Crowdfunding: Creative Financing through Social Media

Crowdfunding is a means of raising money for projects through social media. Using crowdfunding, a large number of people can individually contribute small amounts of money to finance a project.

Generally, a project creator identifies an amount of funding needed for a specified project and individuals pledge varying sums of money to generate the amount required. It is particularly useful for projects that may not qualify for traditional methods of funding.

Kickstarter is based in New York and was founded in April 2009 by Perry Chen, Yancey Strickler, and Charles Adler. It specialises in providing a platform to generate funding for projects falling into one of its 15 creative categories. In order to launch a project on the website, a number of guidelines must be met. Some of which are:

  • The project must be finite and not be simply for an ongoing enterprise i.e. it must be to create a new album rather than a record label.
  • The project creator must set a funding limit and a time limit (between 1 and 90 days) to reach this financial goal.
  • The project must have reached its monetary target within the time specified or the money pledged by individuals reverts back to that individual.

When a donation is made to a project, it is held in an escrow account until the project time expires. At this point the money is either returned to the donor (if the funding goal is not reached) or transferred to the project creator (if successful). If the funding goal is exceeded before the deadline, the project can continue to accumulate funding up until the time limit expires.

The project creator must also set awards to incentivize individuals to donate. In 2009 Emily Richmond wanted to raise funds to sail around the world. To tempt individuals to pledge money, she offered the gift of an origami sailboat for a $5 pledge or a coconut for $125.

Kickstarter charge a fee of 5% on funds raised for successful projects but nothing is charged if a funding goal is not reached. Payments on the Kickstarter site are handled by Amazon Payments and they also charge a fee of between 3% and 5% on the amount pledged to successfully funded projects.

Currently, Kickstarter is only available to project creators based in the US. Because payments are handled by Amazon it can only release payments to creators with a US bank account, address and state-issued ID/drivers licence.

MART is a non-profit visual arts organisation that was established in Galway in 2007 to showcase emerging artists. It has a US base and is currently seeking crowdfunding for a planned US exhibition on Irish immigration called ‘Invite or Reject.’

Matthew Nevin Artistic Director of MART, is using Kickstarter to raise $5,000 for this exhibition because, “…as a website it’s amazing. They’re really nice people. They don’t accept anyone that’s the thing. There’s a procedure to submit your project in. They scrutinise it a good bit and ask you to tweak things. It goes to their members to decide if it’s going to go up or not because they don’t want a load of projects to go up that are not getting funded.”

On launching MART’s project on Kickstarter, Matthew says, “It was really hard. It was probably about 2 weeks of constant work. They want the text right, they pretty much make you do a video. You don’t have to do a video but it’s frowned upon if you don’t. They want you be unique.”

According to Matthew, “As a website Kickstarter is probably the best crowdfunding website you could use because it’s so clean and it is really straightforward and they answer all the questions.”

For emerging talent wishing to take advantage of crowdfunding in Ireland, a new enterprise called Fund it is due to launch at the end of February. Fund it is the creation of Business to Arts, an organisation that brokers relationships between business and the arts.

Fund it is designed to crowdfund a wide range of creative projects. It will accept projects from the entire island of Ireland. Pledges can be made globally in both sterling and euro.

Business to Arts CEO, Stuart McLaughlin, says “it’s an all-or-nothing approach. You have to reach the total. Looking internationally at various models, not just Kickstarter, we found that the all-or-nothing approach is a motivation for the project creators and is also critical in terms of projects being made.”

Fund it believes that social media networks are key to the success of crowdfunding projects. Stuart says “we had been sitting down with various organisations that had been strong in terms of developing their social media network and saying to them – there must be something in this – you’ve got 5,000 friends on Facebook but what does this mean? At the very best it means that you’ve got a very significant portion of people that have bought into you and what you’re doing. At worst, it means nothing actually. Fundamentally though, we believe that kind of network means something.”

Stuart advises potential project creators that “it’s largely social media driven and people need to put a substantial amount of time and energy in making sure that they develop a following amongst twitter and that they have a good basis of Facebook supporters. That’s the primary way of getting the word out on it.”

Marketing your project outside of the crowdfunding sites is a critical part of the process as Stuart explains, “over and above that, what you would say to project creators is that, if for example, somebody is making an album, they need to be working to get onto the pages of Hotpress to be talking about the fact that they are trying to fund this album. When you look internationally, and at other artists that have used other crowdfunding platforms elsewhere, those sorts of things become very significant in terms of attracting people who are outside your network currently.”

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