Kickstarter May Be Non-Starter for Crowdfunding Campaigns

Partners in a crowdfunding campaign for their cafe in Brooklyn experienced criticism for their online funding efforts.

Its successes are viral, such as Spike Lee’s raising $1.4 million for a new film, to the smaller but still successful crowdfunding efforts by firms likeTravail Kitchen & Amusements near Minneapolis who sought $75,000 for a relocation and expansion and ended up with more than $255,000.  But there are hundreds if not thousands of other ventures that fizzle like a wet firecracker on the Fourth of July.

Consider these:

–The partners pictured above who sought to raise $40,000 thru Kickstarter to relocate their wine, cake, candy, and coffee cafe because of a crippling rent increase got only $1000 and lots of posts claiming their efforts were “NOT COOL”

–A restauranteur who wanted to open Community Oven, a bakery and pizza shop in Rockland, ME, needed $50,000 and wanted to avoid bank financing and personal savings, launched a Kickstarter campaign.  She got $8,000 from friends and former customers but then “some pretty irate messages, such as ‘You shouldn’t be doing this, you’re asking for handouts.'” She ended the campaign and said she wouldn’t use Kickstarter again. Too emotional, she said.

–Krazy Jim’s Blimpyburger, a 60-year old restaurant in Ann Arbor, MI, displaced by the property owner who sold the lot, went to Indiegogo to raise $60,000 of the restaurant owners’ goal of $330,000 needed to relocate and reopen. Indiegogo also lets its crowdfunders keep the money they’ve raised even though they don’t reach their goal.  So Blimpyburger also decided to host a $100 fund-raising farewell dinner at the old place.  Some customers loved it.  Critics mocked it and chided the owners.  Local news coverage comments drew hundreds of comments, some of then “vicious,” in the reporter’s words.

Even though RocketHub, FoodStart and Indiegogo allow project creators to keep the money they’ve raised, it’s not like it’s all free money. Kickstarter takes 5 percent of the total as its cut, and credit card processing fees take another 3 to 5 percent.  Then there’s whatever incentives the crowdfunder thinks his supporters should get, such as free dinners or coupons.  If the goal isn’t reached, the pledges are canceled.

Opinions are mixed.  The Brooklyn cafe owners landed a loan and are relocating.  The Travail Kitchen & Amusements owners chalk their success to locals supporting local culture.  Others see it as a hitchhiker might: a ride that gets me closer to my destination.

It’s a coin toss, so to speak.

Here’s Stacy Cowley’s piece about the mixed results of crowdfunding:

http://www.nytimes.com/2014/02/13/business/smallbusiness/businesses-that-try-crowdfunding-face-skepticism.html

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