- Category: Our Blog
- Written by Brent Williams
Kickstarter.com are a bunch of guys who set-up an on-line business (basically a blog) that matches the people with the ideas with the people who can fund them. Following a recent rant on (fruitbowl) the difficulties for small business (or start-ups) in raising money to fund innovative ideas, here's a really cool solution that uses crowd-sourcing, or rather crowd-funding to get around the problem.
In a nutshell, this is how it works.
- You have an idea for a product or a project and post it on the site along with the budget required to get it off the ground. You then have 45 days to raise the capital. (The idea needs to have merit - the kickstarter guys qualify each entry.
- People who are interested in the project then pledge a certain amount, which is only payable once the budget is reached. The money committed is not a loan or equity share, but rather an advanced (or commitment) to purchase.
- Kickstarter keeps 5% for their trouble.
A fairly simple model, but brilliant! Not only does it allow potential innovators to rise cash, and bring a new product to market, but it’s a quick way to tell if the idea has a market in the first place, as in "before" any investment is committed. Hey if you can't raise the necessary cash in 45 days, and directly from the potential punters, then the idea probably aint worth remortgaging your house over!!
An example of a project is a wrist strap that allows you to wear an ipod nano as a watch. I remember hearing about this late last year and loved it but did not realize, at the time, it used Kickstarter to get funding. This project required USD$15,000, but ended up raising USD $941,718. That's like 6,278% oversubscribed.
The person responsible is a guy called Scott Wilson, an industrial designer and ex creative director of Nike who also worked on Xbox and smart-phones. He says that a traditional approach would've taken over 12 months, but using kickstarter it took only 30 days. He’d also have complete control, not having to report to committees and investors - all having their say on what he should do and potentially impact (and most likely negatively) how the product looked of functioned.
Although the main focus of Kickstaeter is to fund arts projects, from film and photography to sculpture, there are also many techie type projects listed. Things like ipod accessories, iphone apps etc.
Perhaps what I love most about Kickstarter is that it is, itself, an innovative startup and uses the Internet to cut out the middlemen - like bankers, venture capitalists. Even more, as a marketer, it cuts out the entire value chain and goes straight from R&D directly to consumers. Brilliant, sheet brilliance!!!