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Does Crowdfunding Work?

Soulskill posted about 2 years ago | from the everybody-donate-8-cents-to-find-out dept.

Businesses 70

Barence writes "Is it really practical to fund a business from hundreds of small donations harvested over the internet? With Kickstarter grabbing the headlines with some high-profile projects, it's all too easy to assume crowdfunding is great, the obvious solution for a business that needs investment. But just how feasible is it for most businesses? This article looks at several lower-profile examples and investigates the positives and negatives of this new way to raise money."

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70 comments

No. This is how it goes... (1, Interesting)

Anonymous Coward | about 2 years ago | (#41505515)

1. Famous douchebag X with a massive existing following does lame PR stunt Y to promote shitty retarded concept Z.
2. Everyone praises shitty retarded concept Z, ignoring lame PR stunt Y and giving famous douchebag X "credz" for opening our eyes to this magical new way that Changes Everything (TM).
3. Nobody grasps that shitty retarded concept Z only worked because famous douchebag X is famous douchebag X and that Mr. Nobody won't even get any freeloaders playing his game or listen to his song or whatever *for free*, much less pay/donate any money.

Re:No. This is how it goes... (3, Insightful)

wjsteele (255130) | about 2 years ago | (#41505565)

And then said "Famous douchebag" posts your message as an A/C on Slashdot.

Man, I just wish I had mod points.

Bill

Re:No. This is how it goes... (-1)

Anonymous Coward | about 2 years ago | (#41505577)

And I wish that you would make some sense, because your post doesn't make any.

Re:No. This is how it goes... (4, Insightful)

Kjella (173770) | about 2 years ago | (#41505579)

Obviously there are a lot of people who won't get any kind of funding and that's perfectly normal, it'd be a pretty strange world if everyone got the money they asked for. That doesn't say much about the relative merits of crowdfunding versus investor funding.

No. (4, Insightful)

thePowerOfGrayskull (905905) | about 2 years ago | (#41505581)

No, for most people and businesses it does not work. You have only to look at the other 99.9% of projects on kickstarter to see that.

Side note: anything that links to pc pro is probably *not* something we should consider news for nerds.

Re:No. (3, Interesting)

Anonymous Coward | about 2 years ago | (#41506069)

I would agree with that. I have a project on Kickstarter that we will likely remove because we couldn't get it funded. There is absolutely no traffic to it and we're now exploring other avenues of funding.

If you get picked up by Kickstarter and featured on the homepage, you will be funded. If you don't, then you have to go back to traditional marketing and advertising to get your product off the ground. Nothing has changed in business yet.

http://kck.st/QGWick

Re:No. (1)

kermidge (2221646) | about 2 years ago | (#41506467)

You just got another backer; looked at your project and liked it. Can't do much, though; after paying bills out of social security check, I allot myself $20/mo. for 'mad money' - an ebook, a donation, a pint or two of Guinness.

Dumb suggestion: offer link to a few .flac files or such (along with strong caveats viz. users' current sound setup) comparing your rig to several representative units.

Re:No. (2)

davester666 (731373) | about 2 years ago | (#41507231)

Well, you still need to do marketing. You need to:

a) get people aware of your kickstarter project
b) give them a reason to invest in your project

Your KS page seems to have done a decent job of (b), but I would guess you didn't put enough effort into (a).

Re:No. (1)

tlhIngan (30335) | about 2 years ago | (#41526243)

Well, you still need to do marketing. You need to:

a) get people aware of your kickstarter project
b) give them a reason to invest in your project

Your KS page seems to have done a decent job of (b), but I would guess you didn't put enough effort into (a).

Exactly.

Why is it as new technology comes around, people think it's the next big thing that completely obliterates the need for stuff like marketing? You may think advertising and such is the evilest thing on the planet, but if people don't know about it, how are they supposed to know?

Kickstarter is all about marketing. You've got to tell people about your project, why they should care about it, and why it's better than 99% of the other similar things out there.

Ditto with apps - sure you can write a app and make millions, but you need the marketing behind it. And yes, being "on the front page" IS marketing.

Oh, and "word of mouth" is also a form of advertising - if all you do is put it on your twitter feed, well, that's an ad. If you tell a friend, it's advertising (to them), and if they tell others, they're advertising your product to them. (Note that any successful scheme involves many levels - even the big brands do word-of-mouth).

You can never rest on your laurels - "build it and they will come" only works when someone else knows you built it.

Re:No. (1)

chrismcb (983081) | about 2 years ago | (#41511611)

Perhaps if you A) explained what your product is. I looked at your page. Saw a bunch of photos of something (speakers?) and figured it has something to do with iPods (maybe?) but still don't really have a clue what your product is.
B) Market your kickstarter. Yeah you are right, if no one knows about it, know one will fund it.
C) Come up with a product people might actually want. Of course I'm not exactly sure what your product is, but as near as I can tell it is two speakers I can hook my iPod up to... Aren't there a gazillion of those already in existence?

Re:No. (0)

Anonymous Coward | about 2 years ago | (#41508797)

"for most people and businesses it does not work"

You're being tautological. Most people don't create anything. Most people are drones. It is the rare and the few who are creators.

Re:No. (1)

crutchy (1949900) | about 2 years ago | (#41511173)

everyone who works is selling a service... the sad part is that most are oblivious to the value of their service and are incapable of marketing themselves to their full potential

the drones your refer to are the welfare bludgers, although there is an ever increasing number of those... resistance is futile

Re:No. (0)

Anonymous Coward | about 2 years ago | (#41511411)

The value of your services decreases proportionally to the number of people willing to do the work for cheaper than you.

Re:No. (1)

crutchy (1949900) | about 2 years ago | (#41522427)

value != cost

Re:No. (0)

Anonymous Coward | about 2 years ago | (#41517897)

So Kickstarter only works for a 0.1% elite ? This other 99.9% goes exploited ? We are the 99.9%! We need to take action!

Occupy Kickstarter !

PS: Catcha Conquer!

In short, yes, it does work. (4, Interesting)

wjsteele (255130) | about 2 years ago | (#41505587)

If the project is well thought out and the pitch is done reasonably well so that the the funder knows what they are getting into, then yes, it does work.

As a kickstarter myself (shameless plug: Ultra-Bot [ultra-bot.com] ) I started out with a modest goal... and quickly achieved it with a product that I think was well thought out, had reasonably low expectations and offered the intended audience exactly what they wanted.

With that said, however, there are a few kickstarters that are way off the mark and haven't thought it out that well... usually because they have their emotions tied into the product and it really isn't as good as they think it is... which in that case, Kickstarter actually works as well... it allows you to know that your idea isn't so hot before you invest a billion bucks in it.

Bill

Re:In short, yes, it does work. (-1)

Anonymous Coward | about 2 years ago | (#41506403)

there are a few kickstarters that are way off the mark and haven't thought it out that well... usually because they have their emotions tied into the product and it really isn't as good as they think it is

No kidding. Check this one out. http://kck.st/QGWick [kck.st]

It works as well as Business works. (0)

Anonymous Coward | about 2 years ago | (#41505607)

Some people have it. Some people don't.
It is a matter of time as to whether or not a business prospers or dies out due to failed managing.

If you plan something right, you could start a business by single monetary donations from door-knockings.
But even with billions in money you can still screw your business up quite easily.

The person matters more than the money does.

Long article; short TLDR (5, Interesting)

vlm (69642) | about 2 years ago | (#41505635)

Its a long winded article, the short TLDR is crowdfunding is the hip new term for the middle aged concert ticket business model which is based on the ancient business model of patronage. Some things like films work really well with a concert ticket / patronage model, almost everything else, not so well.

I've crowd funded a couple films. Mostly tech. Mostly tech documentaries directed by Jason Scott. I'm eagerly awaiting the release of 6502, for which I donated a healthy chunk of change. So I have some experience with this business model, and I like it.

I basically paid "an entire row of movie theater tickets" for a documentary I really want to see, done by a guy with a proven track record of decent tech documentaries. Needless to say the local theater is totally uninterested in taking a couple hundred bucks to put my taste of movie on instead of the bubblegum for the mind they specialize in. I literally cannot get the local movie theater to take my money. But via crowdfunding over the internet, I can finally get someone to take my money.

Crowdfunding really works best when there is no way to get "the locals" or the "established companies" to take my money. There are VERY FEW areas where this actually works. There are no shortage of pizza restaurants around here... crowdfunding a "pizza startup" isn't going to work. Or yet another web 2.0 company following existing trends.

Another thing you need is fanatics... Where mass industry collides with supply and demand. I'm more than willing to give away $15 for Stross's latest novel. Heck I'd give him $50. There is no known business model where I can give a book author $35 more than list price other than crowdfunding.

Finally crowdfunding works well in a gift economy. My wife got me a package deal with some custom signed artwork a couple years ago as a gift. Awesome, but out of pocket I would not have dropped that kind of dough for myself. Right now is prime gift giving time for Christmas, maybe even a little late, so you're going to see crowdfunding articles peak around this time of year.

Want to fund a book w/o crowdfunding? (1)

davidwr (791652) | about 2 years ago | (#41505909)

I know several authors who will be happy to take your money on the old-school patronage model.

Seriously, if you have a few grand lying around, I know some authors who will take that instead of a traditional publisher's advanced royalty payment and use the money to live on as they finish the book.

By authors I'm speaking of people who have already published paper novel-sized works in regular - non-novelty-press - publishing houses.

If you are seriously interested in giving authors $35 or $3500 more than retail for a copy of their book, write the author you want to fund and enclose a check or money order. I'd be very surprised if he turned you down.

Re:Long article; short TLDR (0)

Anonymous Coward | about 2 years ago | (#41508359)

I saw that Jason Scott doc, BBS: The Documentary.

He did a really good job with it. He hit on most of the important stuff and got some great back-story in here.

Re:Long article; short TLDR (0)

Anonymous Coward | about 2 years ago | (#41510771)

That's not what a gift economy is.

Re:Long article; short TLDR (1)

chrismcb (983081) | about 2 years ago | (#41511683)

Its a long winded article, the short TLDR is crowdfunding is the hip new term for the middle aged concert ticket business model which is based on the ancient business model of patronage.

I would argue, it is more of a presale. It will work if you can convince enough people to pony up the money before hand. Crowd source funding isn't anything new, it has been going on for years.
I would also be willing to bet, you could probably contact just about any author, and offer to paypal a donation.

No. (1)

Anonymous Coward | about 2 years ago | (#41505637)

ObBettridge'sLawofHeadlines http://en.wikipedia.org/wiki/Betteridge's_Law_of_Headlines [wikipedia.org]

Re:No. (1)

maxwell demon (590494) | about 2 years ago | (#41505877)

ObBettridge'sLawofHeadlines http://en.wikipedia.org/wiki/Betteridge's_Law_of_Headlines [wikipedia.org]

Maxwell Demon's Law of Headlines [slashdot.org]

Re:No. (1)

Elbereth (58257) | about 2 years ago | (#41508185)

That's not nearly as witty as you think it is.

wrong question (4, Insightful)

DevilM (191311) | about 2 years ago | (#41505657)

I don't think the question should be can you raise money for your business (or idea) with crowd funding. I think the question should be, is crowd funding intelligent enough to pick winners and losers? Most popularity contests are won by the superficial as opposed to substance.

Re:wrong question (2)

poity (465672) | about 2 years ago | (#41506639)

With crowdfunding, it's much easier to get money by being flashy and having a low buy-in price like $1 - $5. A little viral marketing, and you have $50-100k in no time because a buck is nothing to people and you are never scrutinized for wanting some pocket change. If project buy-ins were regulated and limited to certain minimums, say $100 - $500, then the project owners are going to have to submit some well-documented proposals on how they plan to deliver and demonstrate genuine drive to finish the project if they want to see any money at all. As you increase the minimum buy-in the crowd will naturally make more intelligent choices.

Re:wrong question (3, Insightful)

brit74 (831798) | about 2 years ago | (#41506749)

A little viral marketing, and you have $50-100k in no time because a buck is nothing to people and you are never scrutinized for wanting some pocket change.

Honestly, I think it's about a hundred times more difficult to get something to go viral than this sentence suggests.

Re:wrong question (1)

chrismcb (983081) | about 2 years ago | (#41511705)

There was no suggestion on how easy or hard viral marketing is. The OP was right, a little viral marketing, and you'll have a ton of money in no time. Of course it is difficult to get "a little viral marketing." But that isn't relevant to the original post.

Kickstarter replaces IPO (4, Interesting)

udachny (2454394) | about 2 years ago | (#41505677)

This comment [slashdot.org] is on the issue of the market solving the problem of government meddling with raising funds with this kickstarter project. I do not know if all companies can benefit from kickstarter, but surely some can. Today trying to get a business loan is an exercise in futility as the government crowds out all of the real credit, so none is available to the small firms, startups. The startups have to rely on VCs, friends, family, angel investors, but the rest of the market (almost all small time investors) are prevented from investing in companies while there is a potential for a real upside. The government regulations surrounding IPO prevent small investors from being able to get into businesses while there is actual upside, instead it is VCs (and underwriter banks) that mostly gain from IPOs and the IPO becomes a way to cash out instead of a way to try and grow a new business.

Kickstarter is a good first idea that allows people to invest into businesses before they could ever qualify for IPO money. Of-course there is risk in using kickstarter to try and invest, but there should be risk, people should be evaluating risks instead of blindly jumping into the casino that the inflation turned the stock market into.

Re:Kickstarter replaces IPO (4, Interesting)

DevilM (191311) | about 2 years ago | (#41505715)

Correction: You are not investing via Kickstarter... you get no equity for your money. Real crowd funding will start January 1, 2013 when non-accredited investors can start buying equity in startups.

Re:Kickstarter replaces IPO (0)

udachny (2454394) | about 2 years ago | (#41506213)

I don't actually know if you get equity via Kickstarter offerings, is anybody prevented from offering something like that on Kickstarter? IPO is about investing into companies, but more importantly it's about raising money to build a new business and what I am really talking about is that - being able to raise money outside of the official IPOs and various 'normal' channels of getting investment money.

As to actual equity, the investment, dividends and such, if Kickstarter doesn't allow this by contract somehow, then it just means I was correct saying that this is a *quote*

Kickstarter is a good first idea that allows people to invest into businesses

- you can still see putting money into a business proposal on Kickstarter as an investment. Whether you are getting equity, that's a question that can be answered by Kickstarter or some other business that can expand on Kickstarter's business model, but putting money into a proposal can be considered an investment anyway. Maybe you are just interested in seeing a product and for you the dividend is not as important as actually being able to access that product later on, if it is successfully developed.

Re:Kickstarter replaces IPO (4, Insightful)

jfengel (409917) | about 2 years ago | (#41506717)

Yes, the SEC limits your ability to raise funds in exchange for equity. The rules are (surprise, surprise) complex, but if you're asking people to invest who aren't principals of the company, they need to be "accredited investors":

http://www.sec.gov/answers/accred.htm [sec.gov]

The idea had been to prevent people from being bamboozled into making bad investments. With Kickstarter, right now, you're being told explicitly: this is not an investment. It's a gift, with token prizes, not a piece of the action. "Accredited investors" are rich enough that they can afford to absorb losses. That changes next year with the JOBS act:

http://en.wikipedia.org/wiki/Jumpstart_Our_Business_Startups_Act [wikipedia.org]

There is some concern that it will be used for fraud, as people give a lot of money for impossible returns. I think those concerns are well-founded, but we'll have to see. It might just be our next bubble.

Re:Kickstarter replaces IPO (1)

udachny (2454394) | about 2 years ago | (#41506825)

Yes, I understand that point about not being able to go IPO without meeting various government requirements, and while the gov't will tell you that it is trying to 'protect you from fraud', what actually happens is that investors are being 'protected' from making money, while fraud flourishes anyway, and FB is a good example of that, it's legal fraud, it's done with all the regulations in place and it stole billions from people who bought into the IPO.

As to whether it is possible to build a company like Kickstarter that would provide equity, well, maybe it's possible to have Kickstarter become an ETF, such that putting money into a specific business idea that is presented through Kickstarter would also buy you some of the ETF stock. As I said, it's still a new concept, ideas can be implemented on top of it later on.

Re:Kickstarter replaces IPO (1)

jfengel (409917) | about 2 years ago | (#41507275)

Kickstarter's still entirely separate from the public market. That's actually one of the other problems with offering equity via Kickstarter: you've got very little liquidity. Once you're in, you're in, and you'll have a hard time finding somebody to buy you out. You need to know that going in.

They may solve that problem eventually, though as you note, it just magnifies the potential problem. Fraud isn't exactly rampant in the public exchanges. Or at least, it's swamped by irrational enthusiasms. That doesn't mean that fraud isn't present, or that the SEC isn't too swamped to deal with it. The JOBS act may make that even worse, but we'll have to see.

Re:Kickstarter replaces IPO (1)

crutchy (1949900) | about 2 years ago | (#41511227)

FB is a good example of that, it's legal fraud, it's done with all the regulations in place and it stole billions from people who bought into the IPO

...and the really tragic part is that when the next FB comes along, billions more will be stolen legally from the morons who invest in it

moral of the story: easy money from stockmarket investment is akin to easy money from anything (including poker machines, horse racing, etc)... it's called "gambling", and rarely works out the way the participant expects

Re:Kickstarter replaces IPO (0)

Anonymous Coward | about 2 years ago | (#41505763)

I read the linked comment... Out of curiosity, are you aware of the GLBSE [glbse.com] ? A bitcoin based asset/securities exchange, several bitcoin businesses have IPO'd on there (against many regulations I'm sure) and it's been quite successful.

Re:Kickstarter replaces IPO (2)

gl4ss (559668) | about 2 years ago | (#41505777)

it doesn't replace ipo.
it replaces angel/private round - but with something that keeps all the equity in the company.

ipo's nowadays rarely are about getting operational/investment money.. usually they're just about cashing out.

Re:Kickstarter replaces IPO (0)

Anonymous Coward | about 2 years ago | (#41506655)

There are too many similar comments and time is of some value, so here is a link to the reply [slashdot.org] .

You were right the first time (2)

Tenebrousedge (1226584) | about 2 years ago | (#41506277)

Crowdfunding replaces a bank loan. It is interest-free lending [wikipedia.org] for the Internet era. It is not investment. It has nothing to do with government or IPOs.

The problem with interest is that it is unsustainable. [ucsd.edu]

Re:You were right the first time (2)

udachny (2454394) | about 2 years ago | (#41506341)

Crowdfunding replaces a bank loan

Not necessarily, I already replied to a similar remark. [slashdot.org] Kickstarter may be just first of a class of new businesses that help companies to raise money, whether it means that the money provided is a loan or not is immaterial, it's an investment regardless even of you being able to hold equity in the company you give money to. Maybe to you it's an investment even if you don't own part of the company simply because you want to see the product developed and to be able to use it, so it's like a front payment.

Also if you are talking about bank loans - those cannot be made without interest. In fact interest is absolutely essential to be able to secure loans. You can't expect a saver to give you money without interest.

Kickstarter may fail actually in a short period of time, they are still proving the concept, it's not a business model that will necessarily succeed, but there will be adjustments, there will be other types of similar ideas implemented and eventually there will be a working formula found.

As to interest being unsustainable - that's economic illiteracy, and yes, most 'economists' today are economically illiterate, including most of the economists who either teach in universities or work for governments.

I suggest this video with Jim Rogers for a little insight on economics [youtube.com] . As to interest - would you loan your savings out without getting something for it? How do you differentiate risk? How do you set prices? How do you figure out what is worthwhile vs what is a waste of time? There are all these questions and more, that are answered by market interest rates. Of-course today the interest rates (price of money) are heavily manipulated by the governments and central banks, all the 'money printing' (counterfeiting), which is inflation (or more appropriately, it's theft), distorts the system. Inflation and low interest rates signals to the market that there are plenty of savings and nobody wants to save. Actually it is the policy of the central banks like the Federal reserve, to cause people to take more risks, to spend more and not to save at all. This means though that businesses have extremely difficult times securing loans all while the credit that is available is not real, all of it goes from central banks to the commercial banks, who then buy government debt. This is a vicious circle that prevents all economic activity other than government spending, and government spending reduces the production. Government spending increases consumer spending, which means in USA spending on foreign goods. Since USD is 'reserve', many other countries peg their currency to it, using it as a 'backing', but the USD is not backed by anything, so it can be printed in unlimited quantities. This shifts the inflation form the consumers in USA to producers elsewhere, but eventually it will stop.

In fact NOT having interest, having 0% interest makes economy unsustainable, which is the exact opposite of your statement and which is the case right now in USA.

Re:You were right the first time (1)

Tenebrousedge (1226584) | about 2 years ago | (#41506475)

Did you read the linked articles? Banks do exist that do not charge interest. I'm sorry if that breaks your brain.

It does not even have to be a "something for nothing" transaction; as a banker you could require a fixed 120% repayment. That is not, of course, how the existing interest-free lending institutions work.

Your handwaving about economics won't change math or thermodynamics.

Re:You were right the first time (1)

udachny (2454394) | about 2 years ago | (#41506533)

Banks do exist that do not charge interest. I'm sorry if that breaks your brain.

- yeah, and the Federal reserve charges no interest rates to the banks that it 'lends' money to. I am saying that not charging interest rate is unsustainable for the economy, not that some people are not doing it. The Federal reserve is not charging interest rates to the member banks as it provides them with all this money, the banks in turn use the money to buy government debt, which then allows the government to keep spending. As I said - this is unsustainable. This practice distorts the market telling it that there are plenty of savings in the system, while in reality no business can get a loan and savers are destroyed or are pushed into other economies.

There is nothing sustainable about it, that's my point, not whether or not somebody argues for it or does it [wikipedia.org] .

Re:You were right the first time (0)

Anonymous Coward | about 2 years ago | (#41506593)

The Federal Reserve is completely irrelevant to this discussion. Again, try reading the aforementioned linked articles.

Re:You were right the first time (0)

Anonymous Coward | about 2 years ago | (#41507925)

You're missing the point.

Interest does one thing: It automatically creates more debt than there is currency available to pay that debt. In the long term, the system has no option but collapse. Simple maths. Hand-waving and obsessing over details within the larger sandbox do nothing to change the basic facts of the sandbox itself.

Second: I've talked to several economics students who say the same thing: "You HAVE to charge interest!"

When asked why, it never has anything to do with a physical law, or a mathematical law or anything which truly HAS to be. It always, always comes down to them personally wanting more money than they started with.

That's not a necessity. It's a desire. Big difference.

And an economy can run perfectly well without interest, and without private banks. Without psychopaths making spurious claims about greed being good, etc.

Here's a basic alternative model: A government creates its own money, not borrowed. We the people are in control of it. It dispenses it into our society in two ways: either through public projects, (building and maintaining infrastructure, grants etc.), and by lending at zero interest to business and individuals. Money is a public service much like any other.

People have to pay the sum back in a set time or risk not being eligible for future loans.

That money in turn is paid out in the form of salaries and wages, etc.

Rent seeking would be strictly controlled. Money charged on apartments, for instance, would not be allowed to be done for sheer profit; it would be done to maintain the building and pay salaries to the managers. As it stands, most rent payments are used to service mortgages on the building, which means it is feeding banks and interest debts.

Also, hoarding above a certain amount without a valid reason would not be permitted. Spend your 40 billion warchest in the next ten years or it will be taxed down to the allowed level. Money sitting idle serves nobody.

Such a system could work, though it would be very hard to implement with psychopathic individuals and organizations always trying to find loopholes; currently there are an estimated 32 trillion dollars held in tax shelter accounts by billionaires worldwide, (just in liquid cash, not including land and other material investments), which is doing nothing at all.

Cash scarcity is what causes starvation, especially in a society where people are willing to work and where resources are abundant. Hard work is still rewarded and laziness will still starve you; the black hole of money destruction which is usury would simply no longer be weighing the world down.

But only those who get it will get it. Many cling to the current system even as it goes down in flames because they can't see beyond their egos and personal dreams of power.

Re:You were right the first time (1)

serviscope_minor (664417) | about 2 years ago | (#41511777)

Crowdfunding replaces a bank loan. It is interest-free lending for the Internet era.

Not really. It's not a loan because the crowd funders don't expect to get their money back. I chipped in for a crowd funded film and I certainly don't expect to get my money back. It's more like pre-ordering. I paid in advance, and I expect to get a film to watchh.

Re:You were right the first time (1)

udachny (2454394) | about 2 years ago | (#41511965)

You invested in an opportunity to watch a movie that you think you want to watch. It doesn't come without the risk that you may end up not getting any return on that investment if the movie is not produced after all, but that's what all investments are - risky. Nobody can remove risk from investing and while governments promise this to everybody the end result is disastrous, because without the concept of risk everybody takes all risks regardless of the odds of success.

--

Here is a mental exercise: imagine you are in a casino and the casino owner promises you to cover all your losses. You start with 100 dollars. For simplicity the casino only has one game, it's one roulette wheel with a minimum bet of 10 buck per gamble and if you win you always double the bet.

What is the rational thing to do?

The rational thing to do is to split your 100 into 10 bets, put them on the table covering 10 different possibilities. If originally your chances are 1 in 35 or so, by setting 10 bets on the table you now have your odds of 10 in 35 of winning. But you have 0% chance of losing, because after the wheel is spun and it stops even if you lose on all 10 bets, you now have your 100 dollars covered by the casino.

So you are back to square one with 100 bucks, you repeat the gamble again. In about 3 tries you win once, now you have 110 dollars. In under an hour you have enough money to place bets ON EVERY NUMBER on the wheel!

And it doesn't matter to you that you lose on 37 numbers and you only win on 1 number, the number you bet on doubles the money you bet and the rest is covered by the casino, you get all your money back that you just "lost".

That's the problem with banking today and it really started being this way within the last 100 years, starting with the Fed and other central banks, IRS, FDIC, all of this works to cover the losses for the banks while allowing them to keep the gains.

Re:You were right the first time (1)

serviscope_minor (664417) | about 2 years ago | (#41524749)

You invested in an opportunity to watch a movie that you think you want to watch

No, it's not an investment. If you call every outlay of money an investment then it renders the term meaningless. It's no more an investment than spending money to go to the cinema. If that case, I pay for the opportunity to watch a movie that I think I want to watch. In exactly the same way, the moive I want to watch may never be produced (the one I pay for might suck terribly). I don't consider going to the cinema or art patronage to be an investment.

In either case, I'm in the same situation financially whether I get what I pay for or not: the money is gone. It's no different for paying for a meal, day trip, holiday or a massage. None of them are investments.

Re:You were right the first time (1)

udachny (2454394) | about 2 years ago | (#41524995)

It's no different for paying for a meal, day trip, holiday or a massage. None of them are investments.

- that's not true, unless all of your payments go like this:

"I am going to put money into this business idea that may or may not build a massage studio here and if they do, I may get my massage."

In all normal transactions you exchange money for a product not for a promise of a possible product, thus it is an investment when you do that.

Re:Kickstarter replaces IPO (1)

CaymanIslandCarpedie (868408) | about 2 years ago | (#41506329)

As others have said, Kickstarter has no relation to an IPO as it isn't even an investment. More confusing is reference to small investors blocked for IPOs. IPOs are by definition public to all investors. Do you mean pre-IPO? If you do mean pre-IPO what government regulation do you think stops you from investing pre-IPO? You are in fact more than free to find any private company you like and invest in it (assuming they are interested in your investment). Those are obviously risky investments, but has you say can have a lot of upside. No government restrictions however on any individual investing in any private company I'm aware of. On restriction I'm aware of is a private company cannot generally publicly market pre-IPO offerings (at that point you go IPO).

The real restriction to small investors for pre-IPO investments is the market. No company wants to take on thousands of small investors who really bring nothing to the table when they can find one (or a small number) of large investors who besides their cash also bring industry/government connections and experience in building a pre-IPO company toward IPO.

Re:Kickstarter replaces IPO (1)

udachny (2454394) | about 2 years ago | (#41506451)

As others have said, Kickstarter has no relation to an IPO as it isn't even an investment.

I already responded to that [slashdot.org]

Kickstarter allows a startup or an idea to be attempted by somebody, who otherwise has no access to money markets for example via IPO. As to it being an investment, it is an investment. It is an investment in a potential product that the person may want to see developed. Also as I said Kickstarter a first of a kind, if it doesn't allow equity to be shared among investors, then somebody else may attempt building a competitor to Kickstarter where equity could be shared. Kickstarter is not guaranteed to survive with its current business model, it is still premature to be sure what the outcome will be.

However my point is exactly that small investors are prevented from investing in a company that is "not ready" for IPO because of government regulations. My point is that a small company is denied access to small investors who are not investing via VCs and are not 'angel investors' themselves, who may want to be able to invest in say, Facebook 5 years back, but who didn't have that chance.

OTOH a guy like Peter Thiel could invest in Facebook while there was a significant upside to investing in it, he put in half a million and earned a billion on it. The reason he could do it and small investors couldn't is because he was doing a private deal rather than a public one and most people do not get the chance to participate in deals like this.

You are saying "No company wants to take on thousands of small investors who really bring nothing to the table" - this is just not true.

Are you sure you want to try and prove a negative? AFAIC Kickstarter is the proof positive that you are wrong on this. Many companies would love to be able to access the public for initial funding but they cannot.

I think though that if Kickstarter (or a competitor) comes up with the business model that allows a small investor actually to own part of the business they are investing in, there will be government intervention, because government protects the banks and the banks will see this as a huge competition to their IPO business model. That business model gives all the upside to the banks and initial investors and owners and first employees in the company while putting all of the downside on the public that eventually buys into the IPO.

Re:Kickstarter replaces IPO (1)

CaymanIslandCarpedie (868408) | about 2 years ago | (#41506703)

Are you sure you want to try and prove a negative? AFAIC Kickstarter is the proof positive that you are wrong on this. Many companies would love to be able to access the public for initial funding but they cannot.

But with Kickstarter, the owner doesn't have to give up any equity or give contributors any voice in decisions. A VERY big difference. With Kickstarter, they basically get free money to try something if people think it is a good idea.

I think though that if Kickstarter (or a competitor) comes up with the business model that allows a small investor actually to own part of the business they are investing in, there will be government intervention

Absolutely. That would already be illegal with current regulations unless done in a way to basically copy existing VC structures and thus not be public. If you want to market you company publicly you are free to do so, but that is an IPO. If you don't yet want to go public, then you do private deals. You can do a private deal with any one you choose (even private investors), just there isn't much of a market to privately approach a ton of small investors who only bring a bit of cash to the deal for hopefully obvious reasons.

Businesses? (0)

Anonymous Coward | about 2 years ago | (#41505803)

I got the impression that Kickstarter and friends were aimed more at individuals with ideas. Sometimes it leads to a business, but it's not supposed to be for investments in existing businesses.

Better Q: Is crowdsourcing right for YOU (1)

davidwr (791652) | about 2 years ago | (#41505925)

At the risk of sounding like an "In Soviet Russia" meme, the question to ask is:

In 2012 America, will crowdsourcing fund YOU?

Or more to the point, is it the best way to achieve your funding and other goals. Remember, as a business startup, you may have other options that may be better for you even if crowdsourcing would work for you:

A few large-donor patrons or angel-investors, family-money support, a bank loan, personal money, or even buying the shell of an existing public company and offering a secondary public offering of stock might be better than crowdsourcing. Or maybe not. You have to look at your project, your goals, and your situation to decide what is best in your situation.

Does Crowdfunding Work? (1)

sh3p (1716756) | about 2 years ago | (#41505959)

Answer: Sometimes.

Re:Does Crowdfunding Work? (1)

jones_supa (887896) | about 2 years ago | (#41506507)

Which times?

Crowd Funding + Government Assistance (0)

Anonymous Coward | about 2 years ago | (#41506017)

Here in Western Australia, Screenwest (The governing body of film funding in the state) now matches 2:1 any funding acquired by film makers from an Australian crowd funding platform (Pozible). This was brought in due to the success of a number of films that achieved their funding targets without any government assistance.

Yes (1)

Murdoch5 (1563847) | about 2 years ago | (#41506021)

Crowd funding works! How many projects have been able to get off the ground and even become successful after applying for public funding. With crowd funding you get one major advantage and that is the ability to pitch your idea to much bigger group. When you try to make a pitch to a small group of investors your relying on a small group of people understanding and taking great interest in your idea, if they don't understand your idea it's almost doomed to fail. This is what crowd funding helps eliminate.

Non profit/business projects. (1)

lsolano (398432) | about 2 years ago | (#41506071)

Well, maybe and exception, but for non-business projects, Kickstarter works great if the idea of the project can make the people feel they're part of it.

I know about a movie, of a new Director that already made a pair of good very-low-budget movies that wanted to make a new one but better produced. Depending on the amount of money one send, you can get a different benefit like a DVD of the film, a ticket for the movie premiere or at least, see your name in the credits.

Simple projects that you don't expect much in return, but that you think they're a nice idea.

I don't see myself backing a business project with lots of money waiting for a big thing in return.

El Regreso Movie [kickstarter.com] (Spanish)

Not for much longer (1)

Paul Slocum (598127) | about 2 years ago | (#41506109)

Kickstarter is a great idea, but I think it will soon become difficult to fund projects due to lack of quality control. I think there will be too many projects that get funded but fail to deliver (like this one [pitchfork.com] ), people will become wary about what they fund, and eventually it will be almost as difficult to get a Kickstarter funded as it is to just find an investor.

I think this DEVO App Kickstarter [kickstarter.com] is a good illustration of the problem. As an iOS programmer and I can tell you that this project will almost certainly end in disappointment. He basically wants $15k to redo the graphic assets of his failed colorforms-like app, but I think it takes an expert to see this through the clever sales pitch.

Re:Not for much longer (1)

Bieeanda (961632) | about 2 years ago | (#41506143)

I wouldn't qualify myself as an expert, but the app goes from 'this is cute' to 'this is meaningless' with a side of 'he wants HOW MUCH?' in a few seconds of critical observation. I'm a DEVO fan, and I was more than happy to give it the benefit of the doubt, but the pitch pulled apart very quickly for me.

Kickstarter is good for art projects, not tech (1)

sandytaru (1158959) | about 2 years ago | (#41506413)

I've helped fund a lot of self published comic books, a painting series about the Wall Street Meltdown, and other artistic endeavors. Every one I have funded has so far resulted in a tangible product in my hands, usually signed by the artist (with extra sketches).

But I shy away from ones that are involved in things that are purely software oriented,or based on any technology higher than the iPod Nano wristwatch converter (with the exception of indie games from already established studios.) I'm still raising an eyebrow over how much money the Ouyo console managed to bring in, as I still remember the Phantom console (which turned out to be true to its name) from just last decade.

At this point, major hardware based endeavors, and large scale software endeavors from folks who aren't already in the industry, are just too iffy to bet on.

Sounds like a publicly traded company (1)

Anonymous Coward | about 2 years ago | (#41506421)

Crowdfunding sounds a lot like publicly traded companies, except no stock is given.

Being a crowdfunder is amazing... (0)

Anonymous Coward | about 2 years ago | (#41507345)

The Dollyrots [dollyrots.com] were able to record and produce their forth album on their own label with Kickstarter [kickstarter.com] , and I'm so glad I got to be a part of it. They initially set a goal of $7500 and achieved it within a week, eventually getting more than $33,000. I chipped in $75, which got me an autographed copy of the album, an exclusive T-shirt with the new album art and my name on it, and a personalized video from lead singer and bassist Kelly Ogden teaching me how to play one of their songs. The Dollyrots were in Minneapolis last Sunday, and I got to hang out with them and watch them set up two hours before the show, then hang out and chat with them afterwards. They quickly shot up the charts to become one of my favorite bands, and it's all thanks to Kickstarter. They love making those personal connections to their fans, and Kickstarter was how they made it happen; it's awesome.

Numbers? (3, Insightful)

brit74 (831798) | about 2 years ago | (#41507353)

That article was remarkably free of actual numbers. I was hoping for some statistics. Speaking of which, here's an article about Kickstarter projects that I read a while back ( http://www.appsblogger.com/behind-kickstarter-crowdfunding-stats/ [appsblogger.com] ). They included some actual numbers - for example: "Projects that are featured have a 89% chance of being successful, compared to 30% without." (I presume that means "featured on the Kickstarter homepage".) The downside to that statistic is that, as more projects appear on Kickstarter, the smaller percentage of them will be on the front page (because there's limited space). If that's true, it means the percentage of successful Kickstarter projects will decline as more projects appear on Kickstarter.

All big business is crowdfunded (1)

silentcoder (1241496) | about 2 years ago | (#41511831)

That's what stock certificates ARE. That's what the stock-market is FOR.

The only thing that kickstarter changes is the nature of the transaction. Instead of the wealthy investing in the company (or more accurately these days: investing in the likely future value of a piece of the company - which as it's own set of products) the future CUSTOMERS invest in a PRODUCT they want to buy.

If anything that is a MORE sustainable model than the old one, but the idea of crowdfunding a business isn't new. It was invented by the East India Company about 400 years ago. The kickstarter model just means that entrepeneurs can fund their vision without having to give away the actual fruits of their labour.

96% of business founders get fired within 3 years of going public. Funding a business via the "sell people bits of ownership" model of crowdfunding means you stop owning it - you can lose the company you created. With the kickstarter model - you instead are offering people the opportunity to fund the creation of a product they want to buy, a product they could not otherwise have bought. It is true consumer driven market - this probably does and SHOULD scare those whose livelihoods depend on the belief of entrepeneurs that the only way to fund their products is to sell ownership -but it's a good thing for both customers AND entrepeneurs.

Crowdfunding a business has a 400 year history of success. Crowdfunding a business while still being able ot make the product YOU envisioned, and that YOUR customers actually WANTED - now THAT is an improvement.

When people believe in it. (0)

Anonymous Coward | about 2 years ago | (#41520395)

Crowd funding will work when people believe in what is being funded.

Let me tell you the tale of the classic example of an Indian film called MANTHAN (http://www.imdb.com/title/tt0074858/). a 1976 movie.

It is based (only based) on the true life story of the founding of Amul Milk Co-operative. The then head of the co-operative who died recently at the age of 91 was asked to prepare a documentary about his project. Instead, of a documentary he and the director decided to make a full film fictionalised version. The question arose about funding.

It is known (not said to be but documented in interviews and in the "COMPANY CREDITS down in the IMDB page) that the "production co" was the co-operative milk federation and each of it's members contributed Rs.2/= (about 5 to 6 US cents at the then exchange rate) and this made up the bulk of the production cost.

see also
http://www.imdb.com/title/tt0074858/news

OK

can i get my flameproof layman mantle on first (1)

shnull (1359843) | about 2 years ago | (#41527467)

If anyone ever finds a one-fits-all-system that works every single time on everything, pls to mail me the pdf, call stephen hawking and become a forex trader
i think, if you plan to man your own mission to mars crowdfunding aint gonna do it. If however you need a little less what's the harm in at least trying while keeping an eye open for any other option that arises? Is there a law that says you cant do both ? You could probably even convince a 'real' investor better if you can show it you got this hundreds or more ? (no idea what the average is) people willing to support you. Better than a petition, people who are willing to spend makes good impression on 'investors' i suppose.
the biggest sin in life is not to have tried. i cant even get a thought up since it would mean independent business and the law says i cant do that. motivation zero, even if i could, which i dont know i can, i think i'll be ... by then, well that which does not kill you makes you crazy, ask the man himself
psch, did i wind off-topic again? dont tell me i did it again oh nooo
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