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A STUDY ON CROWD FUNDING VIA
SOCIAL MEDIA AND ITS DIFFERENCES FROMTRADITIONAL FUNDING METHODS
ETM520 - Team 2
Sara BahriniElizabeth Gibson
Shabnam JahromiKayvan Javadi
Rupha NatarajanMatt Nickeson
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Agenda• Introduction: Importance of Funding (Elizabeth) • Funding Challenges (Elizabeth)• Funding Options (Comparison matrix) (Elizabeth)• Crowd Funding via Social Media: Kickstarter• Research Methodology (Shabnam)
– Our approach– Our interviews (3 Kickstarter + 2 traditional)
• Interview Structure (Shabnam)• Data/Results• Combined Results (Elizabeth & Rupha)• Future Work• Q & A
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Importance of Funding (Elizabeth)
• New companies start up all the time• Knowledge required is more than just technical
– Leadership and Management Skills – Business Skills– Marketing Skills
• Technology enables small groups to have large results• Customer base is global• Adequate funding and resources is essential
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Funding Challenges (Elizabeth) (cite lit?)
• How to get the money– Money needed to get an idea off the ground. Start up funding is often
underestimated. Not only is funding required for the commercialization of the product or service, but there are also start-up operational, legal, marketing, and living expenses required for the entrepreneur that are often overlooked..
• How to get the word out
• How to maintain control of your own destiny
• Too much success?
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Funding options (Elizabeth)
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Funding Type Definition Structure Typical Size Examples
Government Sponsored
Bid and selection of contractor for joint research objectives.
Joint project $Billions - Trillions Arpanet, IBM computers.
Corporate Spin-off
Grows out of existing corporate structure
Various $Millions - Billions Trip Advisor
Venture Capitalists
Wealthy investors who make an investment into the company, typically for a piece of ownership.
Co-ownership or majority. Board of directors assignment.
$Millions Google, Facebook
Angel Funding Money exchange for: Stock options, grant, loan Typically limited ownership.
$Hundred Thousands - Millions
ANSR
Crowd Funding/ Social Media
Backers: value exchange without ownership.
Online pledge with funding fulfillment upon completion of goal.
$Thousands - Millions
Indiegogo, Kickstarter
Self-Finance/ Private
Owners contribution or private loan acquisition.
Owners purchase % of company secured by stock certificates.
Dependent upon owner wealth.
Family Businesses
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Crowdfunding: Kickstarter
• One of the largest crowd funding platform via social media for creative projects[1].
• Founded in 2009, to crowdsource the funding of art projects.
• Kickstarter projects are now sortable by 13 categories
Yancey Strickler
Charles Alder
Perry Chen (CEO)
[1]http://www.crunchbase.com/company/kickstarter
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Kickstarter Statistics
• Since 2009, over $350M pledged by 2.5 M people funding more than 30,000 successful Projects
• 54 % of successful projects belong to Music, Film and Video categories
• 5% belongs to Design and Technology• Only 17 Projects were above $1M, 6 of them belong to
Technology and Design (35%) and the rest was Gaminghttp://www.kickstarter.com/help/stats Nov 2012 Stat
Category Launched Projects
TotalDollars
SuccessfulDollars
Unsuccessful Dollars
Live Dollars
LiveProjects
SuccessRate
All 78,395 $421 M $361 M $45 M $ 14M 3,354 43.78%
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Kickstarter - How it works
1.Define ProjectClear beginning and
end
2.Create Rewards
3.Setting Your GoalFunding goal and a
length of time(All or Nothing)
4.Making Your Video
5.Building Your Project
6.Promoting Your Projects
7.Project Updates
8.Reward Fulfillment
:))))
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Research Methodology
• Literature Review– Discover primary focus areas
• Interviews – Content Analysis– Crowdfunding via social media
• Kickstarter projects (3 projects)
– Traditional funding (2 projects)
• 4 of them in person, 1 via Google Hangout
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Interview Structure
• Scope/Goal of the project• Reasons to choose the specific method of funding• Success/Failure factors in collecting the funds• Challenges/Risks in the specific method of funding• Benefits of the method of funding
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Interview-Woxom
SLINGSHOT: Stabilizes Smartphone videoCategory: Product Design Project
Asked for $20,000 in 90 daysReceived $70,074
2,739 BackersGoal
Came up with a product idea specifically for Kickstarter and used it both
For funding and marketing platform
Why Kickstarter
Attractive product designAttractive video for young computer-savvy audience
Attractive rewarding scheme, attractive profile,Periodic updates
Marketing outside Kickstarter
Success/FailureFactors
Kickstarter Benefits:• Customer acquisition (Backers)• Great marketing platform• Retailers specializing on Kickstarter products• Full control compared to VC wants equity and a very high rate of return
Time and effort to create the profile and failAsk for the right goal that covers costs
Risks
Future Plans:•Caution note for Kickstarter policies• Proven success online – take to traditional retail channels
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Interview-Red Branch
Art JournalCategory: PublishingProject
Goal
Being young and unknown Social crowd funding the only option
A platform to use their private fundingand use it as marketing to get more fund
Kickstarter becoming popular that attracts young people
Why Kickstarter
Proper use of Kickstarter platformAttractive and honest video
Using social media like Twitter/Facebook
Success/FailureFactors
None- as there was no other options for themRisks
Kickstarter Benefits:• Customer acquisition (Backers)• Marketing platform• Requires no previous reputation• Platform to receive funds from other private funders
Future Plans:•Moving towards supporting biggerprojects•Moving towards supporting services as well
Asked for $6,000 in one monthReceived $7,820
2,739 Backers
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Interview-Trygger (Rupha/Sara fill in data)
Art JournalCategory: PublishingProject
Goal
Being young and unknown Social crowd funding the only option
A platform to use their private fundingand use it as marketing to get more fund
Kickstarter becoming popular that attracts young people
Why Kickstarter
Proper use of Kickstarter platformAttractive and honest video
Using social media like Twitter/Facebook
Success/FailureFactors
None- as there was no other options for themRisks
Kickstarter Benefits:• Customer acquisition (Backers)• Marketing platform• Requires no previous reputation• Platform to receive funds from other private funders
Future Plans:•Moving towards supporting biggerprojects•Moving towards supporting services as well
Asked for $6,000 in one monthReceived $7,820
2,739 Backers
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Interview- Traditional(Elizabeth fill in data)
Art JournalCategory: PublishingProject
Goal
Being young and unknown Social crowd funding the only option
A platform to use their private fundingand use it as marketing to get more fund
Kickstarter becoming popular that attracts young people
Why Traditional
Proper use of Kickstarter platformAttractive and honest video
Using social media like Twitter/Facebook
Success/FailureFactors
None- as there was no other options for themRisks
Traditional Benefits:• Customer acquisition (Backers)• Marketing platform• Requires no previous reputation• Platform to receive funds from other private funders
Future Plans:•Moving towards supporting biggerprojects•Moving towards supporting services as well
Asked for $6,000 in one monthReceived $7,820
2,739 Backers
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Interview- Traditional(Rupha fill in data)
Art JournalCategory: PublishingProject
Goal
Being young and unknown Social crowd funding the only option
A platform to use their private fundingand use it as marketing to get more fund
Kickstarter becoming popular that attracts young people
Why Traditional
Proper use of Kickstarter platformAttractive and honest video
Using social media like Twitter/Facebook
Success/FailureFactors
None- as there was no other options for themRisks
Traditional Benefits:• Customer acquisition (Backers)• Marketing platform• Requires no previous reputation• Platform to receive funds from other private funders
Future Plans:•Moving towards supporting biggerprojects•Moving towards supporting services as well
Asked for $6,000 in one monthReceived $7,820
2,739 Backers
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Crowdfunding via Social Media Results(Shabnam/Team)
• Pro:– Does not require previous
history– Acts as market research
• Con:– Cannot be easily used to
establish long-term company
– Publically available, no data protection
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Overall ResultsCriteria
Private & Angel Funding Venture Capital
FundingCrowdfunding via
Social Media
Design
Stage:Idea v. Defined Project Both Both Defined Project
Type:Product v. Service Both Both Mostly Product
Few ServicesTechnology:
High-Tech v. Not High-Tech Both Both Mostly Not High-Tech
Marketing Customer Acquisition and Market Awareness None Market Awareness Both
Financial Small = 0 - 100k
Medium = 100k - 1MLarge = > 1M
Small & Medium Small, Medium, Large Small & Medium
Social Established Credibility Not Required Highly Required Not Required
Laws / Regulations FDA Approval
SEC RegulationsTax Involvement
FeasibleFeasibleFeasible
FeasibleFeasibleFeasible
ComplicatedComplicatedComplicated
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Future Work (Shabnam,Team)
• Kickstarter as Public Utility– How to manage policies– Conflicts of interest?
• Decision-making model– Quantitative analysis to indicate best funding method
for a given project/team
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Any Questions?