How do you go about the task of raising money for a new idea that you have? Typically the path has been to start with a friends and family round - basically asking the people who you know and who know you the best to take a leap of faith on your big idea.
No complicated business plans to create. No flashy investors decks to build.
Shouldn't that be easy?
It should be easy in the fact that you already have a personal relationship with the investor.
Hello <insert relative/friend name>, I'd like some cash from you to do this really amazing thing. Thanks!But you can't really just do that because you know - you KNOW - they probably will never, ever see this money coming back. For most people lost money is never a good thing. It also tends to strain personal relationships which is also never a good thing.
So now what?
the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations
Now you can build an online campaign (complete with snazzy HD video) that speaks to the millions of people in the world who can't wait to part with some cash to help you realize your dream. This is great - just what you need. Lots of folks only have to pledge a little bit of money in order for you to achieve your funding goal.
But the key here is that the majority of these folks are looking to get some-thing back. A product. They aren't getting stock in your company - yet - until the JOBS Act gets put into action. And because the risk they are taking is helping you build that product, you are going to give them a discount on it when it becomes available. Right?
You have to give to get as it were. And if you want people to believe in you then you better have a cool prize at the end of the product rainbow.
But then this doesn't sound like fund raising. It sounds more like pre-selling - no?
In essence, a site like Kickstarter isn't really about raising funds for your company. It's a clever new marketing vehicle and a discount retailer. Even the originator of the category, Indiegogo, falls into the same camp.
Let's say for arguments sake that it really IS a fund raising platform. How do you attract interest in your dream and convince folks the world over to join up with your cause? The realities are that you will be compelled to get heavy into social media to publicize your campaign. You'll have to actively manage your Twitter and Facebook accounts daily, spread the word so people will get exposed to your produced HD video and hopefully make that video go viral.
At this point you don't even have a product yet! Who has time for all of this pre/post production of HD goodness and aggressive social outreach when you are just a few dreamers in a garage?
Answer? Folks that already have money. They will have the deep pockets necessary to manage all of these time intensive (and expensive) tasks whilst benefitting from the cool factor of being on Kickstarter.
Kickstarter on it's own site says it's not a store - but how can it not be?
Have product listings? Check.
Have discounted pricing to buy that product? Check.
Deliver product when it's ready? Check.
Let's look at it another way.
What happens if you don't have a product? What if it's service? Do campaigns that don't produce something tangible which can be worn, watched or listened to getting funded? How many services, B2B ideas or B2C ideas are flourishing?
Now think about what its ecosystem will look like when Kickstarter becomes wildly successful. Thousands of campaigns vying for funding all decrying their uniqueness and special appeal. How noisy will it be then? Won't your little campaign get lost in the masses of other campaigns? How will funders find you?
Wait - there is something like that already...
What's really disheartening is that after speaking to several industry insiders, I'm being told that a high percentage of the investors in successful campaigns getting funded are - wait for it - friends and family. <gasp>
That's right. Not globally connected, Kumbaya singing let's change things together strangers. Nope, your good old friends and family.
A paradox for sure but maybe that's the real value of these platforms. They help you ask the tough question to YOUR network and that is worth 5% of whatever you end up raising...