When independent film producer Joe Avella sought funding last year for his Master of Inventions movie, he looked beyond the usual suspects – he turned to the crowd.
Avella and his filming cohorts posted a video plea for money on Kickstarter, one of dozens of websites where inventors and others with new products, ideas and projects can seek donations from family, friends and anonymous people in the ether.
Crowdfunding is a viable funding alternative for inventors who are serious about developing and commercializing their ideas. Crowdfunding, by its Darwinian nature, also serves as a viable means test. Ideas that have popular appeal get funded; ideas that suck, die a merciful death. And as the saying goes, it’s better to fail early.
Avella’s unfinished feature-length film is a spoof about hapless inventor Jeff Murdoch, creator of the world’s worst products, such as the beef jerky hydrator, the pen sharpener and a water-proof hair dryer.
Incentives for donations included an autographed Braveheart movie poster, signed by Jeff Murdoch.
The goofy pitch worked. Avella raised $2,185 from 49 people, beating his goal of $2,000.
“I’ve been making films for five or six years,” says Avella, who by day works as an images designer for Groupon. “We wanted to make a full-length film, but we had no money to do it. Kickstarter was the easiest game in town.”
It’s by no means the only crowdfunding game in town.
Michael Sullivan, who claims to have coined the term “crowdfunding” in 2006, has assembled what’s quite possibly the largest listing of crowdfunding sites.
Back in the day, Sullivan was evangelizing crowdfunding for independent video creators.
“I wanted a way for the community to sustain itself,” he says. “Just like you’d Digg or (Facebook) Like something these days, there was a way to donate anywhere from a penny to $50, and I was blogging about this development.”
He’s since moved on to other interests. But his compendium of crowdfunding sites remains. And he does have some words of wisdom for those considering tapping faceless Internet users for cash.
- Professionalism counts. High-quality images, video, presentation and polished text tend to generate more donations
- Prototypes matter. Show you already have done some of the legwork, which helps to show you’re legitimate
- Don’t be shy. Set your funding goals a little more than what you’ve conservatively estimated (but don’t get greedy!)
- Perks. Don’t just be a taker, man. Offer incentives for those willing to kick in a little something for your cause.
This latter piece of advice comes with a caution, however.
Crowdfunding in some scenarios can run afoul of U.S. securities laws.
Technically, soliciting investments from the general public requires filing with the U.S. Securities and Exchange Commission. Essentially, if you’re asking people at large for money in exchange for profits based on the idea that’s being funded, you could be asking for trouble. Be careful what you promise as incentives. When in doubt, consult an attorney.
Another yellow flag involves intellectual property rights. If you post an idea for a product that’s not patented, you risk having it ripped off.
“We get asked that all the time, ‘How do you protect me from someone stealing my idea?’” says Slava Rubin, co-founder and CEO of crowdfunding site IndieGoGo. “We’re not liable for any of that stuff.”
He speaks the lingo of Generation Now, which tends to throw caution to the wind when it comes to disclosure. In this world, folks are just as apt to post their ideas about a new wireless app as they are to share pictures of their plate of sushi. Most inventors, however, would be wise to consider all the ramifications before rushing to the crowd for funding.
IndieGoGo, launched in 2008, features some 27,000 campaigns from 180 countries. Unlike many other sites such as Kickstarter, which limits crowdfunding campaigns to one-off projects, Rubin says IndieGoGo is open to business-model funding and any idea “except for porn or anything illegal.”
Another difference: You get to keep the money you raise. Some other sites require you to reach a certain funding goal.
IndieGoGo successes include an affordable do-it-yourself 3D printer, the Satarii Star mobile video accessory and “the world’s first sustainable, tsunami-proof houseboat.”
Rubin says IndieGoGo is more than a funding platform – it’s a sniff-tester.
“We have some using IndieGogo who already have all the money they need,” Rubin says. “The reason they’re using it is the promotion on the site, the market testing and networking with potential partners.”
Beyond the potential risk for getting your idea ripped off, publicly posting an idea starts the clock ticking on when you can file for a patent in the United States (one year), and completely kills your right to file for a foreign patent.
“File (for a patent) before you disclose,” says Tim Bradley, a patent attorney at Coats and Bennett, a North Carolina-based intellectual property firm. “At the very least, it’s often a good idea to file a provisional patent application, which holds your place in line.”
As for Avella, the budding filmmaker with aspirations to make a mockumentary about a bumbling inventor, he’s still in the filming process.
It doesn’t look like the movie will be out this year. We’ll all have to wait. Meantime, Avella says he’d use Kickstarter again in a heartbeat. But with one proviso:
“I should have asked for more money.”
A Smattering of Crowdfunding Sites
Crowdcube.com – Enables startup companies to raise funding by offering real equity.
Fundable.org – Provides funding for every type of group, activity or project from senior living disaster relief.
GoFundMe.com – makes it easy for anyone to raise money online for their personal fundraising ideas.
Inkubato.com – Berlin-based crowdfunding solution for creative project funding, from inventions to literature.
IndieGoGo.com – An online social marketplace for inventors and other creative types.
Kapipal.com – Enables anyone to create a crowdfunding page with little or no restrictions one projects.
Kickstarter.com – Funds all types of creative projects through donations. Campaigns have to meet certain funding goals; other restrictions apply.
Peerbackers.com – Specifically focused on helping entrepreneurs raise capital they need to launch or grow their businesses.
ProFounder.com – A platform for entrepreneurs. Businesses can raise money from their own community.
RocketHub.com – For grassroots crowdfunding of creative projects; inventor friendly.
Editor’s note: This article appears in the August 2011 print edition.
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