Cedar Anderson, a third generation beehive farmer from Byron Bay, had a great idea – to extract honey from a beehive without having to take the beehive apart to extract the honey. Cedar wanted to bypass the venture capital phase and take his Flow Hive idea to consumers via a crowdfunding campaign. He also had no idea how many orders he would need to fill and he thought crowd sourcing was an ideal way to find out.
Cedar’s sister created a video and put it up on Indiegogo with the hope of raising $US70,000 in eight weeks. They flew past the target in minutes and at the end of the first day had $US2 million in orders. At the close of the campaign, they had $12.2 million in advance orders – 24,000 in fact which needed to be delivered to 130 countries.
Flow Hive is an amazing successful story and changed their business forever. Crowdfunding is a valuable tool for budding inventors, creatives, entrepreneurs, businesses, and even charities looking for funds. The concept is fairly simple. You pitch your idea on an online platform to prospective backers. Interested backers (hopefully) pledge funds in exchange for certain rewards, ranging from simple public gratitudes to exclusive items or hard profits.
Since catching on in 2008, crowdfunding sites have multiplied around the world, and Australia is no exception. The issue for many is how to choose the most appropriate crowdfunding platform. What do you need to even start a crowdfunding campaign? Here’s a quick guide to crowdfunding in Australia. After this, you’ll know if you can crowdfund, some of the best platforms to do it on, and funding risks to look out for.
Cedar wanted to bypass the venture capital phase and take his Flow Hive idea to consumers via a crowdfunding campaign.
At the close of their campaign, they had received $12.2 million in advance orders.
1. CAN YOU START A CROWDFUNDING CAMPAIGN?
Generally speaking, if you are looking to crowdfund, there are a few legal hoops to jump through. The good news though is that it just became a lot easier. In November last year, the federal government finally introduced legislation enabling startups and small businesses to crowdfund new capital from everyday investors. The Corporations Amendment (Crowd-sourced Funding) Bill 2016 enables unlisted public companies with under $25 million in assets and annual turnover to raise up to $5 million on crowdfunding platforms. This has made crowdfunding much more accessible to those looking to capitalise on their ideas.
2. KNOW YOUR PROJECT/IDEA
It’s surprisingly easy to forget this one. There’s a plethora of crowdfunding sites vying for your attention, and it’s not uncommon to lose sight of your goals while looking for the most widely used platforms. Before you choose a platform, know who or what your idea serves. Is it for entertainment or charity? Both? What about a new kind of restaurant or your own music album? The type of idea you have will dictate which platform is best for you to use.
3. CROWDFUNDING PLATFORMS TO USE (BY MARKET TYPE)
This list is far from exhaustive, but here’s a selection of platforms that cater to different kinds of ideas and goals.
TECHFUNDR A NEW PLAYER IN THE MARKET
One of the newer funding options on the market is TechFundr which operates industry specific ‘equity marketplaces’ bringing together the best high-growth, early stage businesses and a network of sophisticated investors, venture capital funds and industry bodies.
TechFundr hopes to help the next generation of innovative business in Australia connect with the capital they need to realise their growth potential and ‘start something BIG’. Providing the minimum subscription target is met, all of the contributed capital is passed on to the business less a 6% success component.
For international superstar ideas – Kickstarter is the granddaddy of startup crowdfunding. With projects such as the Occulus Rift VR headset on its resume, Kickstarter has become the most well known crowdfunding platform out there that caters to all kinds of projects and ideas. It can be a great platform for those looking for international backers. That said, with so much competition for attention, you need to have a truly standout idea to get your funding. Funding: All or nothing – if you don’t meet your fundraising goal, you don’t get any of the money raised. If you do meet your target, you pay up to 10% of funds raised to Kickstarter.
Australia’s Kickstarter – This is where you want to go if you want the breadth of interests that Kickstarter has, but marketed more towards Australian backers. Funding: All or nothing – much like Kickstarter; no target, no funding. Pozible charges successful crowdfunders up to 5% in fees.
‘Causefunding’ for the cautious – ‘Causefunding’ is fast replacing charity drives as a go-to option for funding charitable projects. GoFundMe is the largest crowdfunder of this kind, and has an even bigger annual turnover than Kickstarter (which has raised well over $US2 billion). From helping individuals beat drug addiction to building schools for children affected by disaster, charitable causes can find backers here. Funding: Keep it all – Keep it all – Regardless of fundraising target, GoFundMe passes on all money pledged minus up to 8% in fees.
Crowdfund yourself – 2013 was a good year for people keen to turn fans into online patrons. With Patreon, comic artists, writers, poets, and other creatives with great content can have an online ‘thank you’ fund to keep them doing what they love. It’s perfect for artists in general who want funding for projects which don’t usually earn much to live on. Funding: Instead of target-based funding, backers commit to monthly contributions, which Patreon takes up to 10% of in fees.
Australia’s crowdfunding for music events – GiggedIn is all about drawing funding for live music events. Perfect for musicians, event planners, and venues looking to organise events with crowdfunding. Funding: All or nothing – All or nothing – All your event’s funding is dependent on pledges meeting your funding target. A variable fee is charged on each ticket sold through their system. If pledges aren’t converted to sales, no fees are involved.