Crowdfunding sites are the smart new way to raise finance but how do you work out which projects will succeed?

Crowdfunding sites like Kickstarter take an all-or-nothing approach to success and failure

When "Superwoman" signs up to something, you know that an idea has taken off. Especially when the Superwoman in question is financier Nicola Horlick.

Earlier this year, she raised £150,000 in less than a day, to set up a film-financing company via a crowdfunding site, a place that connects online backers with would-be creators. No wonder her latest venture, revealed this week, is – you guessed it – a crowdfunding site, Money&Co, which will launch next year. She'll have a way to go to catch up with the reigning king of crowdfunding, Kickstarter, though, which celebrated a year of business in the UK on Monday. In those 12 months, more than £22.5m has been pledged to projects in this country, with £17.1m going to successful self-starters.

While it's no doubt that Kickstarter has had a huge impact in the run up to its first birthday, and that crowdfunding is the hip new way to raise capital, there's that little matter of £5.4m. You see, Kickstarter takes an all-or-nothing approach to success and failure. If a project reaches its fundraising target, it is considered successful and if it doesn't, even if it is just £1 (or $1, given the site's American roots) off its target, then it has failed and no money can be taken.

Of course, in real-life things aren't so clear-cut, but there are quite a number of those all-or-nothing failures; 56.13 per cent of all projects "fail" on Kickstarter (which is about the same rate across all crowdfunding websites). But Kickstarter doesn't index these failed projects – that is, they are hard to find both on search engines and on the site itself. Why? According to Kickstarter's communications team, this is because the creators of such projects don't want their failed projects popping up when you search for their name and requested that they be de-indexed from Google. But this doesn't explain why you won't find failure on Kickstarter's main pages. Surely this information would help, not hinder, other project creators?

"It's not so much that Kickstarter hides failure but it's not easy to find," says Vincent Etter, a researcher from the School of Computer and Communication Sciences in Lausanne, and co-author of Launch Hard or Go Home!, a paper on ways to predict whether a Kickstarter project will succeed or fail. "Kickstarter wants to make money, right? It seems that its thinking is that success promotes success."

Dig around the site beyond the landing pages and you can find some of the projects that didn't take off. Project failures are hard to predict from just looking at them. In the "that's never going to work" category is PetTread, a treadmill for cats and small dogs, made from a big wheel stuck in a box, which claims to be "the next step forward in pet health".

The project creator did not reach his $110,000 target. But then there's "Ostrich Pillow Light" – a face-obscuring pillow that resembles a thick snood, for snoozers on the go, it looks very, very odd, and seems just as implausible as a hamster wheel for your cat, yet it has well-surpassed its £28,000 goal with funds of £68,378 and counting. Its big brother, the "Ostrich Pillow" (pictured above), was also funded on the site and is now available to buy. It looks even more daft, but that hasn't stopped its success, not least because it garnered press coverage thanks to its oddity factor (and the fact that everyone loves a nap, right?).

According to Etter, the success or failure of such projects can been predicted within four hours of them launching. He and his fellow researchers are, apparently, correct 76 per cent of the time. "The projects that succeed tend to ask for less money," says Etter.

In fact, the sweet spot is between $5,000 and $10,000, which Kickstarter does advise project creators to bear in mind in its Kickstarter school, an online tutorial on how to obtain backing. What it doesn't do is offer after-care. Its model also doesn't allow for when projects receive their funding and then founders aren't happy with what is produced. In Kickstarter's model, it's up to the creator to be transparent and communicate changes as they go along and to set realistic funding goals.

Code Crawler blocks failed to take off Code Crawler blocks failed to take off
But creators don't always stick to this advice. "It's not always clear cut," says Etter. "There is a whole new dimension, that you back the project and it has technically succeeded but then they never deliver. That is much harder to predict... for example there was a father who designed a board game – The Doom that Came to Atlantic City – with his kids as a weekend project and got $600,000, and now he has to make hundreds of thousands of these board games and he obviously wasn't prepared for that."

Another example is CLANG, a sword-fighting video game apparatus that was technically "successful" ie it raised it's monetary goal on Kickstarter, but wasn't what funders wanted; there is no game and development has been put on hold.

Amanda Boyle, CEO of UK-based crowdfunding site Bloom VC, says failure can be instructive and takes the opposite tack from Kickstarter by including projects that have failed in her site's "Hall of Fame". She also assigns a mentor to every person who creates something on the site, so they are advised on how to pitch and what investors expect from them.

Investors get angry when the project creators don't do what they've said they'll do and don't offer a proper explanation, says Boyle, and those are the kinds of projects that "succeed" but fail in investors' eyes, but as long as the creators are transparent about the process, investors are usually forgiving.

"Of course creative projects change along the way. On our site, we see a lot of feedback from funders and a lot of projects get altered because of that feedback. From our research, we know 30 per cent of people who put collateral in don't want the physical rewards," she adds, "and often the reward can be intangible, like being an exec on a movie – it's about allowing people to be part of the story."

Criticism really can be key to success where crowdfunding is concerned. A recent example of a project that failed hard is film director Spike Lee's plea for money to fund a film about human beings who are addicted to blood. After an initial panning, Lee read the comments, changed his pitch to make it more detailed and set clear goals. After those changes, the project reached its funding goal. If only he'd seen more examples of failure, he might have known what to do from the start.

So, Nicola, if you want to make your site a force to be reckoned with, make sure you big-up failure as well as success.

Which products hit their funding targets?

"Code crawlers" – building blocks engraved with computer code for toddlers FAILED

A US actor whose front teeth were knocked out made a video on Bloom VC asking for $3,500 to pay for dental work FUNDED

A Kickstarter start-up for a TV show about Kickstarter start-ups FAILED

A set of playing cards with designs inspired by the Sherlock Holmes novels, asking for $30,000 on Kickstarter FUNDED

Tip Flops – toe-separating flip flops that lets your nail polish dry while you're walking about FAILED

ebooks
ebookA delicious collection of 50 meaty main courses
Life and Style
ebookNow available in paperback
News
i100
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
health
News
science
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
News
Chuck Norris pictured in 1996
people
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
News
A voter placing a ballot paper in the box at a polling station
i100
News
people
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
Sport
football
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

    SThree: Trainee Recruitment Consultant - Dublin

    £13676.46 - £16411.61 per annum + OTE: SThree: SThree Trainee Recruitment Cons...

    Ashdown Group: Database Analyst - Birmingham - £22,000 plus benefits

    £20000 - £22000 per annum + excellent benefits: Ashdown Group: Application Sup...

    SThree: Recruitment Resourcer

    £20000 - £25000 per annum + Uncapped Commission: SThree: Do you want to get in...

    SThree: Recruitment Consultant - IT

    £25000 - £30000 per annum + Uncapped Commission: SThree: Sthree are looking fo...

    Day In a Page

    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'
    Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

    Flesh in Venice

    Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
    11 best anti-ageing day creams

    11 best anti-ageing day creams

    Slow down the ageing process with one of these high-performance, hardworking anti-agers
    Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

    Juventus vs Real Madrid

    Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
    Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

    Ashes series looks a lost cause for England...

    Whoever takes over as ECB director of cricket, says Stephen Brenkley
    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power