By: Anna Brunner
Purpose: To describe crowd-funding and provide an overview of the concept using one website, Kickstarter, as a platform for fundraising.
This document covers a new source of funding for beginning farmers and incubator organizations known as crowd-funding, a source that can provide funds more quickly than traditional funding methods, often with non-monetary payback. Beginning farmers face funding challenges that are sometimes difficult to meet through traditional loans. Sometimes this challenge is due to the longer time horizon, up to a year, that it takes for loans to be processed and awarded. Sometimes the challenge arises because the applicant does not have a strong enough credit history to receive a loan. Finally, banks or other lending institutions may not be willing to back a creative idea or venture because they suspect it will not be successful or will not be profitable. Whatever the reason restricting new farmers from funding, the challenge exists.
What is Crowd-Funding?
A new category of funding known as crowd-funding or crowd sourced funding has become an increasingly widespread and popular means of support for small projects. Crowd-funding spreads the risk of a capital venture over a wide number of people and those people are rewarded through the success of the venture, often not with money. An example of a kind of crowd-funding that is discussed elsewhere in this manual is community supported agriculture or CSA. This document will discuss crowd-funding, generally, and the organization Kickstarter, specifically.
There are many emerging organizations that facilitate crowd-funding to various groups, including:
Peerbackers: For entrepreneurs with an existing network
MicroVentures: For technology start-ups
Quirky: For inventors
IndieGoGo: For any project
RocketHub: For creative projects
Kickstarter: For creative projects
Kickstarter is perhaps the most well known of any of these and is the largest crowd-funding website currently running. Although Kickstarter focuses on creative projects in a variety of categories, beginning farmers can apply to have their ideas funded through Kickstarter under the category of food. [Source 1]
How Does Kickstarter Work?
Because of Kickstarter’s success, applicability to beginning farmers, and Tilian’s successful experience using the site, the rest of this document will focus on Kickstarter, specifically. [Source 2]
Tilian Farm Development Center’s successful Kickstarter campaign page
The basic rules of Kickstarter will help beginning farmers decide if Kickstarter specifically, or crowd-funding generally, is appropriate for funding their idea. Kickstarter receives about 2,000 proposed projects per week and accepts around 60% of them to be posted on their site, so having a well thought out, achievable idea to be funded is important. Projects that tend to receive funding are those that seem manageable, but also creative. Much of the creativity comes through in how financial backers are rewarded by the group proposing the project. Kickstarter requires that backers b
e rewarded through non-monetary means, often with the products that are created through the realization of a funded project. Kickstarter requires that the funding goal be reached in the deadline set or none of the money pledged will be collected. This strategy of all or nothing funding allows backers to be more confident with the risks they take. After all, a half funded project will be less likely to succeed than a fully funded project and the more people who vet the project and decide to fund it, the greater the likelihood of commercial success. Therefore, each project proposal must have an idea that needs funding, a way to reward the financial backers creatively, the amount of funding needed for the project to succeed, and the deadline for full funding to be reached. [Source 3] [Source 4]
Tips for Starting a Kickstarter Project
Once you have an idea that you think may be successful on Kickstarter, first look around at other funded projects, which are located on Kickstarter’s website to get a sense of the kind of projects that are both accepted by the screening process and appeal to a wide range of people. Be sure to explain why your idea is both realistic and creative. Successful projects draw funding because they seem likely to succeed and also worthwhile to fund.
Have fun thinking of ways to reward your potential financial backers. Often people will want to know more about your farming operation, so a tour of the farm would be a good way to reward investors. Food produced on the farm is another way that backers can be rewarded through non-monetary means. Be sure to include rewards that could reach investors who live farther away, since Kickstarter projects are funded over the internet and not restricted by proximity. Conversely, including rewards for local backers is a good way to increase the network of buyers and supporters who may support your farm after the funded project has been completed. Before applying to a crowd-funding source, be sure to have thought your proposed project through thoroughly with the restrictions of the crowd-funding interface in mind.
A Successful Kickstarter Campaign
Tilian farmers used Kickstarter’s platform successfully in the spring of 2011, when they raised $13,323 to pay for a toolshed, deer fencing, and a walk-behind tractor. Tilian had an original goal of $12,000 that was surpassed. At the $5 pledge level the reward for backers was a tour of the farm with a full description of the growing practices, the way livestock was raised, and how the incubator and farms were run. Other funding levels were rewarded with Tilian t-shirts, with backer’s names engraved on tools, and a mid-summer barbecue out at the farm. Using Kickstarter as a platform to raise money for needed infrastructure was a successful path for Tilian farmers, and could be used again if an appropriate project arises. [Source 5]
A basket of produce from each of the three farms for the highest pledging backer, at the $300 level
Crowd-funding is a valuable new funding source for groups and individual beginning farmers alike because of the flexibility of funding offered that is not found in loans. First, crowd-funding provides a faster turn around time than most loans, allowing farmers to set achievable goals within a short period of time with a good chance of receiving funding. Secondly, crowd-funding is not based on credit history, but rather on the feasibility of the idea, as judged by a diverse group of financial backers. Third, crowd-funding has no limit on the number of ideas one individual or group can propose at once, so funding is not contingent upon current commitments, just the content of the idea. Lastly, unlike loans which must be repaid, crowd-funding often operates on the barter system, where items produced through the funded project are used to repay the donors which made the project a success.
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Sources:
1) Websites accessed which rank and describe crow-funding sites Accessed 01/15/12
2) Kickstarter Tools For Tilian
3) Comparison Of Crowd-Funding Websites Accessed 01/15/12
4) Kickstarter Accessed 12/28/12
5) Kickstarter Tools For Tilian Accessed 01/20/12
