How to Use Kickstarter to Launch a Business
Have a little idea that needs a boost? If you have a robust social network, this crowdfunding site could be just the thing to help.
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Caroline Mak and Antonio Ramos of Brooklyn Soda Works
Caroline Mak and her boyfriend Antonio Ramos loved the taste of ginger, but didn't like the sugary-sweet taste of ginger ales and ginger beers on the market. They weren't spicy enough, nor were they adequately tangy. On a whim the couple set out to brew their own potent carbonated beverage out of their Brooklyn kitchen. Along the way, they concocted an array of other soda flavors, including grapefruit, jalapeno and honey and cucumber, lime and sea salt.
Lacking bottles, kegs, and any sort of industrial kitchen, Mak and Ramos – by profession an artist and a research chemist – needed funding to create any sellable quantity of their inventive sodas. So, they asked their friends, family, and strangers to pledge to them $1,500 over 40 days. The dollar and time parameters are part of the setup at Kickstarter.com, itself a start-up founded in April 2009 by five friends with the idea that individuals would give a little – especially if they got something back – to fund a creative project. (For more, check out Inc.'s story about Kickstarter's original business model.)
Roughly 1,000 projects, from rock albums to documentary films to, well, soda-bottling ventures, have been funded on Kickstarter since its launch. Kickstarter has never been about long-term funding; it's supposed to facilitate the asking for and giving of support for single, one-off ideas, says Kickstarter co-founder Perry Chen. Usually, project-creators offer incentives for pledging. Say, give a writer $15, and get a book in the mail. Give $50 and get an autographed copy and a screen-printed poster.
"The thing about the projects is that they are finite. You are telling people if you support me with these funds, you are going to get this thing," Chen says. "People are not investing in your soda company going on to become a big thing."
That means there's no long-term return on investment for supporters. There's not even the ability to write off donations for tax purposes. That hasn't stopped close to 100,000 people from pledging to Kickstarter projects. (For more, check out Inc.'s 2008 story about Kickstarter's original business model.)
Though Kickstarter is not designed to launch entrepreneurs into sustained success, it has shown great potential to bring ideas to fruition, and give traction to projects that, if smartly executed, can grow into small companies. Just look at Brooklyn Soda Works, which now sells its product weekly at a Brooklyn market and is getting requests from restaurants and retailers to sell the artisanal beverages.
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Using Kickstarter to Jump-Start a Business: Hone Your Idea
Before rushing into the world of crowdfunding, or micro-finance, as Kickstarter has alternately been called, there are a few facts to consider.
1. There's a barrier to entry.
Although Kickstarter is potentially open to everyone, each project must be approved by the site before it is given the go-ahead to post photos, videos, and a plea for pledges. Highly inventive projects are usually shoe-ins; a business venture with apparently adequate existing funding is not. A plan to travel Asia while creating location-inspired couture or mailing hand-designed postcards back home to donors could be approved; just saying "I want to backpack Europe" might not.
2. You set your own goals.
Once a project is approved, the project creator sets up a goal amount of money and a time period, say $2,000 over 30 days. If that amount is not reached in the time period, the project gets no donations and donors do not contribute. If the amount is reached or exceeded, it gets the funding and goes ahead.
3. Your online social network might be your biggest asset.
One other helpful way to meet both of the above criteria is to have a vibrant, diverse, and enthusiastic social network already backing you online. Whether it's just lots of Facebook friends or followers of a website related to the proposed project, Kickstarter will take that into account, knowing that friends will likely kick in a few dollars here and there – and big numbers really add up to strong support. Chen says projects succeed more often when they are a creative idea backed by strong network with existing gravitas.
Artists and entrepreneurs who have used Kickstarter say that though the barrier to entry might seem prohibitive, the founding crew of the crowdfunding site is often willing to work with potential project-starters, offering tips or coaching through the process. When April Smith, a musician from Brooklyn, had a repertoire of songs that she felt went over well in front of live concert audiences, but lacked a record label to record them onto an album, she turned to Kickstarter.
"Basically, I really wanted to record – I had the songs ready and really wanted to be able to release the album soon, because I had been playing them live and they had been getting a really great response," she said. "Rather than wait for a record-label break, and deal with all the red tape that could be involved and hold back the album, we decided to see what happens when we try to do this by ourselves."
