Crowdfunding: raising money from strangers

Need help producing your new album or financing a film? Just ask someone you've never met to stump up the cash. 'Crowdfunding' is taking the web by storm, says Rhodri Marsden

January saw the recorded music industry announce another set of grim figures while waving a white handkerchief. An International Federation of the Phonographic Industry report showed that the growth of digital music halved over 2010, with its chief executive, Frances Moore, stating that digital piracy remains the biggest threat to the future of creative industries.

But away from the crumbling of traditional structures that have for decades supported musicians, film-makers et al, there's been a feelgood story brewing online that suggests that our enthusiasm for giving money in exchange for creativity has far from disappeared. Crowdfunding is a modern spin on the ancient system of patronage, and the polar opposite of file-sharing; if we're fond of what someone's doing, we give them some cash. Sometimes we get something in return, but more often it's just for the karmic glow of having helped a project to come to fruition.

A small number of artists were ahead of the curve in realising how online communities could provide alternative sources of cash. British rock band Marillion were unlikely trailblazers, and they have made a number of fan-funded albums at a time when major record labels have deemed them too unfashionable. Other creative fields inevitably followed; Franny Armstrong's highly regarded climate change film The Age of Stupid completed its five-year production process in 2009 after the £450,000 budget had been raised from 223 individuals and groups. Now, designers, journalists, coders and cartographers are all getting in on the act, their task having been made easier thanks to a number of websites that streamline and legitimise the fundraising process.

Slicethepie and Sellaband were pioneers that aimed to launch the careers of young musicians, and they've since been joined by start-ups such as PledgeMusic and My Major Company (MMC). Meanwhile, sites such as Feed the Muse and RocketHub have broadened it beyond music to any kind of creative project. But the biggest noise is being made by Kickstarter. Launched in April 2009, Kickstarter's rise to the top of the pile has been assisted by a number of high-profile projects, all attracted by its low commission rate (5 per cent) and its promise to keep its nose out of the creative process. Diaspora, the open-source alternative to Facebook currently being built by a group of American students, received $200,000 via the platform, while MNML, a design company looking for funding for its kits to transform the iPod nano into a multitouch watch, has now collected almost $1m.

But behind these headline-grabbing figures are a huge number of smaller projects that are seeing the light of day thanks only to crowdfunding. Marc Fields is a documentary film professor at Emerson College in Boston; his grant for a film about the history of the banjo dried up some $25,000 short, and, although reluctant to do so, he was persuaded by his brother, Jason, to turn to Kickstarter. "He was sceptical that anyone would care," Jason recalls. "But we received over $46,000 from over 500 donors – and suddenly TV networks who were originally lukewarm about the film are now calling Marc up. It's completely changed his perception of what social media can achieve."

French experimental film-maker Vincent Moon, known for his work with REM and Tom Jones, is similarly evangelical about using the platform. "For years, my work has been based on that same kind of spirit – the kindness of strangers. Kickstarter's ethos fits very well with that – and also with the way people create things nowadays. That DIY, one-to-one approach."

Kickstarter, like many of its online cousins, works on an "all or nothing" system. You set a funding target: if you reach it, the money is released; if you fail, it's returned. You encourage donors via a sliding scale of incentives, depending on their generosity; it could be a signed version of the finished product, a private concert, a trip with the artist in a hot-air balloon – the only limit is imagination. This completely transparent model ("This is what I need, this is why I need it, this is what's in it for you") has been crucial to Kickstarter's success, but the bigger story is the goodwill shown to artists at a time when we're constantly told by the music and film industries that we don't value music and film highly enough.

Isabel Monteiro is the singer of Drugstore, a band who found themselves cut adrift after chart successes in the 1990s; they're now recording a new album after fans donated via PledgeMusic. "We signed to a small independent label," she says, "but people were telling us that they wanted to help, too. So there's a 50-50 arrangement; the label pays for the practical things, and the fans' money pays for other essentials like transport and food. But we quickly realised that this thing is way beyond money; it's about people wanting to be part of the project."

This fundamentally changes the nature of the relationship between artist and audience. In modern times, people have always paid for products or tickets, with some of that money trickling back to the artist (at least in theory). But now, the middlemen can be cut out of the equation. Critics of crowdfunding think of this as slightly vulgar: do those who contribute to the project somehow "own" the artist – especially when the rewards on offer can involve personal meetings? Monteiro disagrees, and relishes the direct relationship that has transformed her band from being a remote, 2D presence into something more tangible. "It becomes more meaningful for both sides," she says. "Obviously there's a line that's drawn, and the fans know where that line is. They know they don't have shares in the project or influence over it, but still they donate. It makes me cry when I think about it."

My Major Company describes itself as "a record label with fan funding at its core", and its CEO, Paul-René Albertini, has held top positions at Polygram, Sony and Warner Music. MMC sets a target of £100,000 for each band, which is then used to record and promote an album; when it's released, the band gets 20 per cent of the profits, the fans get 30 per cent and the rest goes to the company. Doubters have raised a quizzical eyebrow at the figures; with the business of making and promoting music in such massive flux these days, is £100,000 really necessary? Is that money merely supporting old music-business structures that are on their way out? And why involve a company in your band's development when Kickstarter could get you the money and stay out of your hair?

MMC, for its part, says that it's about helping artists with their eyes on the charts to compete at the highest level, and this puts it at the other end of the scale to Kickstarter's projects, which could be perhaps seen as "take the money and run". So far, two bands have reached their magic £100,000.

A crucial part of MMC is the stake that donors have in the commercial success of a project, something that with Kickstarter and PledgeMusic is almost by the by. But sourcing small investments from hundreds, if not thousands, of people via the internet is a legal minefield – a fact quickly discovered by Darren Westlake, managing director of Crowdcube, a company launching in two weeks to offer fledgling businesses access to crowdfunding. "Myself and an FSA [Financial Services Authority] specialist came up with a number of different models," he says, "but one by one they were all knocked down for one reason or another. Finally, we managed to come up with one that everyone is happy with, and it's going to give us all the chance to put small sums in small businesses. There's no real way of doing that at the moment; we're really about democratising investment."

It's perhaps a logical extension of the crowdfunding model: businesses making products that solve problems will be able to appeal directly to the people they're aiming to help. Music and art, of course, don't solve problems. It's emotional responses that realise so many projects on websites such as Kickstarter, and each one makes for a fascinating and heart-warming tale.

Of course, raising that money and completing those projects is far from guaranteed, and fraught with problems that we rarely get to hear about. Despite a clutch of celebrity endorsements, three crusading teenage film-makers are still seeking funds for their production of Jules Verne's Clovis Dardentor at buyacredit.com, and while fingers are crossed for news of any developments on the website's blog, you can't help but wonder what will happen if they fail. But failure's not always a bad thing. Kickstarter's "all or nothing" model essentially allows creators to fail early, fail often, and keep on trying for that project that strikes a chord with the public. And, crucially, not once do they have to plead with a man in a suit.

Suggested Topics
Sport
The sun rises over St Andrews golf course, but will it be a new dawn for the Royal and Ancient Golf Club?
sportAnd it's Yes to women (at the R&A)
Arts and Entertainment
Friends is celebrating its 20th anniversary this year
tvSeries celebrates 20th anniversary
Sport
Yaya Touré (left) and Bayern Munich’s Spanish defender Juan Bernat
footballToure's lack of defensive work is big problem for City
Voices
voicesApple continually kill off smaller app developers, and that's no good for anyone
PROMOTED VIDEO
Life and Style
ebooksA superb mix of recipes serving up the freshest of local produce in a delicious range of styles
Life and Style
ebooksFrom the lifespan of a slug to the distance to the Sun: answers to 500 questions from readers
Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Sport
Wembley Stadium
footballNews follows deal with Germany
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Gadgets & Tech

    Technical Product Marketing Specialist - London - £70,000

    £50000 - £70000 per annum: Ashdown Group: Cloud Product and Solutions Marketin...

    Trainee Helpdesk Analyst / 1st Line Application Support Analyst

    £18000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

    Data Analyst / Marketing Database Analyst

    £24000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

    Business Analyst – 2 year fixed term contract – Kent – Circa £55k

    £45000 - £55000 Per Annum 31 days holiday, pension, healthcare, annual bonus: ...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week