MORE FUNDING
- how to use crowdfunding to get people engaged in your media project
a pocket guide from Media Evolution
Media Evolution This publication is published by the media cluster Media Evolution. We’re working to boost growth in the media industries in southern Sweden. One of our key areas is gathering intelligence to monitor what’s going on in the media industries across the globe. We take that information and use it to highlight opportunities and business models that our members, and media industries in general, can exploit and develop. www.mediaevolution.se
INTRO by Media Evolution
An in-depth look
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ith our members, we’re constantly looking for new models to fund, create, distribute and sell media products. Getting your fans on board and involved as early as the funding stage is an option that’s only come about recently.
“Getting your fans on board and involved as early as the funding stage is an option that’s only come about recently”
The world is changing fast. Opportunities come and go. It isn’t always easy to get things in focus and see the connections. This is the first in a number of in-depth looks we’ll be taking into subjects we believe in and think are important for media industries to know about. On the following pages you can read about some of the crowdfunding services that exist, what you should think about when designing a crowdfunding project and what Simon Klose did when he needed money to edit his film about The Pirate Bay. We hope you enjoy the read. Do let us know if you’ve got any questions, things to add or if you just fancy sending us flowers. 4 Crowdfunding as a business model 6 Services to help you fund your project 9 How to finance a crowdfunding platform 10 8 pieces of advice for a successful funding project 12 Don’t forget to spread the word 14 How I crowdfunded my film TPB AFK 16 Venture capital hand in hand with crowdfunding 18 Contemporary buzzwords
More funding October 2010 Published by: Media Evolution Editor: Martin Thörnkvist martin@mediaevolution.se Design: You Us and Them
WHY by Martin Thörnkvist
Crowdfunding as a business model
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raditionally ideas for new business models have been about looking at what happens once a product or service is ready. You end up wrangling and wrestling with different ways of getting consumers to pay up.
Jill Sobule is a US musician who in 2008 was about to record her fifth album. Up until then her career had involved a string of record companies who had either dumped her or gone bust. Now she decided to take matters into her own hands but she didn’t want to compromise on what she saw as quality – a good studio, good musicians and a good producer. And that Jill Sobule costs. 75,000 dollars to be precise. Money she didn’t have. To fund the project she set up a site, www.jillsnextrecord.com. There were 12 different price levels for people to support the project ranging from 5 dollars for a digital download of the finished album to 10,000 dollars (”Weapons-Grade Plutonium Level”) for which you could come and sing on the album. It took 53 days to reach her target. In total she made 88,969 dollars from 638 people.
flickr.com/uncensoredinterview (CC)
Everyone who has a product to sell is still doing this. But more and more people are putting more and more of the focus on the funding of the product, as a strategy for covering their costs and making a profit before the product is even finished.
In total just over 620 people have jointly funded and invested over £885,000 (about one and a half million dollars) in the film (!!!). Even now that the film is finished the model is still being used to finance trips to screenings round the world. These are just two examples of a shift from the old days when we used to talk about the importance of creating a smart business model, to focusing on a funding model that pays the bills even before lunch. Having a business model that involves crowdfunding is also a good way of attracting attention for the coming project and getting consumers involved and engaged early on. Once the product is finished, you’ve got a ready-made posse of committed backers who will all be spreading the message and marketing the project.
flickr.com/ageofstupid (CC)
Another example of a creative artist who took funding into her own hands and then passed the idea on to everyone else is film maker Franny Armstrong. While producing The Age of Stupid, a drama-documentary on climate change, she has constantly put up new parts of the production for funding. As a backer, you could choose to donate things that struck a chord, such as paying for pizza Franny Armstrong and sweets for late-night editing sessions or funding miniDV cassettes. As well as people being able to support the different elements of the film making process, Franny also offered pure investment for larger amounts where the backer bought a stake in future profits.
“You get a posse of committed backers who will all be marketing your project”
WHAT by Martin Thörnkvist
Services to help you fund your project
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s the costs of many forms of media production have fallen, so has the amount of funding required, making it easier for even more people to create and spread their ideas. But although the cost has come down, that doesn’t mean you won’t need any cash at all. At the same time, the internet has made it possible to reach lots of people quickly. Creators such as Jill Sobule and Franny Armstrong have built their own sites where interaction between producer and backer can happen. But hiring a programmer to build your own service takes a lot of work and it doesn’t come cheap. Fortunately, since they started their funding projects a number of services have been launched where creative people can easily upload their projects and get them funded by users. Here are three examples of services where payment solutions and a template are provided for you out of the box. Kickstarter.com The most high profile, best looking and most user-friendly service. Kickstarter has also succeeded in creating a platform for finding new, fun and innovative projects. They only let in projects that involve art and the media. This means that one project’s pulling power spills over onto many other projects. Kickstarter keeps 5% of the amount funded in charges (charged only if the pro-
Launched: April 2009 Set up: Decide (1) how large an amount of money you need, (2) what your backers will receive in return, (3) a date for the end of the funding period. (4) For the transaction to be completed, the project needs to be funded by the deadline set by the project owner.
ject is successful). Amazon (the payment solution) also charges a transaction fee which varies depending on how large the transaction is. The big downside with Kickstarter is that you need a US bank account to set up a project.
“The big downside with Kickstarter is that you need a US bank account to set up a project”
The most successful Kickstarter project so far is Diaspora, a decentralised social network. Besides being an interesting idea, they got a huge boost when the Facebook privacy debate was at its height, with much attention in the major media as a result. In any case, they received 2,006% more than they asked for, 200,642 dollars (!). Indiegogo.com Very similar to Kickstarter in design. Indiegogo is open to international projects, so not restricted to ideas from the US. This means there’s a huge range of diverse projects to search through. Creative people from 143 countries have used the platform. Unlike Kickstarter, the project owner keeps the money they receive even if they don’t reach their target. Indiegogo also has a wider perspective on the kinds of project they accept. For example, you can also set up projects that are purely for charity.
Launched: January 2008 Set up: Decide (1) how large an amount of money you need, (2) what your backers will receive in return, (3) a date by which the project needs to be fully funded. (4) The project owner keeps all the money they get in, whether or not the entire amount is achieved.
Indiegogo takes a cut of 4% of the total amount in charges for successful projects. If you don’t reach your target, they take 9% instead. Besides this, the payment solution also imposes a transaction charge.
Invested.in Has a very broad definition of what a project can be. Here you can upload everything from needing help to fund your dental costs to an idea for a computer game. It’s about harnessing the power of your own social internet network as much to solve personal everyday problems as to realise your ingenious project idea.
Launched: March 2010 Set up: Decide (1) how large an amount of money you need, (2) what your backers will receive in return, (3) a date by which the project needs to be fully funded. (4) For you to get your money the project needs to be fully funded by the deadline you set.
Invested.in keeps 1% of the amount. The backer pays a transaction charge of 5% of their payment. Invested.in is available worldwide, but the focus on private individuals means it’s quite a messy site in terms of the number and type of projects up there. Services for specific media Pledgemusic.com and Sellaband.com are for musicians. Spot.us is a service to fund journalism, so far only available in a handful of American cities. Profounder.com (still in beta) is geared to entrepreneurs who need investors for their company idea.
Summary Kickstarter is the biggest platform and has the best engine for creating commitment, but you need a US bank account. With Indiegogo you keep the money whether your project is fully funded or not. Indiegogo is global. Kickstarter only allows private projects with an art or media focus. Indiegogo and Invested.in also allow company ideas and charity projects. Put some thought into identifying which service best suits your needs.
Further reading on crowd funding services: Is Crowdfunding the Future of Journalism? – Mashable bit.ly/crowdfundednews
INTERVIEW by Martin Thörnkvist
How to finance a crowdfunding platform Kickstarter receives an average of 200 project proposals a day which four people sift through by hand. About 50 of them are approved and are put up on the site every day. “It is actually a bit of a pain to say ‘it’s not you it’s me’ all day long,” says one of Kickstarter’s founders Yancey Strickler. “We decided at an early stage only to projects from the arts. Otherwise it would be a constant moral dilemma for backers if they were forced to choose between supporting an art project or the victims of the Haiti earthquake.” Kickstarter was founded in 2009, but they started sketching out the site 5 years before that. “We spent four years coming up with all the functions we could think of and a year scaling it down and isolating the essence of the site. We recently found a notebook from 2004 with sketches for the site. To our great delight they looked basically the same as the site does now.”
What challenges do you see ahead? “Basically it comes down to don’t ‘fuck it up’. More specifically we have to make sure that we’re something people don’t get tired of. We are already hearing the reaction that people are starting to feel that the film sector is getting a bit saturated.”
How did you finance Kickstarter? “We wanted to start a movement to save the TV series Arrested Development.” A friend’s cousin knew one of the actors and arranged a meeting. “He said that the series was shelved for a reason but he liked our crowdfunding idea and asked whether we needed money.”
Kickstarter’s transparent and honest approach will hopefully reassure they won’t have any problems overcoming this type of obstacle. Before our chat is over, Yancey Strickler says something about his company that makes me confident: “In a wider sense we are all artists, who understand what being an artist is all about.”
Yancey Strickler
HOW by Martin Thörnkvist
8 pieces of advice for a successful funding project
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ith a great idea for a media product in your head and services out there helping you to draw on your fans as early as the funding stage, all that’s missing is a structure for setting up a funding project. We’ve taken an in-depth look at projects that have got it right to try and work out what it is that makes a successful project. We’ve summed it up in eight pieces of advice on how to get backing from existing and future fans. 1. Have a good idea It doesn’t matter how good the services are at getting people involved if the core of the project, the idea, isn’t good enough. Get all your fiddling with it done before you start asking for people’s money. 2. Make the most of yourself Go for the personal approach. Focus on who is behind the project. People find it easier to support people than projects. Think about who you are and come up with a good way of communicating it. 3. Tell your story What are you doing? How did you come up with the idea? What’s your dream? What are the obstacles to carrying out the project? Get your audience to understand your world of obstacles and opportunities. 4. Put time into making a video Invest a lot of time in making a video showing the first three points convincingly and honestly. There’s a huge amount of competition on funding sites. The first thing people see is the video about the project.
“Here you’ve got a chance to use people’s desire to get the best, to upgrade to the next level to become a more thorough fan.”
6. Creative rewards Use your creativity to create different rewards that backers can get in return for supporting your project. Don’t just ask for money straight out. Combine obvious incentives, such as the finished product when it is ready, with exclusive rewards that are only available for a limited period or in a limited number. 7. Don’t leave any money on the table Backers all have different amounts of money and different priorities. Make sure you have rewards to suit all pockets and levels of commitment. Try to have 10-15 levels covering rewards for contributions from 10 to thousands of dollars. Here you’ve got a chance to make the most of people’s desire to get the best, to upgrade to the next level to become a more thorough fan. 8. Create a story you can build on A crowdfunding project often lasts between one and three months. Most projects attract most of their money at the start and at the end. One way of flattening out this curve is to constantly update your project, adding new details and arguments. Make a plan in advance so that you can add more reasons to engage bit by bit.
flickr.com/mikegk (CC)
5. Specify Don’t try to squeeze your entire project or your entire life into a funding project. It’s better to isolate a specific part of the total project, e.g. editing a film or part of a tour. This makes it easier for potential backers to see that their money will make a difference.
“Don’t just ask for money straight out.”
HOW by Petra Berggren
Don’t forget to spread the word
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ifteen percent of the projects on Kickstarter don’t attract a single dollar. So there’s more to getting funding than just uploading your project. It’s not the funding service’s job to attract the backers. That’s your job. So what can you do to spread the word about your project? Here are some practical tips and recommendations. Recruit ambassadors The most successful way of spreading information about your project is probably the classic “word of mouth”. You’ve probably got a good idea of who the strong ambassadors for your project are by now. Focus on getting them on board! If they are as impressed by your project as you are, they’ll be sure to tell all their friends. Before you know it, you’ll have more ambassadors and a project that bit closer to taking off. Sow more seeds! Talk about your project to friends and family. Be upfront and ask if they can help you by telling people about your project online and off. Naturally you’ll choose the friends and acquaintances who you know have a network that might be interested in funding your product or service. You can also ask the people planning to fund your project to do so at an early stage. Backers tend not to put up money for projects by people they don’t know until it’s clear that the project will be a success. In other words, it’s best if the money rolls in early.
Spread through thousands of networks To get more people to notice your project, it’s a good idea to talk about it in all the digital networks where your target audience hangs out. If your project is film-based, for example, look at film forums. Once you are more familiar with the networks you can start plugging your project. Once more, it’s important to be honest and transparent about your role. Most importantly: Make sure to keep communicating with your fans. The worst thing there is is to have someone turn up and be friendly only when they want cash. Welcome people and be proactive in the dialogue with your potential funding fans all the time, avoiding a one-way communication.
“Before you know it you’ll have more ambassadors and a project closer to taking off”
flickr.com/wootam (CC)
Bloggers are your best friends If you manage to get popular bloggers whose readership is the same as your target group to write about the project, you’re almost home and dry. But reaching bloggers can be tricky. Start by identifying bloggers who are important to your project, in other words, people who write about similar subjects. Then get to Encourage your followers to spread the word know them, getting a sense of how they write and what about. Once you know that, you’ll know how to put together and angle your pitch. It’s important in your pitch to be honest and transparent about who you are and what you want. Send a short, personal message. If you’re lucky, they’ll go for it and spread the word about your project.
EXAMPLE by Simon Klose
How I crowdfunded my film TPB AFK
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uring September 2010 I managed to collect 51,000 dollars for my documentary “TPB AFK: The Pirate Bay Away From Keyboard”. On the crowdfunding site Kickstarter 1,737 private individuals from all around the world supported the film, paying an average of 29 dollars each. In return they’ll get a link to the film when it’s ready, T-shirts and the finished film on DVD. During the 30 days our campaign site received over 400,000 unique hits from 170 countries. It’s an amazing feeling to have support from Honolulu and Curitiba to Jakarta and Novosibirsk a year before the documentary is even finished.
I used Kickstarter as a funding service to build a community and bring in money so I could start editing the film. I also wanted to comment on the myth that the net poses a threat to creative people.
Frank Ascheberg
My film is about the personal process that the three Pirate Bay founders went through during their trial against the media industry. I’ve been filming for two years and I hope to be able to show it in 2011 or 2012.
Simon Klose is filming Fredrik Neij and Peter Sunde Kolmisoppi.
Inspired by other financing projects To get inspiration, I looked at other film projects on Kickstarter and asked around a bit. I was advised that a longer campaign isn’t necessarily better than a short one and it’s more important to work towards an end date that means something for the project. For that reason we decided to run a one-month campaign that ended the same day that the Svea Court of Appeal trial started in the Pirate Bay case. The Kickstarter people also said that projects with videos where you can see and hear the creator of the project get more money than projects without video. The money from the campaign will fund the first part of the editing job. The rest of the film is funded traditionally, currently through Swedish television channel SVT, the Swedish Film Institute, Film i Skåne, NRK in Norway and BOOST Hbg. Much of the project’s success is down to the strong worldwide support for Pirate Bay. Plus the fact that we used their homepage to drive traffic to Kickstarter. But that said, I would still recommend people to try to fund their projects on the internet. Communicating honestly and focusing on projects that people can relate to builds trust with like-minded people online. Once you have earned that trust, I think people are willing to throw a coin in the hat. I’d definitely do it again.”
Simon Klose is a documentary film maker from Lund in southern Sweden. Check out how he set up his crowdfunding project – bit.ly/simonkickstarter
“It’s an amazing feeling to have support from Honolulu and Curitiba to Jakarta and Novosibirsk a year before the documentary is even finished”
WHY by Christer Månsson
Venture capital hand in hand with crowdfunding enture capital companies that invest money in companies at an early stage are facing a major challenge. Where patents and a large-scale approach used to be the important things, in today’s media industries it’s less tangible values and emotions that count. Maybe understandably, traditional venture capital has chosen to make the risk less adventurous by reducing it to zero. Their evaluations are based on a patent that can be defended for decades, on the back of which major production plants and distribution chains can be built. This is why when financing a corporate startVenture capitalists discuss their role in the future. up, the focus has been, and to some extent still is, on defensible international patents that are well described and integrated in an extensive business plan. In this traditional valuation by venture capital companies, the person, the entrepreneur and the management are merely a minor component. The patent and the business plan are of far greater value. However, in the past ten years, the pace of development has increased, making production plants more insecure as a longterm asset. The internet has brought new and considerably faster forms of distribution. This has switched the focus to different values that are partly replacing the role of the patent. As with crowdfunding, it’s the idea and the people behind it that are the important components. A business concept and a good team comprising the visionary, the business developer and the structured technician are increasingly being highlighted as important assets when venture capitalists are valuing companies.
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The result is that it’s now even more important for the venture capital to assess the knowledge and experience of the entrepreneur. Whether they are capable of acting quickly, focused and forcefully in a hyper-fast market. Whether they have the right network of partners and clients and whether they, ideally, have previous entrepreneurial experience. These are not easy assessments to make and adapting and keeping pace is a major challenge for the venture capital industry. New opportunities But, very soon very many users will be good at valuing ideas and judging whether the people behind them are capable of seeing them through. If venture capital companies are smart, they’ll keep an eye on successful projects on funding sites. Projects that several thousand customers are supporting with their private money already at the idea stage probably have interesting assets. The crowdfunding services are a potential goldmine from which the entrepreneurs of the future can be unearthed. Media companies that use these platforms as a window to test their ideas and seek support from users at an early stage have the potential to train their ability to present themselves to potential backers. They also get used to the idea that help is out there, which is helpful at a later stage if greater capital is needed in order to grow. They learn to go straight for the deal, developing customer-tailored products and services. More reading on bringing in capital: Paying customers are the real angels – Jonas Klevhag bit.ly/payingcustomers
“Crowdfunding platforms are a potential goldmine from which the entrepreneurs of the future can be unearthed”
WORDLIST by Media Evolution
Contemporary buzzwords Reward In this context, rewards are things that the backers of a project receive in return for their support. Rewards tend to be described cleverly and the emotional value is higher than the purely monetary one. Crowdfunding When a group of people come together to jointly provide financial support for a project, a company or a charitable purpose. Crowdfunding service A platform where creators can upload their projects for users to fund. The service provides a payment solution and there is a template for what you should focus on if you want to communicate your project in the best possible light. Funding project A project a creator creates for users to support collectively. These are limited in time (often one to three months) and have an amount of money as a target to reach. Media industries A broad definition for companies and people who work with film, TV, music, computer games, publishing, literature, communication, media technology and other media-related areas. Venture capital Money which specialist companies and people invest in companies in the start-up or growth phase.
About this publication This publication comprises texts previously published at mediaevolution.se. The idea is to repackage our regular analysis as focused in-depth looks at areas that we think the media industries need to understand a little bit better. We use bit.ly links to link to further reading online. These are easier for you to type straight into a web browser and will take you to the right address. More funding is published under the Creative Commons licence by-nc-sa. Read more at creativecommons.se
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