Crowdfunding: how the kindness of strangers is changing business (from the Sunday Telegraph Seven Magazine)
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. Over £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 £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: Continue reading on the Telegraph website