Publish Date : 21-Aug-2012
A funny thing happens on Kickstarter, the website where people ask for money to finance their projects. Sometimes, they get more money than they ask for.
Sometimes, they get millions more.
In April, three-person startup Pebble Technology sought to raise US$100,000 to make 1,000 wristwatches that can be programmed with different clock faces. Donors on Kickstarter showered them with more than 100 times that amount: US$10.3 million. It would have gone higher had Pebble not put a cap on contributions and ended the fundraising early.
\"We had tried raising money through the normal routes, and it didn\'t really work,\" said Eric Migicovsky, the 25-year-old founder of Pebble.
Kickstarter is the largest of dozens of sites devoted to crowdfunding, in which donors contribute small sums of money to get a project off the ground.
Inventors, artists and entrepreneurs post their projects on a Kickstarter page, usually with a video presentation. They set a fixed duration for their fundraising, from one to 60 days, and a dollar goal for contributions. Anyone can contribute. If the goal isn\'t reached by the deadline, no money changes hands and the project is cancelled.
Usually, the contributors get something beyond the satisfaction of knowing they helped turn a dream into reality - like a ticket to a theater production, or in the case of Pebble, a programmable watch.
Designer Casey Hopkins asked for US$75,000 to make a luxury iPhone dock out of solid aluminum. He got US$1.4 million. When that happened, in February, his was the first Kickstarter project to surpass US$1 million. There have been eight more since then. Artist Rich Burlew asked for US$57,750 to put his comic books back in print, and ended up with US$1.3 million.
Since launching in 2009, Kickstarter has raised US$323 million for projects. Starting a project is free, but Kickstarter takes 5 per cent of contributions if a project is funded, and Amazon.com Inc. takes another 3 to 5 per cent for processing the payments. The funds are usually subject to taxes as well.
Crowdfunding started as a way to fund band tours and albums. Kickstarter wasn\'t the first site of its kind. It is, however, the most successful. Co-founder Perry Chen has said that the site was born out of his frustration at being unable to organize a concert. But it\'s becoming a potent launchpad for tangible products as well, upending in some cases the usual way things get made.
There\'s a time-worn route for entrepreneurs: They come up with an idea, find funding, make a product, sell it, then pay back the funders - with interest or an equity stake in the fledgling company. Under that model, funders are usually looking for a big payoff on their early investment.
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