Is Crowdfunding Really a Viable Source of Funding for Creative Industries?
The days of trolling around businesses, seeking sponsorships from investors and applying for arts grants are all but gone. To many creatives, it seems that crowdfunding is the only avenue available. Independent filmmakers, musicians, writers and video game designers often rely on Kickstarter and IndieGoGo as the sole source of finance for their projects, placing all their eggs in one basket. If they fail to reach their goal, nothing ventured, nothing gained; they simply give up and hope their next idea enthuses the public’s imagination.
I remember working on a film in 2012 titled White Space in a Painting. Crowdfunding was still in its infancy back then and wasn’t considered a legitimate way to gain capital. That said, we managed to raise £2,000 via IndieGoGo without any promotion. Alongside two private investors, who provided an additional £4,000, we had enough to move into production, cover the cost of post-production, and provide union rate salaries for everyone involved.
One year later I gave it another shot, hoping this time to fund an entire project through Kickstarter, which at the time had developed into the new trendy way of funding a startup. I was so confident I’d succeed I didn’t even bother searching for other investment opportunities. I assumed I’d be able to exceed the White Space in a Painting campaign, and perhaps even have enough to cover the marketing, festival submissions. So I ran a Kickstarter campaign, and despite having a much better pitch than the first film, only managed to raise £250, a mere 10% of the goal. I gave up.
Throughout 2013 crowdfunding websites were springing up all over the Internet. What was a quirky way to fund a creative startup turned into a massive business model. And it didn’t take long before the market became oversaturated. After realising that crowdfunding wasn’t going to bankroll my future, my filmmaking “career” came to a standstill. I lost confidence and enthusiasm, and didn’t make another short film for almost four years. In this time I went back to the 9-5 routine, rather than doing what I should have done: sought investment elsewhere.
Returning to the Fold
At around the same time I returned to filmmaking, a friend and I decided to launch a card game on Kickstarter, The Damned Children. The crowdfunding revolution had served as a catalyst for the board game industry (many new designers were making hundreds of thousands in pre-sales), so again, it seemed like a logical step forward. This time, however, I actively promoted the page, driving as much traffic as possible to the campaign through social media. Within the first couple of days we raised £2,000 (20% of our overall goal). Although the campaign was subsequently cancelled due to an issue with our distribution company, had we continued, we would have most likely hit our target – most projects that exceed 20% of their funding target succeed.
These three crowdfunding experiences taught me two things: the platform itself doesn’t matter and there are no shortcuts. Now, let me make myself clear… I’m not against using crowdfunding to fund a startup, and I can only blame my own naive attitude for my failures; however, if I ever decide to give it another shot, there are definitely a few things I’d do differently. And if you have a creative project or want to start a new business in a creative field, please take note…
Crowdfunding DOES NOT Drive Significant Traffic
Analytics show that less than 10-20% of backers are obtained through Kickstarter and IndieGoGo (the big two) – and my campaigns were no exception. The rest of traffic comes from external referrals: Facebook, Instagram, forums, etc. When you take conversion charges, payment transfer fees, service charges, and backer rewards into account, the cost of using a crowdfunding website can easily surpass money it brings in, usually by around 10%. So in order to succeed, you absolutely must drive traffic manually.
With that said, surely it makes more business sense to drive that traffic to a platform that doesn’t charge service fees and all of the other costs? In my opinion the excess expenditure could be far better spent buying a website, and designing a pre-sales shop with the option to continue the campaign until the final release date.
This independent route has been gaining traction ever since Star Citizen managed to amass $2 million via Kickstarter and over $150 million (breaking previous records by tens of millions) through their own website. This turned them from a small tech startup to one of the most powerful gaming companies in the industry. Other campaigns have since followed the same model, including Yu Suzuki’s Shenmue 3, which set up an independent platform – aptly named the “Slacker Backer” campaign – to allow those who couldn’t afford to invest within the initial 31 day period to support the project. Additionally, Suzuki’s team also used it as an opportunity to accept payments via PayPal, which Kickstarter doesn’t support.
While crowdfunding may seem like the easy way to get a creative business up and running, it requires a phenomenal amount of work. And if you’re going to put in all that effort, taking a little extra time to create your own platform may work in your favour. At the very least this will give you control over payment systems, the option to amend reward tiers during the campaign, and no time limit. And web design isn’t the tricky beast it used to be. Providing you have something that looks trustworthy, it need not cost the earth. According to Toolkit Websites Ltd, “Over 76% of visitors will want something clean and simple website that’s about the product, not a design statement.”
Fundamentally, if you’re starting a creative business you should never rely on crowdfunding – or at least the platform – as your sole source of income. Lest not forget, the whole industry was built upon providing seed capital or supplementary finance to get projects off the ground, not to fund them entirely – it’s in the name KICK-starter! Crowdfunding was never meant to be a shortcut or some kind of buy-in-advance online shop. Which is what most people seem to use it for these days (guilty as charged).
So embrace it by all means, but do not let it dominate your creative process or put you off reaching the finish line. After all, sometimes all that hard work would be better spent going it old school, seeking traditional forms of investment. After all, when you factor the time it takes to devise, manage and implement a crowdfunding campaign, it might be a more viable option…
Written by Adam Manuel.
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