Through crowdfunding, customers invest in the businesses they think will succeed; but sometimes businesses thrive despite a lack of support
By Michael Hingston | September 1, 2014
The Icicle Tricycle Ice Cream Bikes are slick, pedal-powered way of bringing ice cream directly to the people. Assembled in Portland, Oregon, these custom trikes not only look sharp, but also have seven speeds, reinforced folding frames, and – most importantly – insulated compartments in their fronts that will keep your ice cream perfectly chilled and ready to serve at a moment’s notice.
The tricycles are things of beauty and, in early 2013, Mike and Iva Stone decided they wanted one. The husband-and-wife duo had recently opened a gourmet cookie store on 124th Street called Cookie Love, following five years of selling out of a booth at the downtown farmers’ market. By turning their cookies into ice-cream sandwiches, the Stones figured they could use the tricycle to set up shop at pedestrian-heavy locations all around the city. And with summer fast approaching, they knew the time to act was now. But there was a problem.
“Honestly, we put the financials together,” Mike says. It was going to cost $2,500 to buy the bike, and another $500 to have it professionally decorated. They’d also have to spend time – and gas money – driving down to Portland, picking the unit up, and bringing it back home. All told, what they’d dubbed the Cookie Love Machine was going to cost the Stones around $5,000. “And we didn’t have it.”
So they turned to what more and more small-business owners have, in lieu of an old-fashioned bank loan – crowdfunding. The Stones set up a page to raise money for the tricycle on Indiegogo, created several tiers of perks (recognizing various levels of donations) and then sat back, hoping that their ice-cream-loving community would rally around them. Instead, what they learned was the stark and all-too-common reality behind this flashy method of fundraising.
After 30 days, the Stones had raised just under $2,000 – less than half of their goal. Unlike some other crowdfunding sites, like Kickstarter, Indiegogo allows users to keep the raised funds even if they don’t hit their overall targets. But it penalizes you by taking a larger cut of the total: In the Stones’ case, a whopping nine per cent. “We didn’t have that calculated in,” Mike admits. Then there’s the additional 2.9 per cent, plus 30 cents, that PayPal takes for handling each individual transaction.
Once you factor in the cost of the perks that were claimed, the crowdfunding model doesn’t look quite so miraculous.
These days, entrepreneurs of all stripes use crowdfunding. In 2013, nearly 20,000 projects were funded by Kickstarter alone, and the site boasts an overall success rate of 44 per cent since launching in 2009. But many of Kickstarter’s greatest beneficiaries have been big-name entertainers. Earlier this year, Scrubs star Zach Braff raised over US$3 million on the site to direct his second film, Wish I Was Here. In 2013, a campaign for the Veronica Mars movie, based on the cult TV show, raked in over US$5.7 million from some 91,000 donors – nearly three times its goal.
Here in Edmonton, director Shreela Chakrabartty and screenwriter Kash Gauni had similar aspirations. They liked the extra benefits that independent financing offered filmmakers, especially ownership of the final product. That’s why they took to Indiegogo in 2012 to raise funds for their first feature, the contemporary suspence thriller, Rock Paper Dice Enter, about a hacker who masterminds a diamond heist in a fictitious North American city, which nonetheless has some very familiar-looking alleyways and LRT stations. That way, Chakrabartty tells me, “We didn’t have to look for exclusive producers. This enabled us to maintain our copyright, maintain our ownership and creative control of the film, and still have people tell us at the ground level that they’re interested in our stories.” In the end, however, Chakrabartty and Gauni also fell short, raising less than 10 per cent of their $40,000 target over a period of two months.
What went wrong? In the case of Rock Paper Dice Enter, Chakrabartty says they weren’t specific enough, fundraising for part of the film’s total budget, rather than a more concrete expense, like hiring a crew or even throwing a launch party once production was complete. She adds that the crowdfunding platform itself threw some people off, because it is still so new. “A lot of people don’t trust it,” she says. “We found many people felt comfortable just writing us a cheque.” In fact, they raised as much money from people just giving them cheques as they did from crowdfunding.
Then there’s the matter of perks. Mike Stone knew that a unique reward would bring in donors who otherwise had no interest in the long-term success of the business, but he struggled to think of what Cookie Love had to offer. “We’ve got cookies and ice-cream sandwiches,” he says. “How special can you make it?” Chakrabartty, too, struggled to entice potential donors that way. Even offering something tangible, like a DVD of the finished film, proved difficult, considering the movie hadn’t even been made yet: Donors would have to wait several years to receive that particular perk, by which point DVDs themselves might be obsolete.
When perks go right, however, they can carry an entire campaign by themselves. Karen Woitas, owner of Annie’s Repurpose Shop, discovered this for herself this spring, when her $2,500 campaign to outfit a van to bring her paint and tools directly to clients’ homes hit its target, and then some, in a matter of weeks. She ran her campaign on Alberta BoostR, a crowdsourcing platform powered by ATB Financial that takes no cut of the proceeds, aside from a nominal transaction fee. The key, Woitas says, was offering a range of perks. “I offered product” – like her high-end van Gogh fossil furniture paint. “I offered custom work, workshops and ride alongs,” she says. In fact, Woitas raised more than two-thirds of her goal from a single donor, who jumped at the chance to get all of her kitchen cabinets refurbished at a discounted rate.
The silver lining here is that there is life beyond crowdfunding. Despite falling so far short on Indiegogo, Chakrabartty and Gauni went ahead with Rock Paper Dice Enter. Not only did they finish making it, but the film also went on to have theatrical runs in Edmonton and in India, where it screened in the country’s largest cinema chain. They’re currently looking for distribution deals in other countries.
Mike and Iva Stone, meanwhile, took their partial Indiegogo funds and splurged on the Cookie Love Machine anyway. It seems to have paid off.
Halfway through our interview, Mike’s phone rings. A local business wants him and his tricycle at its corporate event the following week, to the tune of 130 ice-cream sandwiches. Mike calmly works out the details while eyeing his already-busy calendar on the wall – five events, and nearly 850 ice-cream sandwiches, all within a week.
“All right!” he says to me, hanging up the phone and slapping his knee with delight. “That’s why we did it, buddy. That’s exactly why we did it.”