A scroll through the Kickstarter website is like watching Dragon’s Den, without the wilder flights of entrepreneurial fancy edited out.
Among the entrepreneurs recently in need of financing from users on the crowdfunding platform were a Newcastle council worker who wanted £2m to buy and sail a yacht around the world, a Bridgewater pastry chef hoping to unleash something called Hungarian BBQ chimney cake on the south of England gateau market and a former professional goalkeeper in South Wales raising funds for palm-sized drones.
But for all its quirkiness, the website is an example of how crowdfunding has become one of the internet’s fastest-growing phenomenons. In the new year, Kickstarter will reach £1bn in global funds raised since the company was launched in 2009.
Pioneered in the US, where most of the funds are still raised, crowdfunding is catching on fast in the UK. Graham Tonge, the would-be yachtsman, was inspired to appeal for his millions after reading about an American, Zack Danger Brown, who asked for $10 to make potato salad but was instead deluged with $55,492.
To date, Britons have raised £56m using Kickstarter and there are now predictions of a rapid expansion in the fundraising phenomenon in Britain. Alternative finance, which includes this kind of crowdfunding, is projected to grow to £4.4bn in Britain in 2015 – more than doubling in the next 12 months, according to a report by Nesta and Cambridge university.
In 2014, Sir Stelios Haji-Iannou’s EasyGroup and Hugh Fearnley Whittingstall’s River Cottage Group turned to crowdsourcing for investment, alongside thousands more struggling film-makers, theatre groups, rock bands and authors. Even the UK Independence party used crowdfunding to take small donations, through a site called Nationbuilder, worth a reported £80,000.
This year British people raised £26m through crowdfunding sites such as Kickstarter, which offer donors token rewards rather than shares, and £84m through sites like Crowdcube, which allows people to take equity shares in growing businesses. Crowdcube predicts it will handle more than £100m in 2015.
But for all the success of alternative financing some big question marks remain. After three years, no one who has invested in a business on Crowdcube has made a cash profit. The company says it is still too early to see real returns. Meanwhile, huge numbers of projects are never fully funded. Of the 11,650 Britons who have used Kickstarter, 62% failed to reach their funding goals. One of the most successful appeals of recent months was made by an online vigilante, Stinson Hunter, whose attempts at trapping paedophiles have been described by senior police officers as “hugely inadvisable”. The Midlands-based vigilante launched an appeal this year for £10,000 to pay for video equipment and a vehicle and received more than three times that amount from 1,798 different backers.
But many of the people seeking funds do so for more traditional enterprises.
“We have taken on more than 70,000 new members this year,” said Luke Lang, co-founder of CrowdCube, based on the campus of Exeter university. “Start-up businesses, and growing businesses are turning to crowdfunding but also there’s a strong appetite among investors keen to support small British businesses.”
One of the most successful British appeals on Kickstarter is for Torquing Group, a south Wales company that has devised a palm-sized photography drone that can be controlled by smart phone. It took three days to raise its £125,000 target and by Boxing Day it had received £1,029,278. The company has used the system essentially to get pre-orders on the devices and says that the more money it gets, the more features it will develop.
“What ensued is nothing short of breathtaking,” said Reece Crowther, marketing director. “After eight minutes, the campaign had received its first pledge. After 24 hours, the campaign had generated just over £40,000 … We didn’t want to go to venture capitalists where we could lose a significant proportion of our company so we reached out to hobbyists and enthusiasts on Kickstarter.”
A side benefit is the network of almost 500 keen buyers, many of whom are providing feedback about the development of the devices. But there have been some serious flops too.
“I came up with a crazy idea to buy a yacht, get a crew together, do a round the world trip and make a documentary about it,” said Tonge. “I am inexperienced in sailing but I am adventurous. I thought maybe people would think it was a good idea.”
Instead of being deluged with cash, he raised just £7.16 from two backers.
Rick Kirby, 30, a father of two and chef from north Wales, suffered a similar disappointment. He came up with an idea for “Kirby’s Kandy”. He wrote on his Kickstarter page: “The dream is to create a real life Willy Wonka chocolate factory experience! Complete with chocolate river and edible landscape.”
He even costed the theme park idea and decided he needed £5m but got only £200.
“It’s just dream-chasing really,” Kirby said. “It was worth a crack and the fact that I got one pledge from someone was good enough for me.”
