Entrepreneurs Turn to Crowd-Funding

Many B.C. businesses are relying on the power of the people – and their collective donations through crowd-funding websites – to get their new ventures off the ground. What do a music video, a new design for stackable soap bars, a series of webisodes about bicycle theft and a coffee brewer with a patent-pending two-stage microfilter all have in common? They’re all Vancouver-based startup business ventures that were financed – at least in part – by crowd-funding.

Crowd-funding | BCBusiness
Espro Inc. founders Bruce Constantine and Christopher McLean raised five times what they were asking to help develop their new coffee press.

Many B.C. businesses are relying on the power of the people – and their collective donations through crowd-funding websites – to get their new ventures off the ground.

What do a music video, a new design for stackable soap bars, a series of webisodes about bicycle theft and a coffee brewer with a patent-pending two-stage microfilter all have in common? They’re all Vancouver-based startup business ventures that were financed – at least in part – by crowd-funding.

For entrepreneurs (and some just plain crazy folks), crowd-funding is a viable way to get a project off the ground, and anyone with access to an Internet connection is a potential investor. On crowd-funding website Kickstarter.com, singer Elisa King raised $3,602; Aric Norine, founder of the Stack soap upstart raised $17,921 (nearly twice its ask); Bruce Constantine and Christopher McLean, founders of Espro Inc., raised $83,693 (five times the ask) to develop their Espro coffee press; and on Indiegogo.com, Ingo Lou, producer of To Catch a Bike Thief, has garnered pledges of $3,000 to help him complete his web videos.

On nearly all crowd-funding sites, it’s easy and free to register a project. Pledges are made by credit card, PayPal or third-party avenues such as Amazon Payments. In the case of Kickstarter, all you need is a specific project with a specific goal. Once, and if, your goal is reached, the sourcing site takes a cut of your pledges. Some, like Indiegogo, offer a “flexible funding” fee structure, which allows entrepreneurs to keep whatever they raise – even if their goal is not met – minus nine per cent. Fixed-funding campaigns incur a fee of four or five per cent, but if the goal is not reached, all pledges are cancelled and the entrepreneur is back at square one. Some sites put a hold on donors’ credit cards immediately; others only take the funds once the goal has been reached. The Espro founders report receiving their funds in three days. King had yet to receive her funds a week after the close of her campaign, but given Amazon Payments’ 14-day payout time, “I’m sure it will be fine,” she says.

There’s no shortage of donors for even seemingly far-fetched projects – take Playa Time, the “20-foot human-powered cuckoo clock” listed on Kickstarter, for example – which raises the question: what drives people to pledge? Incentives help, whether it’s a free download of King’s new song in exchange for $5, or, in Espro’s case, a pre-order for one of its projected coffee presses in exchange for $85 (a discount of 14 per cent off the projected retail price). For creative projects, the reward might be intangible: the To Catch a Bike Thief producer, for example, promises a tour of “Vancouver’s bike theft scene,” or a date with one of the show’s cast members.

A successful crowd-funding campaign doesn’t necessarily mean you’re ready to present to venture capitalists next, but it can help to get things going. Elisa King used her funds to pay for the nitty-gritty of her music video (location permits, insurance, lighting, catering for her crew, etc.), and she plans to share the completed project with her fans and pledges in a few months. She believes social media made all the difference in reaching her goal: “I can’t imagine this being so easy without it,” she says.

Bruce Constantine, who co-founded Espro with Christopher McLean in 2004, agrees that active promotion, plus the ability to deliver the promised rewards within 90 days, contributed to his company’s successful campaign. Similarly, Espro’s entire goal of $15,000 was met on a single day after a story appeared about the company on Gizmodo.com. But Constantine cautions that “crowd-sourcing is getting soured by bad projects,” and suggests that providers such as Kickstarter and Indiegogo need to implement tighter review processes in order to continue as a credible launch tool for legitimate businesses.

That said, “I would absolutely use Kickstarter again,” says King. “It’s easy, safe and builds a good connection with the people out there that want to see your dreams come to light.”