: He contributes directly to a band whose music he enjoys, supports their career and gets to hear more music. For all the groups that have been faced with breaking up because there wasn't enough money left in the tank to embark on another tour or fund another album release, crowd-funding might be the way to stop the bleeding.

Donators aren’t just putting money into online tip jars during crowd-funding campaigns. They get something back for their donation – a reward of sorts. Here are a few of the more interesting rewards we found on Kickstarter.

Although it will turn only three years old on April 28, the website has already accomplished a great deal. In 2010, Kickstarter successfully funded 3,910 of the 11,130 projects that launched on its site, a 43 percent success rate.

Keep in mind that only fully funded projects will collect their funds – projects that don’t meet their desired financing goal in the allotted time don’t get any of the funding at all, and no one is charged for their donation. This is not necessarily typical of a crowd funding website, but it’s how Kickstarter works. Those 3,910 successful projects resulted in a little over $27 million of pledges while the site attracted 8.2 million visitors.

Then 2011 happened. The number of launched projects increased to 27,086, with 11,836 (46 percent) getting fully funded. The total amount of money raised was $99.3 million and over 30 million people visited Kickstarter.com. Music and film projects accounted for a combined $51 million of the pledged dollars.

Dollars Pledged Via Kickstarter, By Category (Total Pledges: $99,344,382)

As 2012 has rapidly passed by, the website is still breaking its own records. On February 9, an iPhone dock made by a company called ElevationLab became the first Kickstarter project to raise $1 million. Just hours later, a video game project with a working title of “Double Fine Adventure” became the second campaign to break $1 million – after being on the website for only 22 hours and having an initial goal of only $400,000.

“Double Fine Adventure” went on to set the Kickstarter record for funding by breaking the $3.3 million threshold. But the same day that project was completed, another video game project for “Wasteland 2” launched with a goal to raise $900,000 – the loftiest goal for a Kickstarter campaign ever. It completed its funding in under two days and currently stands at $1.6 million, with donations being taken until April 17.

So what’s the underlining concept here? Why are so many people willing to fund other people’s projects during poor economic times? According to University of Florida professor David Whitney, it’s the combination of the good will that comes along with donating to an interesting process and the unique rewards that crowd funding offers.

Whitney, who is the first-ever entrepreneur in residence at UF’s College of Engineering and has 30 years of experience in venture capital investing and investment banking, said that as long as people are willing to donate, websites like Kickstarter will continue to provide a valuable service.

“We're a nation of people that like to do good,” Whitney said in a phone interview. “I hope that philanthropy never goes away.”

Whitney also stressed the bright future of crowd funding, referencing the JOBS Act that recently made its way through the House of Representatives and the Senate. The act takes the crowd-funding model and makes it easier for investors to put money into start-up companies. Whitney said that if passed, the act would be a “game-changer” in the economy and have a lasting impact in the way start-up companies and websites get funded. Now that it has been signed into law, investors from across the globe who don’t even know each other can invest money in a new company, watch it rise to fantastic heights, and stand to make a fortune. The future of crowd funding takes the donation idea and turns it into a real investment.

But not everyone shares Whitney’s positive thinking about crowd funding. Tom Williams, 24, plays guitar in an alternative hardcore band called Stray From the Path. Although the band is now on a record label, it was independent for years and, according to Williams, still doesn’t “have a manager, a business manager or anything. We are self managed, and have been for a very long time.”

Stray From the Path exhibits the do-it-yourself mentality attached to independent bands, but Williams says he views Kickstarter as a “cop-out” for bands. “[Crowd funding] is teaching that any band can just mismanage its money completely, and then just ask for some [from their fans].”

Stray From the Path regularly voices its opinions against Kickstarter via Internet message boards. Tom Williams is pictured far left.

Williams said websites like Kickstarter teach laziness and eliminate the “thrill of earning something” for aspiring bands and artists. Others say the simple fact that so many projects get financed via websites like Kickstarter proves the crowd-funding model works in today’s economy.

Justin Kazmark, a member of Kickstarter’s communications team, said working for a crowd-funding website has enabled him to see first-hand how many people can accomplish something that they otherwise couldn’t accomplish.

“It’s incredibly inspiring everyday. Not to get mushy, but it’s just a really creative environment. Every day we come in and get an email about all the projects that launched the day before, and it’s really exciting to see the creativity in the world,” said Kazmark, who has donated personal funds to 193 different Kickstarter campaigns. “We have a unique vantage point to get a sense of what’s happening and it’s really exciting.”

Leanor Ortega, saxophonist for recently reunited Christian ska band Five Iron Frenzy, knows how valuable a crowd-funding project can become. Five Iron Frenzy disbanded in 2003 and turned to Kickstarter in November 2011 to finance their first new album in almost a decade.

“When we first thought out the project, we wanted to make a goal of $30,000 in 30 days,” Ortega said. “Then I said, ‘Let’s make it 60 days, because this is a lot of money.’ I didn’t think we were going to get it. But it was near Thanksgiving and Christmas so we were hoping people might chip in.”

What the band experienced was one of the most overwhelming responses to a Kickstarter project in the website’s history to that date. Reaching its goal of $30,000 in what Ortega recalls as a very accurate 58 minutes, the band ended up with a total funding of $207,980, donated by 3,755 different people.

“My daughter was sick the night we launched the project,” Ortega recalls, “so I would run and take care of her then run back to the computer to refresh, and every 10 minutes or so I would see it jump by like $5,000. I was so beside myself.”

Sidebar: The Classic Crime Kickstarter DiaryThe Classic Crime is an indie rock band from Seattle that was signed to a label called Tooth & Nail Records until 2011. When the label decided not to pick up the option for a fourth Classic Crime album on their contract, the band turned to Kickstarter to raise the funds to record what might be a last hurrah.

“Crowd funding was our only hope to put out music that was of the same caliber our other records – whose budgets were much higher than we could ever afford working our service industry jobs,” said Classic Crime vocalist/guitarist Matt MacDonald. “We didn't want to put out a record that was a lesser product just because we were independent.”

So the band launched a Kickstarter campaign and hoped for the best. This is a diary of their crowd funding experience.

Wednesday, March 7
A team at Kickstarter approves the Classic Crime’s campaign. MacDonald lays in bed with his wife, wondering whether it’s a good idea to launch the project on a weekday at midnight. The band has only allotted 35 days to raise $30,000 and drummer Paul “Skip” Erickson isn’t positive they’ll reach that plateau.

“Shouldn't we lower it to $25,000?” Erickson asked MacDonald earlier in the week. “I mean, if we don't hit $30,000, we don't get anything.” But according to MacDonald, the band said, “Screw it,” and went for $30,000. He said the same near midnight on March 7 and launched the project.

Thursday, March 8
MacDonald wakes up and $12,000 has been pledged overnight. “I was floored,” he said. MacDonald makes a video from the studio thanking Classic Crime fans for their support.

By the time the video is ready to post, it’s just around 10 p.m. and the entire project is funded. “I'm not posting that video right now because it's completely irrelevant,” MacDonald wrote in an update on the Kickstarter page. “We have to make another video, a better one, in order for us to properly thank you profusely for giving us the ability to make music in this form at this juncture. Did you really just pledge over $30,000 in under 24 hours?

Friday, March 9
MacDonald and the rest of the band are trying to think up ways to reward the fans and what to do with the extra money. Originally, the band said that extra funds would go toward the marketing and promotion of the new record. The band decides that at $40,000, they will go on a two-week tour. At every additional $10,000 after that, they will add two weeks onto the tour.

Saturday, March 10
Backlash everywhere. People see Facebook posts from The Classic Crime’s band page and think the band is asking for $40,000 to do a two-week tour. Some are outraged and spam the band’s Facebook wall with hate messages. One person decides to pledge $10,000 to the campaign with the intention of canceling his pledge right before the project ends. He wants fans to think the goal has been met, so they won’t pledge any of their own money. Numerous bands and other people take to social media with criticism.

“The agony and the irony, right?” MacDonald asked of what he calls the project being taken out of context. “It's okay, we got Kickstarter to cancel [the $10,000 pledge].” The band justifies the cost of their tour by saying they have about $5,000 of van and trailer repairs.

Sunday, March 11
Trying to clear the air, MacDonald posts a lengthy blog on the Kickstarter page explaining the events of the past two days and reaffirming fans that they aren’t asking for $40,000 just for a two-week tour. Responses to the blog post on social media and message boards are mixed, with some defending the band and others criticizing their approach.

Thursday, March 29
As of midnight on March 29, The Classic Crime had raised $67,899 – 226 percent of its original goal. For all the negative feedback the band received, 1,356 fans backed the project. MacDonald credits it to simple supply and demand, saying that fans saw rewards they wanted and went after them.

“Nobody pledged for a reward they didn't want. Never in my life have I looked at a product, decided it was a total rip off, then pulled out my wallet and purchased it anyways,” MacDonald wrote in an email. “I'm not stupid and neither are our fans. They saw the rewards and bought them; that's how we raised $30,000 in 24 hours, and that's how we've now broken $60,000.”

Tags: kickstarter, crowdfunding, too long do read
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