Dec 2, 2012

5 Non-Money Reasons For Crowd Funding

Recently, I came across a project on Indiegogo for a short, independent film called Por las Plumas / All About the Feathers.  Because I am a huge fan of indie films and an aspiring film maker myself ("aspiring" being the key term here), I was struck by the raw and enthusiastic nature of the pitch.  More important, I was genuinely excited for the possibility of the project being funded through crowd funding, a rapidly growing means of raising capital for aspiring entrepreneurs and inventors and, in this case, film makers.  It's a trend that I believe is the future of capital investment!

Crowd funding, by definition, is a means of bringing a large number of people together, typically through the internet, to collectively fund the activities of people, organizations and companies.  As traditional sources of capital increasingly, and frustratingly, become more difficult to attain, entrepreneurs and inventors are finding crowd funding to be a perfect solution to their growth needs.

This was primary driving force for starting Jumpoff, a crowd funding site dedicated to kid-related products and kid entrepreneurs and inventors.  Through our work with Wild Creations, a toy and game developer, we understood firsthand and intimately the difficulties of raising money for a new project or idea, especially in the toy and game industry.

After endeavoring to start Jumpoff, however, we began to realize that that there were numerous other benefits to using crowd funding beyond just Raising Capital.  For instance ...
  1. Establish Priority: While it is clearly a good idea to patent or copyright an idea, posting a project on a crowd funding site provides a permanent record of your idea in the public domain.  This is far better than just having your idea on a bar napkin in file in a desk drawer.  Of course, it is essential that you have your records in order and, for highly sensitive ideas, start the process of protecting them legally.  
  2. Raise Awareness: Since most of the money in a startup goes toward developing an idea, creating a prototype, etc, there is typically very little left for marketing.  Crowd funding provides a great and inexpensive platform for introducing your idea to the public.  The project does need to be thoroughly thought out and creative, however, otherwise it gets lost in the noise.
  3. Build A Community: These days, with social media playing an increasingly significant role in brand awareness, having supporters and fans, as well as reviewers and commentators, is crucial for developing a grass roots effort to promote your idea.  While using Facebook, Twitter, and other social media sites will surely play into a strategy, the crowd funding community is a great place to start.
  4. Develop Proof of ConceptProof of concept is the realization of an idea to demonstrate its feasibility.  Most crowd funding sites, Jumpoff included, do not fund a project unless it meets certain project guidelines and, most important, meets its funding goal.  If the funding request is not met, NO money is exchanged and the project just goes away.  If it IS funded, however, the project not only has the money it requested, it has a proven track record and most likely sales.  This is tremendous leverage when taking the product to the next stage of growth. 
  5. Create Partnerships: As the crowd investing guidelines of President Obama's J.O.B.S. Act starts to take form and go into affect in 2013 (knock on wood), the natural place to begin looking for projects in which to invest will naturally come from crowd funding sites.  Entrepreneurs and inventors can get a head start now by creating an online crowd funding profile and submitting projects in order to begin networking with the most active community members.  This is where the true partnership are going to take place.
Crowdfunding.org estimates that funds raised through crowd funding will grow from 2011 $1.5B raised to an estimated $3.2B in 2012.  This growth is sure to continue in 2013 and beyond, but I believe that the greater benefit is going to come from the huge, global community that these sites create.  I believe we are just seeing the beginning of this incredibly exciting industry, and as a co-founders of Jumpoff, I am indeed excited to be involved!

As for my dreams of becoming a film maker ... well, let's just say that with inspiring and creative projects like "Por las Plumas" on the horizon, I'll just stick to my day job!



Por las Plumas / All About the Feathers from Neto Villalobos on Vimeo.