Andrew Serong

A hobby blog. Expect cats.

Kickstarter, Pozible, and how (not) to approach business

February 21, 2013

We’ve all read stories about wildly successful crowd funding campaigns, and it seems every comic book artist, filmmaker, game developer, theatre company, and product engineer is taking to Kickstarter or Pozible to get their start, maintain their career, or try out a new concept.

In principle, I love the hell out of the idea of crowd funding. I’m not, by any stretch of the imagination, a business expert or even someone very interested in financial management. But I’m totally happy arguing one thing: crowd funding is not a business model.

I’m a consumer and a fan of the arts and pop culture, and what I’m going to talk about is from the perspective of a fan. Basically, I’m talking from the perspective of someone who wants to give money to things that I like, but also I don’t want to get ripped off.

How not to rip someone off.

Do not use crowd funding to source donations. No-one should donate to your project through a crowd funding source. If you accept donations, register for gift recipient status (DGR), or if you’re an artist, go through a body such as ABAF, and get tax-deductible donations happening on your behalf. This is the responsible way to do it: those who are generous enough to donate to your cause are getting a little something in return, and it’s officially a donation.

The only remaining purposes of crowd funding then, are two: pre-sale of a product, and capital investment. In the neatest examples of successful crowd funding, capital investment ends up involving the pre-sale of a product, and the backer ends up receiving far more dollar value than the money they put up. The people running the campaign have the ability to provide great value to those doing the initial backing, and everyone winds up very happy with the exchange.

The problem is this: don’t think about how much money you can get out of people, don’t think of your backers as a bank, think of them as business partners. How can you ensure that your backers get a ‘return’ on their investment? In the simplest of terms, if they get one of the products you’re offering, for less than they would have paid once the product is in wide release, then great, you’ve both won. If you can give them tickets to your theatre show for less than they would’ve paid once tickets are on sale, cool. If you can add further value, say with updates on product development, or access to the developers, input into the development itself, and the chance to join a community surrounding that development, then great.

So, why is it okay to pre-sell a product, but I’m saying it’s not okay to try and get a donation?

This gets back to what I said earlier: crowd funding is not a business model. Let’s say you complete your campaign, your product gets made, your website goes live, or your theatre company goes on tour. Fantastic. Awesome. But what did your backer get out of it? Was it just the pleasure of contributing? If so, then why don’t they get a tax deduction as a result? Is it because your project was not charitable, because it was intended to eventually turn a profit? Well, guess what, you just exploited an investor, because that wasn’t a donation, it was investment.

An investment, or a series of investments, will form part of a wider business model for yourself, your company, or your product. Firstly, what I expect, if I’m going to back something, is that the people working on the project are putting in more than I’m going to put in. The best campaigns are the ones where they’re only asking money for materials, to pay other people (not themselves), to get a project over the line. Why are they not asking money for themselves? Because they’re taking responsibility for their own success and, crucially, because when the product is released, they are the ones who will be taking the profit. These are the campaigns where you know, as a backer, that they’re going to use your money wisely, and you’re more likely to see the finished product one day.

But the main reason, after all of this, that it’s so crucial to view backers not as a business model, not as donors, but as an audience? If they’re an audience, and they’re happy with how the campaign went, with the product you made, and that they got to be a part of it all? Then the members of that audience become your fans. And as your fan, I’ll want to spend money on your next thing as well, and your next one. And then I’m not just part of your business model, I’m someone who can’t wait to see what you’ll come up with next.

And finally, this whole massive, sometimes isolating experience of the internet can feel more like a local market, with artists interacting directly with their fans.

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