September 26th, 2018
Need Money for Your Light Bulb Moment?
Thanks to crowdfunding - many people making small donations towards the ideas they like - the days of the millionaire backer could be over. But how does it work?
By Jake Wallis Simons, LDT, Oct 14
Bullying; out-of-control Facebook parties; unimaginable filth a mere click away. The internet has given us many reasons to shake our heads, worry about our children, and mutter about its dangers. But the online world is as wondrous as it is dangerous. For every vile troll there is an example of an extraordinarily creative vision brought to life by the power of the web. And there’s perhaps no better example of this than crowdfunding.
Put simply, crowdfunding is when enterprising artists and business people appeal to the world to make micro-donations, which, taken together, are enough to fund a project. The idea began to take hold in 1997, when fans of British rock band Marillion launched an internet fund-raising campaign to bankroll an American tour. More than pounds 35,000 was raised, and the tour went with a bang. Today, crowdfunding is used by film-makers, charities, technology companies, even football clubs. For projects that would otherwise struggle to get off the ground, it’s a godsend.
Recently, the writer Alexander Masters announced in The Daily Telegraph that he was setting up a crowdfunding project to pay for research into treatments for the “Steve Jobs” cancer. For Masters, this is personal: one of his close friends suffers from the disease. A possible treatment has been found, he says, and the only thing missing is pounds 2?million to develop it.
In Britain, it is becoming commonplace for organisations unable to secure state funding to take on this approach. The website Spacehive, which describes itself as “the world’s first funding platform for public space projects”, is a case in point. Through the site, one can “fund a new park or renovate your high street as easily as buying a book online”. Projects include a “forest garden” in south London, free Wi-Fi provision in Mansfield, and turning a primary school into a community centre in West Yorkshire.
Some American states have responded to the recession with radical experiments in citizenfunding. In 2010, voters in Colorado Springs chose to avoid tax rises in exchange for dramatic public spending cuts. One in three street lights was turned off; bus services were reduced; park maintenance was put on hold. But residents could choose to fund these things themselves with small ad hoc payments. If the $125 needed to turn a street light back on was raised, on it went. Park bins could be provided for $3,000. It was not without controversy, but voters soon got used to deciding for themselves which services they wanted to maintain.
In Britain, it is unlikely that the Government or local authorities would ever consider such radical measures. But with crowdfunding spreading into areas from which the Government has withdrawn, within a few years we may think nothing of philanthropically supporting what previously were basic services.
By far the biggest crowdfunding success stories today come via the New York-based Kickstarter, which recently began accepting UK projects after launching in 2009. Although most of the thousands of ventures on the site only just reach their funding targets, several have ended up attracting far more money than they asked for. When a company called Palo Alto, for example, requested $100,000 to manufacture a smart watch that displays messages or emails from mobile phones, they were rewarded with an overwhelming $10.2?million.
When it works, crowdfunding is a thing of beauty. Like a less brutal and humiliating Dragons’ Den, the artist or inventor makes their pitch. If the public likes what they see, they contribute as much or as little as they like, and in return they get, say, their name on credits, an early look at the product, or simply the warm feeling of having helped.
But when such vast sums of money are suddenly generated from the goodwill of strangers, things can become acrimonious - especially when a crowdfunded company fails to deliver on their promises. Last December, the Oregon-based start-up ElevationLab used the site to ask for funding for a minimalist iPhone dock. They received almost $1.5?million, which far outstripped their target, and each donor was promised a dock. But the company, taken by surprise by the scale of demand, experienced production delays. To make matters worse, the launch of the iPhone 5, with its new connector, effectively rendered ElevationLab’s dock obsolete. But they were under no obligation to return the money, and to date have not done so.
In April, Amanda Palmer, singer with the Gothic Boston duo the Dresden Dolls, put a request for $100,000 on Kickstarter to fund her new album and tour. Within a month, she had received $1.2?million. Then she put out a plea for local musicians to play on her tour without any recompense save unlimited beer and a promise to “hug/high-five you up and down”. After objections were raised, she agreed to pay all the musicians who accompanied her.
Despite the risks, with the alluring possibility of instant funding for even the craziest ideas (Detroit’s life-sized Robocop statue comes to mind), it’s clear that crowdfunding is here to stay. Here are five projects proving that this is no bad thing:
The LIFX smartbulb: a hi-tech light bulb funded through Kickstarter
In September, a team of Melbourne-based tech entrepreneurs took to Kickstarter asking for $100,000 to develop their idea for a Wi-Fi-enabled, energy-efficient LED light bulb that could be dimmed, brightened and have its colour changed via mobile phone. Within five days they had been pledged $1,312,525, and there was talk of this becoming the biggest Kickstarter project ever. However, they decided to “cap” the project, due to concerns about logistics.
According to Phil Bousa, one of the founders, the runaway success took him and his team by surprise. “Within a minute of posting we had our first sale,” he says. “We thought it was a mistake. We hit refresh and we had three sales, then minutes later seven sales. We looked at each other and I think at that point we all realised how big this could get.” Before capping the project, the founders were inundated with 400 emails a day each, including offers for distribution, messages of support and general questions. “We wanted to focus our energies on production,” says Bousa, “rather than trying to be egotistical about numbers. Our job is to deliver an amazing product, not overinflate the campaign.” Their advice to budding crowdfunders? “Make it sexy,” says Bousa. “People don’t care about your product, they care about how it makes them feel.”
Ebbsfleet United: a non-League football team funded through Myfootballclub.co.uk
Since 2008, Ebbsfleet United, who play in the Football Conference, has been run by volunteers and bankrolled by crowdfunding. According to Keith Handley, the chairman, an initial burst of publicity resulted in a high of 32,000 regular donors. Over time, however, the excitement died down and numbers dwindled to 1,200.
Although the team is still going strong, Handley admits that it has been a struggle. “Life has been full of ups and downs. Playing at non-League level is hard, and every pound has to be earned,” he says. “Long- term, the dream is to get into the Football League. But that can only happen with an amazing amount of effort from volunteers.” Progress can sometimes be hampered by the devolution of many key decisions to the membership, which has been able to vote on everything from picking the team to the length of contracts offered to players (one such decision only attracted 132 votes).
Nevertheless, Ebbsfleet is often held up as a possible model for other football clubs - owned by the fans, rather than a money-grabbing billionaire interloper.
Glyncoch Community Centre, South Wales: funded through Spacehive.com
“The turning point for the campaign was when Stephen Fry tweeted to millions,” says Louisa Addiscott, the youth and play development officer at Glyncoch Community Centre. “This raised the profile of the campaign and we were featured all over the news.” When Addiscott began her job two years ago, one of her main tasks was to “take on and drive forward” the redevelopment of the dilapidated community centre, which had been an ambition for many years. However, despite concerted fund-raising efforts, there was a stubborn shortfall of pounds 30,000.
Given the climate of austerity, the organisation was starting to contemplate admitting defeat.
However, through sheer perseverance Addiscott managed to get a redesign of the centre drawn up, featuring “a conference suite for local businesses and community groups, an IT centre to host workshops, and facilities for young people, from computer games to cheerleading classes”. The greater goal of the project was to provide a “springboard to jobs and learning opportunities [which] will help reverse the cycle of deprivation in the area”.
She put the project on the crowdfunding website Spacehive, setting a funding goal of pounds 792,000. With the aid of contributions from a number of organisations, as well as donations from individuals, her goal was achieved. Construction on the centre, which Louisa hopes will provide everything “from Bingo to Taekwondo”, is due to start soon.
‘God Help the Girl’: funding a musical film through godhelpthegirl.com
In 2003, Stuart Murdoch, lead singer of the group Belle & Sebastian, began writing songs with a “girl group” sound that he knew “weren’t for him to sing”. Before long, the songs had turned into an album, but he put it on the back burner for three years. In 2006 he felt that the project “wouldn’t go away” and decided something had to be done. “It became increasingly clear that the girl group songs formed a story, and that story had to be written,” he writes on his website.
Belle & Sebastian helped record the songs, and a script was written for a musical film. Auditions were held for the leading parts. The resulting album, God Help the Girl, was released in 2009, and a small tour was arranged. The resulting publicity attracted Barry Mendel, producer of hit films such as Rushmore, The Sixth Sense, The Royal Tenenbaums, Munich and Bridesmaids; he agreed to produce the film.
In 2011, the project was thrown open to crowdfunding, with a target of $3?million.
So far, around $2?million has been raised. “There are some very supportive and, luckily, financially blessed individuals out there,” says Murdoch. It hasn’t been easy, but it looks like success is finally within his grasp; filming is planned for this year. In the spirit of crowdfunding, the production team has appealed to donors to offer creative input for everything from casting to locations and the design of characters’ clothes.
Watsi.org: medical crowdfunding for the poor
In 2010, Chase Adam, a loan officer from San Francisco, was travelling through Watsi, a small village in Costa Rica, when he was inspired by a woman collecting money to pay for her son’s medical treatment. He had “what can only be described as an epiphany”, and set up the crowdfunding website watsi.org, which allows people to donate money to provide life-saving treatment to those who cannot afford to pay for it. It’s been more successful than he ever imagined. “On the day of our launch,” says Adam, “we went viral on Hacker News and funded all of our profiles on our site in hours.”
People who donate money receive updates when the patients they fund receive treatment. Recently, says Adam, four patients in India received life-saving heart surgeries, and Alexa, a 12-year-old girl from Guatemala, had surgery for a debilitating heart condition that was funded by 12 donors; she is now well on the way to a full recovery.
Jesse Cooke co-founded the website. He was inspired to help build the site, he says, because “I’ve seen crowdfunding work for people.” In the late Nineties, when he was at school, a friend of his was killed in a traffic accident and his family could not afford the funeral. Cooke asked every student at school to donate $1, and the funeral went ahead.
Countless people around the world have received funding for medical treatment through Watsi. “I love the idea of improving, even saving, the lives of people while helping others feel good about donating, and the web is the perfect medium,” he says. “People are more engaged now than ever, and if we can funnel some of that engagement to positively affect people that would otherwise lead lives inhibited by malady, then we all win a little.”
The Sunday Telegraph