The US-based company Kickstarter, an online crowdfunding platform, announced this month that it would open up to Canada-based projects later this summer. Previously, Canadians could use the American version of the site to fund projects, but required a US bank account in order to do so.
Kickstarter and similar platforms such as Indiegogo are based on the concept of “crowdfunding.” Crowdfunding involves a group of individuals collectively pooling their financial resources to support someone’s initiative.
Essentially, crowdfunding works opposite to traditional financing – instead of going to a single source (such as a bank) to obtain a large amount of funding from one place, an initiative is backed by numerous smaller contributions from a variety of sources. Platforms such as Kickstarter simply provide the means to connect project creators with potential individual funders, and they also act as an intermediary for collecting pledges from these supporters.
How Can Small Businesses Use Kickstarter?
Kickstarter focuses specifically on creative projects such as films, games, and music to art, design and technology. Everything promoted via the platform must be a project, which Kickstarter classifies as something that “will eventually be completed, and something will be produced as a result.” You can read more about Kickstarter’s specific project guidelines on its website.
With those guidelines in mind, many opportunities exist for small business owners to raise funds for specific business initiatives. Linnie von Rekowsky of Silk Web Publishing is one BC-based business owner that already done that by simply using a crowdfunding platform.
"Indiegogo allowed me to realize my publishing dream without the traditional stroll to the bank,” says Linnie. “While it is scary to put your idea forward on a public platform, the reward speaks for itself. We raised over $11,000 towards publishing 'Our Canadian Love Story' and just five short months later we are about to hold our book in our hands. If it weren't for crowdfunding platforms I would have pushed the 'hold' button on this dream and added it to my bucket list."
What Are the Risks and What Are the Costs?
The catch with Kickstarter and most other crowdfunding platforms is that the funding is all or nothing – as the project creator, you set the funding goal and a deadline, and if you obtain enough pledges to meet your goal before the deadline expires your project will be funded. There is no cost to start a project, but Kickstarter will apply a 5% fee to the funds collected if your project is successfully funded.
Since its launch in 2009, more than 4.4 million people have pledged over $688 million to more than 44,000 creative projects on Kickstarter (with 44% of all projects successfully meeting their funding goals). Last year, Kickstarter helped fund everything from the theatrical release of a film that was subsequently nominated for an Academy Award, to a group of sixth grade girls who wanted to send a camera into space.
For More Information
To find out more about Kickstarter’s launch in Canada, you can sign up for email updates at www.kickstarter.com/canada.