Cash from the masses

“People think you can put up a project, chuck it on Facebook, tweet it out and wait for money to roll in,” says Oliver Mochuzuki of Bristol crowdfunding platform, Fundsurfer; “there’s actually a lot of hard work behind every successful campaign.”

Crowdfunding has boomed in recent years. Compassionate crowd funding appeals such as #FindDancingMan and a page to raise money for a disabled man in Newcastle who was mugged outside his home went viral and brought the finance steam into popular view – but though social and artistic causes feature, entrepreneurship is the biggest crowdfunding category by some stretch.

It pre-dates the 2008 economic crisis, but there’s little doubt that this and other alternative forms of finance have grown in the credit-squeezed times since, and the available cash in this arena is expanding exponentially. In 2014 the global crowdsourcing industry was worth $16.2 billion; it’s estimated to be $34.4 billion by the close of 2015. Some crystal ball gazers think that by 2025 that could tip $90 billion.

The figures are impressive, growth is rapid and the idea of personally facilitating free-thinking innovation is appealing, but it’s not a golden goose.

“Crowdfunding is hard. You have to pester journalists/bloggers/people constantly, you have to answer questions whilst constantly revising your pitch. It’s a full time job,” says Chris Guest director of LightBug, a local GPS tracking company looking to bring a solar-powered tracker that helps people locate their kids, pets and stuff to market.

There are two main forms of crowdfunding: rewards and equity. Rewards – the most popular – works by pre-selling a product or offering a special gift to investors who support a business concept; equity transfers a number of shares to the backer in exchange for cash.

Chris turned to Kickstarter in an effort to reach a critical funding mass. “We did not want to go with investment (or equity crowdfunding for that matter) because we already have a GPS tracking business that’s ticking over just fine,” says Chris. “Giving away equity just seemed unnecessary. Kickstarter seemed like the right platform because it allowed us to gain publicity and get a large amount of money upfront to manufacture the devices cheaply. [It] was a zero risk option.

“It’s been an amazing marketing tool – we’ve got loads of business leads from it – and it’s helped us refine our product pitch by throwing it out there to the world. [But] it’s not the silver bullet people often think it is (and that I secretly hoped it might somehow turn out to be for us).”

Jon Woodford, founder of Woodford Design in Wedmore, turned to Joe Public for funding support of his Quickdraw 2.0 charging cable, “not to help fund the development of a new product but to help with raising orders so that manufacturing costs could be reduced and therefore allow us to reduce prices”.

His first experiment with Kickstarter was a great success (“we broke our funding goal by 450%”, he says): “it is a great means of gaining publicity and opening your product up to a greater audience – we now ship 70% abroad with the US and Saudi Arabia being our largest markets. It allows us to test the appeal of a product before investing in manufacturing.”

Chris offers would-be crowdfunders some blunt truths. “The vast majority of people don’t care about your idea. You need to build up a following before launching a campaign. If you want to succeed without a following, it’s traditional marketing.

“People want to feel special, but more importantly they want a bargain. If you sell products through Kickstarter which are exclusive and pretty cheap, you’ll get funded.”

“A common trap is assuming the crowd will care,” agrees Oli. After years of experience, his company run a workshop on how to operate a successful campaign. He names Twentieth Century Flicks on Christmas Steps as one of Fundsurfer’s success stories: “Even then, they only had 416 people pledge funds from a mailing list of more than 90,000. It didn’t hurt that Simon Pegg tweeted it out because he owed them £4 from his uni days.”

Oli says projects that disrupt the emerging order or make a change tend to win hearts and wallets: Twentieth Century Flicks supporters from as far afield as Japan and Lebanon “loved the idea of an Indie film shop making a stand against Netflix”.

Workshops on how to successfully crowdfund, gain support and get NGO matchfunding are also available from The Bristol Crowdfunder site, which launched on 1 September, to support low carbon projects in collaboration with Bristol Green Capital Partnership.

In a very ‘Bristol’ twist, Fundsurfer is now looking at a collaboration with volunteering app Helpful Peeps, allowing people to donate their time and expertise as well as their money.

“There’s an ethos of collaboration not competition,” Oli sums up; “Bristol is really booming because we are very creative and socially minded.”

Read about more local crowdfunding projects.