Raising money for your business

So, you have this amazing idea for a new service, a movie, a video game or a CD. Your plans are in place. Your team is ready. What’s the one thing you need to make it happen?

Money!

One way to get your hands on a chunk of startup cash is to pitch your idea to investors. A few years ago, Priscilla Groves and James Kennedy did just that. They went on the TV show Dragon’s Den, to raise cash for their budding business called “Piehole,” an online voice casting service.

Did they get the money they asked for? Find out for yourself:

Audio book publisher Karen Wolfer had a different idea. She used crowdfunding to pay for the spoken version of “Safe Harbor,” by Radclyffe. You can find her project on Kickstarter.com.

Since launching in April 2009, Kickstarter has successfully funded more than 20 thousand projects backed by 1.8 million people who raised over 200 million dollars.

The idea is simple. Once your project is approved, you post it on the site and you list how much you’d like to raise within a certain time frame. Visitors to the site can pledge a dollar amount and in return they receive a reward.

If the project succeeds in reaching its funding goal, all backers’ credit cards are charged when time expires. If the project falls short, no one is charged.

SUCCESS STORIES

Winning projects don’t get to keep all the money raised. 3-5% goes to Amazon Payments for processing the donations and 5% goes to Kickstarter.

Video game developer Double Fine Productions surprised everybody in 2012. They were shooting for a 400 thousand dollar investment. Within 24 hours they had received over 1 million. An hour before it closed, the project had reached the 3 million dollar level.

Entrepreneur Eric Migicovsky outdid them. He created Pebble, a futuristic watch that syncs with Android or iPhone apps. Migicovsky raised over 10 million dollars!

Compared to them, Karen Wolfer was asking for a modest $4,700. Why did she decide to raise funds using Kickstarter? Karen Wolfer:

“With Kickstarter, the money is collected before the recording project is started. Fees can be paid for narrators, sound engineers and materials up front. And by involving fans of the story or of the narrator, it becomes a form of pre-advertising for the finished book. Social media is utilized in a big way, so buzz is created from the first stage of an audio book’s life.”

You need a minimum $4,700 for this project to get the green light. Is this your entire production budget, and if not, what does it cover?

“Yes, this is my entire production budget. It will cover travel expenses for the actresses (Diane Gaidry) we signed to do the book, her fees, the sound engineer fees, and a new pre-amp we need.”

How do you reach potential backers?

“Social media: Facebook, Twitter, emails. Lots of them!”

Your company, Dog Ear Audio specializes in lesbian literature. What has been the response, so far?

“Pretty darn good! There is a passionate fan base for these stories, and Dog Ear Audio is the only audio publisher serving this niche market. The biggest surprise so far is the dollar amounts being pledged. We’ve had more pledges over the $100 amount, than we’ve had of the expected $5 and $10 amounts. The biggest pledge was a whopping $500 from folks in the Australian Outback! That floored me. But it also showed me there is a hunger for these books.

All the money is coming from fans of the author our narrator, and of course, we also have fans of Dog Ear Audio’s other titles. They have been very loyal customers. We’ve had pledges from the aforementioned Outback of Australia, the UK, and all over the US. I wrote to my brother about donating, but have not heard back from him. If he doesn’t help, boy, is he in trouble.” 😉

What will happen if you don’t reach your goal on June 1st. Will “Safe Harbor” still be recorded?

“Lol…I won’t let that happen now that we are so close. There are still lots of people to meet and share our project with. It’s all a matter of finding those ‘friends’ and groups that this story would appeal to. It is very much like any sales campaign, only the sales work is done first. You get paid first, and then you create the product.

The great thing is, there are still sales to be made after the book is published through the normal sales pathways. But to further answer your question, yes, I would still record “Safe Harbor” because I believe in this project so much, and I know the fan base is there.”

Based on your experience with Kickstarter, will you be using it again?

“Absolutely. The site is so beautifully organized. It is easy to create your project, all the answers are there to help you with the process, and I love the energy the creators of Kickstarter put into all their communications. Someone has put a lot of thought into the entire process.

A huge side benefit to launching a project this way, is that you can measure the likely success rate of your book, or any project, before you invest considerable time and money into that work. I have seen some projects receive no money, so maybe that idea needs to be revamped or even abandoned. But the person now knows that there may not be a market for that idea without having invested a lot of their own money.

Or, it may be that person needs to hone up on their social media skills. That can make or break a project, too. And as you see with Kickstarter, if a project does not receive full funding, no money is collected from donors. It is safe for anyone pledging.

I understand that it helps if a person donates to other projects before they launch their own. It is a form of ‘payback karma’; you help me, I help you, not only in donations, but in advertising of a project. I have ‘liked’ other projects that are similar to mine, and they have done the same to me, so the social networking is wonderful. Sooooo, if anyone needs a place to start, I would greatly appreciate any help from this voice-over community toward our goal.

One last detail. We are donating a percentage of any monies collected to the Safe Harbor Prison Dog rescue in Lansing KS. There are more details on this on our Kickstarter page. Again, it is in the spirit of paying it forward, and sharing the abundance that is out there.”

RISKS & RETURNS

Karen reached her goal three weeks before the deadline plus and extra $1,000. It doesn’t always work out that way. In 2011, 46% of the projects posted on Kickstarter were successful. In 2010 the success rate was 43%.

Let’s assume a project reaches its minimum limit. Who will hold the fundraiser accountable to live up to his or her promises? Kickstarter writes:

“It is the responsibility of the project creator to fulfill the promises of their project. Kickstarter reviews projects to ensure they do not violate the Project Guidelines, however Kickstarter does not investigate a creator’s ability to complete their project. (…) At the end of the day, use your internet street smarts.“

Pledges to Kickstarter projects are generally not tax-deductible and if you live outside of the United States, the site will tell you that you might “experience a problem trying to pledge.”

Then there’s the fact that the success of a Kickstarter campaign heavily depends on word of mouth. It’s the number of backers that determines what gets funded and not necessarily the quality of what’s being offered. It’s a popularity contest.

If we would leave it to public opinion, the paintings of Thomas Kinkade would now be in the Museum of Modern Art. Indie artists looking for funding might think twice about seeking support for their work on Kickstarter.

Last but not least, funding Kickstarter projects is not an investment. You might get a T-shirt out of it, or some public recognition from an author, but that’s it.

What if Eric Migicovsky’s Pebble watch becomes a huge hit? We know that Kickstarter and Amazon together take about ten percent of his 10 million dollars raised.

If you have pledged $99, all you get is a watch. Okay, it’s a very cool watch, but still…

Would you back or post a project on Kickstarter?

Paul Strikwerda ©nethervoice