News Column

Crowdfunding Websites Draw Eyes, Dollars

September 10, 2013

Michael Machosky

economics crowdfunding
economics crowdfunding

Sept. 10--It's hard to put a price on a great idea.

Sometimes, though, you have to -- particularly if you ever want it to be more than just an idea.

Whether it's an idea for a movie, or an art project, a product, a charity, a business or whatever -- you're probably going to need money to see it through to completion.

Of course, asking for money can be a bit awkward, embarrassing, even painful. A lot of ideas don't get past this hurdle. However, the asking-for-money process seems to be getting a little easier, thanks to the recent profusion of online crowdfunding options like Kickstarter and Indiegogo.com.

To encourage donors -- and, perhaps, soften the awkwardness of asking for money -- the project owners are encouraged to offer something in return. Sometimes, those perks are as creative and interesting as the projects themselves.

One of the most high-profile crowdfunding campaigns was Spike Lee's new movie campaign -- an attempt to circumvent the Hollywood studio system, which, he says, isn't interested in funding the kinds of movies he wants to make. He reached his $1,250,000 goal with time and money to spare.

Donors included director Steven Soderbergh, who gave $10,000. At that donation level, the perk was court-side tickets alongside Lee at a Knicks basketball game.

The vast majority of crowdfunded projects, though, are much smaller. Kickstarter, the most popular of the crowdfunding sites, gets 1.1 million visitors a month, according to tech observer Mashable.com. But there are a lot of projects vying for attention.

Property developer Brian Mendelssohn is building Row House Cinema, a movie theater showing classic and cult films, in a rehabbed storefront in Lawrenceville. Next door, he plans Atlas Bottle Works, specializing in craft, local and imported beers, to drink while watching movies or take home.

"It's a single-screen neighborhood movie theater, old-school 1920s style," Mendelssohn says. "Lawrenceville hasn't had one since 1955."

The project hit a few unexpected snags, which Mendelssohn turned to crowdfunding site Indiegogo to address.

"(We're) opening it from scratch, which is unheard of, and we have to be totally digital-screen compliant," he says. "That makes things much more expensive than we thought."

This project needs to raise $14,000 before Sept. 27.

Perks range from a movie ticket and sticker for a $10 donation, to the ability to host a private screening of a movie of your choice, with unlimited concessions and beverages (and a sticker) for $2,000.

In between, there are lots of interesting options. For $500, donors can curate a week-long movie marathon around a director/actor/genre of their choice. For $200, you can get your name engraved on a "prime seat" in the theater. This option has already sold out.

For $150, a donor can get a dinner with Hollywood movie producer-director Pieter Jan Brugge ("Heat," "Glory," "Defiance"), at Bar Marco in the Strip District. Mendelssohn met Brugge while the director was hanging out in the neighborhood during the local production of his film "Love and Other Drugs" (2009).

"He has really become a mentor for this project," Mendelssohn says. "He's helped us understand our place -- we can't go out and compete with the first-run theaters. How do we get people off the couch and into the theater and create that magical experience of going to the movies?"

Mendelssohn waited until the project was well underway to start the Indiegogo campaign.

"If your customers are part of the process of development, helping shape it, it will become what they want. In this case, it's a community center for film buffs in the area," Mendelssohn says.

"We know exactly what we need financially to pull this off. If we're going to allow the community to invest in us, we've got to deliver on our promise to open this up."

One example of a successful, creative crowdfunding campaign is Pittsburgh rock band Meeting of Important People's recent album, "My Ears Are Having a Heart Attack," which was funded through Kickstarter.

"I realized I wanted to keep everything in-house and take my time doing it, and hire exactly who I wanted to hire, and upgrade the equipment," says guitarist-vocalist Josh Verbanets. "Otherwise, I'd just as soon record it on my cell phone.

"We reached almost twice our goal in terms of funding, (enabling us) to really invest in the best equipment, and hire Jake Hanner to mix and master the album."

About 150 backers stepped up via Kickstarter, and the album was released in November 2012.

"It was one of the best experiences of my adult life," Verbanets says. "A lot of it was raised locally, by friends, family, fans you see at shows. We had some big backers. There was a wonderful local businessman who pledged $1,500 for my guitar at the end, that I recorded the album on.

"We did all kinds of quirky rewards. I recorded Valentine's songs with the names of girlfriends and/or boyfriends substituted in, kind of like they do at Chucky Cheese. We had a fish-sticks-and-mac-and-cheese dinner at my house. We read every backer's name on the album, backwards -- the only way to hear it is to play the album backwards at the end of the last song on the album."

Kickstarter claims that 44 percent of projects on its site have met their funding goals, to date. The site applies its 5-percent fee to projects that meet their goals, and Amazon also applies credit-card processing fees. If funding fails to meet its goal, Kickstarter waives its fees.

The film "A New York Heartbeat," a low-budget gangster film shot in Pittsburgh, starring Eric Roberts and Rachel Brosnahan, also went the Kickstarter route. The director/-screenwriter Tjardus Greidanus sought $50,400 to complete the film. The campaign raised $52,702 in 32 days.

"The most popular items (perks) were DVDs and posters, (and) also Tjardus' original hand-drawn storyboards," says the film's producer, Laura Davis. "Two individuals ... kicked in $7,500 each for executive-producer credits."

On an even smaller scale, two local filmmmakers, Thomas Williams and Christopher Lee, thought they could raise the money to produce a web series they had written called "Internet Famous." They passed their goal of $5,000 on Kickstarter, raising $8,680.

"I had seen other projects that offered random gifts that really didn't have anything to do with the project they were attached to, and they didn't seem to perform as well as the ones where there was a definite tie-in," Williams says. "For most of our rewards, we went with stuff that we were already going to have in our budget: DVDs, posters, shooting scripts.

"Then, for the larger contributions, we offered producer credits, a walk-on role, and the chance to have our main character 'rant' about you. The jumping off point for our series is when Andy goes on a drunken rant about his hatred of Internet culture and celebrity that is secretly recorded and uploaded to the web. The video goes viral almost overnight, and Andy becomes a star."

This offbeat approach seemed to work.

"We also wanted rewards that wouldn't cost us much, if anything, while still being worthwhile enough for people to 'up' their contribution, and I definitely think we managed this," Williams says. "Our top four contribution levels didn't really cost us anything."

Two Lawrenceville residents, Deirdre Kane and Dora Walmsley, are currently using an Indiegogo campaign to help open the 52nd Street Market, a corner grocery store in a part of the neighborhood where access to fresh food is limited.

Walmsley, who works at the Greater Pittsburgh Food Bank, is particularly interested in food-insecurity issues, and wanted to help "make healthy food accessible, affordable and inclusive."

"Specifically, we did not have any cash reserves to contribute to the high costs associated with starting a small business," Walmsley says. "After researching successful projects similar to The Market Concept, we looked at Kickstarter and Indiegogo to launch our campaign. The appeal of Indiegogo is that if you don't reach your projected goals, you still get a portion of the funds -- they just take a larger cut."

The perks they offered range from "Our Biggest Grins" for $1, to a "Private Dinner for 8" for $2,500. The "Custom Design Vintage Apron" ($50) has been popular. There's also an offer for customers to pick any item for the store to stock for a year -- and the donor gets 50 percent off that item for 12 months -- in exchange for $1,000 in funding.

"We think it's also important to mention that crowdfunding enables people like us, with limited means, to pursue projects that they might not have considered due to a lack of capital," Walmsley says. "We're aware that not everybody agrees with asking for financial contributions to support a for-profit venture, but are confident that our socially driven mission and long-term goals for the business are aligned with the collective vision for our neighborhood."

Michael Machosky is a staff writer for Trib Total Media. He can be reached at mmachosky@tribweb.com or 412-320-7901.

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