Crowdfunding

     A Guide to What Works and How


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New Podcast in Part about Crowdfunding

While this blog has been quiet as I put the book project into abeyance, I thought anyone still reading this blog would enjoy my new podcast at Mule Radio Syndicate: The New Disruptors. I’ll be talking to people who make stuff (artists, programmers, industrial designers, and everyone else) who are using technology platforms like Kickstarter and Etsy and new technologies like 3D printing to reach audiences directly. It’s about funding, making, and distributing things and bits. I hope you enjoy it!


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Suspending and Learning

I’ve opted today to suspend my book’s crowdfunding campaign at Kickstarter. The project is only a bit over 10% funded and unlikely to succeed. But I’m happy about it. Why? Have I gone crazy?

No. I learned an enormous amount through this effort. Let me share a few pieces of feedback and insight.

Clear vision. When I started thinking about this project, I envisioned a coffeetable book that would spread some of the excitement about crowdfunding with insights about what worked. As I developed it further, I realized my strength, and where the greatest interest lay, was in a how-to book. I never entirely centered the book’s mission on that new goal.

Pre-order versus support. As noted in other posts, many successful projects are of the “do another thing like that thing I liked before,” such as a musician releasing a CD of music like the music that fans like. My crowdfunding book is, in many ways, unlike everything else I’ve done, and I don’t have a “natural” (or existing) audience for it. Thus, for some backers, friends and colleagues, they supported me by supporting the project.

But for a larger group, and I think this included folks who might have retweeted and otherwise spread the word about the project, the pledge levels were too high. The ebook was $25, the paperback book $50, and the hardcover limited edition $125. This reflected the cost plus a portion of the overall project budget. But that wasn’t how it was seen by folks who saw this as pre-order not support.

When I relaunch, the ebook clearly needs to be about $10 and the paperback $25. (The speaking/site visit levels still make sense because of the time and cost issues.)

Pre-write some of the book and shoot some videos. I also received clear feedback that not seeing any of the book, just several articles I’d written, didn’t give backers who didn’t know me a sense of what the book would actually be like. My thinking was that much of the book involves interviews and research, and thus I couldn’t write a draft. But to make it work, I’ll need to write, at a minimum, a chapter and a prospectus that lays out the project better. The same with videos. I should be able to rent decent equipment and undertake some video interviewing in Seattle and Portland in that regard.

Find an audience. I plan to continue to update this blog, and hope you’ll come with me (and comment on it) as I go. This will be a good place for me to discuss ideas and solicit feedback as to what works for folks.

All of this was invaluable, and I count all the time towards the project as time well spent. I talk to other people working on and planning crowdfunding projects regularly, and have exchanged and learned quite a bit from what they’re up to, as well as provided advice that has actually worked as a result of previous research and what I’ve learned from this effort.

I’ll be back! Keep reading, and pass the URL for this blog on to others.


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Should Penny Arcade Have Turned to Kickstarter?

Penny Arcade, an outfit that produces two videogame-related comics among much more, launched a Kickstarter campaign a few days ago that had some people scratching heads, even as the project moved rapidly towards its $250,000 goal. (It’s a few dollars away as I write this.)

Penny Arcade started as two guys with a comic strip and, they admit, little business sense. They met a savvy business fellow, launched the PAX conference, and have become a power in the gaming industry. They have a charity for children that’s raised millions, produce multiple events each year with 10,000s of participants, write and draw two comic strips (one with another popular webcomic artist), have an ongoing reality video series of sorts, and apparently have time to play games to keep up on the field.

I’m not a videogame player, but I’ve always found the strip hilarious (even when I sometimes scratch my head like an 80-year-old and say, eh, sonny, what?), and respect the integrity of their approach to an industry that is full of editorial conflicts and douchebaggery towards players and subscribers.

The Kickstarter project still seems a little weird, and I’ve been trying to wrap my head around why. Kickstarter’s own guidelines say that you should launch a fundraising effort not just to raise funds; rather, there should be a goal of something that is made at the end of the day after funding is achieved. You’re not raising money to pay the bills.

Penny Arcade’s project states bluntly that their goal is to replace revenue from advertising on the site for a year and allow them to go ad free. But not just for donors: for everyone. The more money they raise above $250,000, the fewer ads. Enough pledges and they will ultimately produce some new creative work, such as reviving a podcast, and could switch to a Creative Commons licensing model for their work, which is currently protected under more restrictive copyright terms. The rewards are quite good (although having Jerry say your name during sex is possibly not a reward as such) for those who are fans of the strip and Penny Arcade’s events.

Their point is that the strip started and ran for years really on user support, and that they make decisions today that are designed to increase page views. In the absence of ads, the site could serve visitors’ desires better.

What they’re describing is very much like a membership model in which people join and are rewarded with an ad-free site along with premiums, as in the pledge rewards in the Kickstarter. But membership-based sites typically provide benefits only to the members. Penny Arcade’s goals are all public; the rewards may be to individuals, but the results of the fundraising are for everyone.

While the folks behind the company say they are using the money to pay salaries and the rest of the bills, technically the money is used to create a year’s worth of work, and thus it fits Kickstarter’s guidelines: the deliverable is, in fact, that work.

There is sometimes a confusion between pledge rewards being the deliverable item or the main thrust of the product being the deliverable. Often, there is a one-to-one relationship (a hardware product), but sometimes the rewards are all special items and intangibles that are separate from the primary work being created.

Right around the time Penny Arcade launched its project, Roman Mars of the 99% Invisible podcast (one of my favorites) also started a crowdfunding campaign to provide the fees for season 3 of production. Some of the reward levels are quasi-advertising: underwriting spots in a which a sponsor is briefly thanked in the program, typical in public radio.

Nobody raised a stink around Roman’s effort (a nice fellow with a million-dollar voice who I met a few months ago) because he was doing something seeming precisely like the general public-radio pledge drive, only for a single show and entirely via a web site.

Roman’s fees go to cover a year’s production, just like Penny Arcade’s cover a year’s production. Roman is replacing traditional fundraising routes in this manner, where Penny Arcade is replacing its traditional advertising sales process. (Its ad sales guys aren’t being fired, by the way. They’re moving into making new things instead of selling the site.)

At TidBITS, the Mac publication for which I run the back-end systems and write, we decided well over a year ago to pursue a membership model that is in many ways like Penny Arcade’s. We rely on sponsorship and some advertising to fund the site. By turning to members, we pursued the public radio/TV model of saying, “If you like the kind of journalism we produce, support us and we can keep doing it and more.”

Our readers came out in droves, and we met our loose targets. (We would have continued nonetheless, but this certainly gave us a more stable and consistent future.) The benefits are for all visitors: we can write more and offer more to everyone. Members get ad-free pages and a few modest benefits, but most benefits are public.

I started out seeing Penny Arcade as misusing a model: right idea, wrong platform. But over a few days, I’ve come to see that they have a choice of funding options. By offering crowdfunding, they reduce their dependence on other methods, even though their work could continue without the Kickstarter campaign.


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Back the Person or the Product?

I have been giving a lot of thought, partly because of conversations with reporters I know this week, about the difference between two major categories of crowdfunded project.

On the one hand, you have campaigns that are designed to allow a creative person or group of any discipline (music, film, design, maker, what have you) to create what I have started calling another thing like the thing you made. That is, an audience likes the previous creative effort, and wants that individual or organization to now do something else that is like that only new.

In that sort of case, the motive force behind a project has amassed an email list, readership to a blog, a Web site on which to post things on the home page, Google juice for getting referrers to said Web site and blog, and social-media connections via Twitter, Facebook, and beyond.

That person or group says, “I am doing this thing like the thing you like that I have done before. Please become part of the effort to allow me/us to do this new thing, and you will be able to get this new thing, along with the option to have enhanced versions of this new thing, and possibly the chance to meet and have real interaction with me/us.”

That’s a patronage situation. The rewards may start at a level in which a donor pledges an amount equal to or less than the retail price of obtaining the resulting work, but also engages in two kinds of risk. First, they risk that the project won’t fund, and they have committed themselves to wanting it to fund. Second, that the project won’t be fulfilled, and they will encounter sadness (and an unreciprocated financial transaction) due to not having the thing that they wanted to call into existence.

The other hand comprises fundraising for products that don’t require any direct previous knowledge of the maker. These have typically been hardware and video games created by people with a track record, but for whom a typical donor may never have heard of before or only know by project, not personality.

In those cases, the campaign organizer is saying, “We have made this sort of thing before, and we want to make something that is different and better that we can do when freed of the constrictions of investors. By backing the project, you will get one of these things, and we promise to make it.”

That is more akin to pre-ordering a product and expecting that it will eventually ship within a predicted timeframe. The whipped cream on top is when a creator offers customized or exclusive versions of a product that increase the object’s rarity and thus value in the eyes of a donor. In some cases, the highest levels of pledges related entirely to distributors who will fund the item in order to sell the resulting product at a profit.

There is overlap, of course, and lots of exceptions and quirks.

For instance, if someone is creating essentially a work of art, such as an album, movie, or other thing that is fixed into a replayable medium (digital or otherwise), that is also a pre-order. Some percentage of people who back such creative projects view it just like ordering an album on Amazon before it’s out. (But these people also must be fans, or discovered that they like the creative effort by visiting the Kickstarter page and related links, otherwise why pre-order the item?)

The relationship between patron and pre-order also blurs at the moment a project receives its minimum funding, at which point all subsequent donors have a higher degree of expectation that the project will come into being, and thus they are making a firm commitment for something that will happen, vagaries of fate aside.

You can also easily see the viral spread of certain projects that may meet none of the above criteria. The Glif in 2010 or the Ouya this week are both examples. The Glif creators had no previous products on the market, but they made a compelling case and had prototypes to show of something that was so useful and obvious (once you saw it) that people went berserk. The two designers made people want something that doesn’t exist, and major sites provided the amplification to spread the memetic virus into the brains of people who put their money down for a Glif.

Likewise, the Ouya game controller, which is an open gaming system for developers (as opposed to closed systems that require the assent of Sony, Microsoft, or Nintendo to release valid games), is an idea for which the time has arrived, and people were waiting for such a viable system to be created. If Ouya could only have appealed to people who knew the designer’s earlier work, there would be no millions of dollars raised so far.

We’ll continue to see the tension between these two categories, because a project can slip between one or the other, or occupy both states at once. You already see comments on pre-order-style projects in which people go slightly insane that their money was collected but an item hasn’t shipped. (In some cases justified, because a project organizer has gone missing or just said they aren’t going to make the thing in question.)

This is also evident in mainstream coverage of crowdfunding as it’s expanded. Trying to put everything into one column or another isn’t going to work, because there’s a continuum, and each donor may have a different position on the motivation behind their pledge.


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Keith Knight on Crowdfunding

One of the lovely people I talked to in preparing my project was Keith Knight, a cartoonist whose work I’ve loved for years. Keith writes and draws a large-panel strip and a daily comic, as well as performs in a band and illustrates on the side. It’s all in a day’s work for a cartoonist.

Keith offered up several pieces of advice and self-discovered wisdom from his campaign for “I Was a Teenage Michael Jackson Impersonator!“, a graphic novel he’s creating from his own life. True stories! Keith set out to raise $40,000 and brought in $42,843.

I happened to pledge to his campaign when he was a few dollars short of $40,000, so I claim to have technically put him over the top for funding!

Here’s a few nuggets of wisdom:

  • Kickstarter dies on the weekends. Don’t launch or have a project complete on a Saturday or Sunday. People don’t pledge on those days.
  • Schedule time a few days in to a project to start emailing the folks who already know your work and get them on board.
  • Put up samples of your work. Keith somehow managed to launch without including any cartoons! He quickly rectified that. This would be true for any writer, musician, or artist; videos would suffice for people making products to show work they’d already created.

Keith’s breakthrough in funding came when he had neared $20,000, and figured he wasn’t going to make it over the top. But a friend of his said, “All you have to do is get people to double down.” Many contributors had given relatively small amounts from $5 to $40. They had already committed to the project, and clearly wanted it to happen.

Keith sent out a backer update asking people if they’d consider upping their pledges in order to make it a reality. Many did. He shot to nearly $40,000 in a few days, and then reached funding not long after that.

I’ll be meeting Keith in person in Los Angeles as part of my storygathering tour for the book.


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The Unique Problem of My Book

One of the problems I have with raising funds in this method to write my book on crowdfunding is that it’s not “more of the same.”

That is, most crowdfunding is successful for people and groups that have already built a substantial audience for the kind of thing that the audience likes. Amanda Palmer has a huge following in real life and on Twitter and on her blogs and elsewhere because of the decade of music she’s made. She already recorded the album that she used Kickstarter to raise what was ultimately $1.2 million ($100,000 was the goal).

Someone who loves Palmer’s work says, “Ah ha! Something along the lines of what she’s done before that I already love, but new, and I get to be part of it, and I can get exclusive things if I pay more for them, like an art book or a private house concert.”

This is less true for products, in which people may never have purchased anything from the makers of the Pebble watch, which took in over $10 million for their effort, but the backers could read up on the track record of the makers, and the product was compelling enough to pre-order.

I’m somewhere in the middle, which may be a problem. While I know that millions of people have read my work over the years, some of it is without byline (as at the Economist in the print edition, or just with initials on the blog), and much of it is the kind of writing that people may not recollect my name.

I have nearly 7,000 followers on Twitter, and some have rather large followings to which they have already or will re-broadcast my book’s Kickstarter project. That network effect will certainly help.

But I don’t have a critical mass of fans who are saying, “Glenn, that thing you do: we want to help you to more of it.” It’s also true that this book isn’t precisely like what I’ve done before. I’ve written dozens of books and thousands of articles, and this book will be a bit like some of the how-to books (especially in the Take Control series) and somewhat like some of the articles. But it’s entirely new.

I do expect I will be able to fund the project. My marketing and PR efforts start in earnest on Monday, when I start to reach out to friends and colleagues, write articles for other sites, and send email to many of the folks I’ve spoken to over the last several months about writing this book, and whom I want to profile in it in the case studies part.

I’m 3% there after the soft launch. Let’s see what happens when I turn on the engines.