- Tech & Gadgets
- BRW. lounge
Published 04 June 2012 13:03, Updated 12 June 2012 05:06
Melbourne’s Kylie Gusset holds the Australian record for the most funds raised by an individual using crowd sourcing after she corraled $38,893 to buy a tonne of premium wool directly from a farmer in Tasmania. Arsineh Houspian
On the same day Facebook floated on the Nasdaq stock exchange valued at $US104 billion, another technology start-up smashed a record for a very different funding model.
Pebble Technology, based in Palo Alto, California, raised $US10.27 million via crowd-funding website Kickstarter for its Pebble watch, which works with iPhones or Android phones.
Crowd-funding websites allow entrepreneurs to get their ideas in front of a large audience and may enable them to raise small amounts of money from some of those individuals.
In the case of Pebble Technology, it was able to go one step further, the 68,929 individuals who backed the project actually bought a watch turning them into customers instead of just investors.
The $10 million is the biggest amount raised so far by crowd-funding websites such as Kickstarter, Pozible, IndieGoGo and StartSomeGood.
Australian-based Pozible is picking up more business and, while the US is ahead of the curve, Australia is set for an “explosion” in crowd-funding, a co-founder of the website, Rick Chen, says.
So far the record on Pozible is held by news website New Matilda, which raised $175,838 for the relaunch of its website, while Melbourne-based Kylie Gusset holds the record for the most funds raised by an individual.
Gusset, a sole trader specialising in hand-dyed yarns and fibres, raised $38,893 last year to buy a tonne of premium wool directly from a farmer in Tasmania and organise small-scale, local processing.
A tonne of wool was the smallest amount the processors would accept and she needed at least $33,000 to cover her costs.
“There is very little yarn that is being processed in Australia,” Gusset says. “I wanted to educate end users, which is primarily the hand knitting market, and encourage the production of slow textiles in the same way that we’ve seen slow food happen in Australia.
“As a result of the project, I’m now with the School of Social Entrepreneurs in order to build a viable business.”
The founder of Perth-based Littlesweet Baking, Megan Henry, who raised $12,150 on Pozible at the start of this year, describes the project as a “great experience”.
The money is to pay for the design of new packaging and a corporate identity so that Henry can realise her dream of creating products such as premium cake mixes to sell in retail stores.
“There were so many more benefits to me other than just raising the capital,” Henry says. “It took on a life of its own with people sharing the project with me. Also, new customers found me through the project. I’ve had a 200 per cent sales increase since then and I went from being reasonably busy baking for markets to running a full-time business and employing a part-time worker.”
Henry set a Pozible record for the fastest successful project by blasting past her initial fundraising target of $5000 in just nine hours. By the end of 30 days she had raised more than double that.
Henry credits her success to the fact that she already had a product with great word-of-mouth buzz and she was offering tangible rewards, in the form of boxes of brownies and vouchers.
She promoted the project on her company’s Facebook page, where she had about 1200 fans at the time, mostly people who had direct experience of Littlesweet Baking.
In fact, Henry’s project hit upon what Pozible’s Chen describes as the two secrets of successful crowd-funding – a good reward structure and an active presence on social media.
“Rewards are really, really important, especially if you want to target people who are not friends or family but strangers interested in buying your product,” Chen says. “Before the campaign starts, you need to think about how you can get the word out there to target people who might be interested in what you are doing.”
About 45 per cent of projects started on Pozible succeed and statistics are similar on other sites. Like Kickstarter, funding is all or nothing, so you can raise more than your minimum. However, if you don’t reach the baseline, you get nothing.
What sounds like a disadvantage, is in fact it is a plus for many entrepreneurs. The fact that creators are not expected to deliver projects with only partial funding means you can test your concept on the market without risk.
Although based in Australia, Pozible takes projects and donations from all around the world and in multiple currencies via PayPal. StartSomeGood and IndieGoGo are both based in the US but open to Australians. However, Kickstarter – probably the best known crowd-funding site thanks to the success of high-profile projects such as the Pebble watch – is difficult for Australians to access because it requires a US bank account.
A co-founder of Melbourne-based Annex Products, Rob Ward, says he and his business partner jumped through hoops to get their project on to Kickstarter and it was worth the effort.
The company has successfully raised capital via Kickstarter twice – $US41,209 in January this year for a Quad Lock case that lets you mount your iPhone to your bike, car or wall and $US28,303 for an Opena case that doubles as an iPhone shell and a bottle opener.
Ward knew that a large part of his target audience was in the United States and that he also had a greater chance of receiving press coverage on US tech blogs for a Kickstarter project.
“I find that Aussies and Europeans are happy to back American sites but Americans are not as happy to back Australian sites, even if using PayPal,” Ward says. “We were thinking global the whole time.”
However, the choice of platform matters less than people think, an Australian co-founder of StartSomeGood, Tom Dawkins, says.
“There’s almost no such thing as a Kickstarter community. People come to support a specific project and 80 per cent of pledges are one-off donations,” Dawkins says. “There’s not a crowd out there waiting to fund your project. You have to bring people to it.”
He says you can have the same success using any of the crowd-funding sites but he advises project creators to have a story to tell and “think about the frame you want to put around it”.
Kickstarter and Pozible are for creative projects – a broad definition that also encompasses design, technology and food – while StartSomeGood is for social entrepreneurship and IndieGoGo is more of general-purpose platform.
Another factor is the structure. While, Kickstarter and Pozible share the all-or-nothing model, other sites take a different approach. With IndieGoGo, you keep any funds raised but the website takes a bigger cut if you don’t reach your target, while StartSomeGood allows for tiered funding goals.
Dawkins says one of the biggest misconceptions people have about crowd funding is that they assume that it is unsuitable for business. In fact, the opposite is true. “People are completely comfortable with it being for-profit at an early stage,” he says.