Over the last decade, the internet has heralded the arrival of a new way to allow independent filmmakers across the globe to obtain funding for their latest projects. With the rise of websites like KickStarter and IndieGoGo, online crowdfunding has become a much more viable resource, not only for budding inventors and entrepreneurs, but for indpendent filmmakers as well.
Crowdfunding, also known as micropatronage, allows people to pledge donations to a project through crowdfunding sites in exchange for non-monetary benefits. This differs from conventional single-investor practices in that there are now many people giving small amounts of money.
Prospective creatives create a page on a crowdfunding website with all relevant information, including information about the project, details of the benefits and perhaps a short video too. Then, once the page is published, they are open for donations.
Many engage in online promotion, primarily through social media, in order to get the word out to friends, fans and potential investors.
A common feature of these sites is a time limit, commonly known as ‘all or nothing’ funding (Kickstarter), whereby if the target amount is not reached by the end of the designated time window, the creatives involved cannot claim any funding.
One of the most prominent of these companies, Kickstarter, was founded in New York in 2009. Kickstarter has successfully funded over 25,000 projects, out of the 61,000 plus projects that launched on their website, giving them a success rate of 44%, and a gross total of $264m raised for said successful projects (kickstarter.com). Like many of these sites, Kickstarter generates revenue by taking a percentage, between 4-9%, of all monies raised from successful projects, and nothing from unsuccessful ones, depending on what conditions are attached to a project by its instigator.
These new applications for the internet have been welcomed by amateurs and professionals from a variety of fields. These platforms eliminate geographical disadvantages faced by those searching for investment, globalising a previously local service like so many other internet companies of the last decade. It also allows a greater number of projects and endeavours to be funded, as the base from which funders can be drawn expands now to anyone with a computer and a credit card. Any project’s target audience can now be involved its creation. Many venture capitalists have criticised the rise in crowdfunding as an effective democratisation of their industry. A 2009 report by the Kaufmann Foundation predicted that total assets of venture capital firms will contract by 50% to $12 billion over the next few years.*
The other major risk that one takes in donating to a project is that there is no guarantee that the project will ever come to fruition, even if all funds are sourced. Those considering investment in a project are encouraged to research the artist, musician, filmmaker and other persons involved to ensure legitimacy.
Certainly, crowdfunding has allowed the creation of many projects that would not have otherwise seen the light of day. By no longer having an investor peer over the shoulders of those involved, fewer projects will suffer from too many chefs being in the proverbial kitchen. However, is a perspective lost when the voice of a one significant financial backer is shut out of the creative process?
The consequences of this new phenomenon have yet to fully reveal themselves, but there is no doubt that many artists, musicians, filmmakers and inventors alike have benefited greatly from this new form of fundraising. Whether this setup is sustainable, however, is a question that will no doubt be answered in the very near future.