Crowdfunding on trend for 2013

One of the things I love about the New Year is people weighing in on what the trends will be for 2013.

Certainly one of the trends in our industry is crowdfunding. With the passage of the JOBS (JumpStart Our Business Start-ups) Act in the US which relaxed some securities laws, there will be even greater growth of this financing mode. More details will be released early this year on this bill.

Crowdfunding is redefining the relationship between the producer, investor and consumer. With this in mind, there are higher levels of transparency needed and an increased intensity of engagement, with instant gratification via social media.

A good example of this relationship was The Age of Stupid, Amy Spanner’s docudrama on climate change. Or the very successful Sedition Wars a horror-themed tactical board game from renowned game designer and figurine maker Mike McVey (Studio McVey).

Although already an established name in the games world, in June 2012 McVey used crowdfunding to raise pre-production funds and build buzz around the game pre-launch. Sedition Wars raised $950,000 (US).

The growth of crowdfunding platforms is a story in itself.

In 2007 there were 100 platforms. Now there are more than 450. From the time of Kickstarter’s launch in 2009 to February 2012, there were no $1 million projects. Now 12 projects have raised over $1 million. In fact, a product is eight times more likely to be funded on Kickstarter than successfully launched through a US company.

Each of the crowdfunding platforms are looking for international growth. Before this year, you needed to be an American citizen with a US bank account to be eligible to open a Kickstarter account. Now we’re seeing the global expansion: Kickstarter’s platform is available in the UK.

There are three types of ways that crowdfunding can work.

1.Micro patronage – each contributor makes a donation to the cause. This has been a powerful way for financing charities and cause-related documentaries.

2.Lending platforms like Kiva – this platform has micro loans which provide financing with the understanding it is repaid like any other loan or that it is a forgivable loan if certain conditions are met or pre-sales are made.

3.Investment model – this resembles an equity investment where an individual receives shares equal to their investment. This is where the American JOBS Act will make a difference and leave other jurisdictions scrambling to make changes in their securities acts.

So what brings success on a crowdfunding platform for people who aren’t as well known as a Mike McVey?

Here are tips to help you decide if crowdfunding might be the way to go for financing your venture.

Know your audience and know it is right for crowdfunding

Usually, the people who are willing to invest have done so in the past. That usually means people who have put some money into successfully funded products – games, comics or ones that have caught the attention of geeks. Or there is a natural community like environmentalists with a narrow interest such as saving seals.

Figure out a financial goal

Unless you already have a huge fan base with an established following, you need to set your financial expectations low. People who have had success raising funds say a realistic figure is $20,000.

It’s easier to raise financing for something that is almost finished

This gives people confidence that it will be executed. Some content creators have had success in raising funds for specific aspects of their projects – say for marketing or post production.

Good audience engagement

As part of their investment you need to be in touch with your audience on a continual basis to ensure their enthusiastic support. Tangible rewards are also part of your engagement – t-shirts, behind-the-scenes footage and perhaps an invite to the premiere are all part of the promotional support for your giving public.

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