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Summary:

Crowdfunding’s growing up.

On one such site, 13,512 people recently raised nearly $1 million for a Chicago designer. And fan-funding sites…

Crowdfunding’s growing up.

On one such site, 13,512 people recently raised nearly $1 million for a Chicago designer. And fan-funding sites are now bankrolling albums from established music acts, not just dodgy indie bands.

But just how much are these services making for members, and for themselves?

I’ve spent the last few weeks collecting data on the sector, by talking with all the main crowdfunding platforms…

My conclusion: an estimated $80 million has been pledged through these sites, by fewer than a million supporters. But not everyone gets funded, and returns for the sites themselves appear modest.

» See our data table here

Leader of the pack

New York’s Kickstarter is kicking it amongst the head of the pack. Since it started, it’s taken pledges worth $35 million for over 12,000 hopeful projects.

Such sites typically make their money by taking a commission of the amounts they pay projects – but most sites only pay money if projects’ pledges meet a pre-specified target amount.

In the case of Kickstarter, which takes five percent, about 45 percent of submitted projects hit their target – so the amount Kickstarter has made for itself is five percent of something far less than $30 million, and probably of about $8 million.

Growing scale

Still, the overheads required by such sites are low – essentially, web hosting and growing notoriety within creative communities.

Kickstarter is now on a perpetual growth curve – the nearly $1 million its users raised last month for the designer of an iPod Nano wrist-watch strap is one of its biggest hits to date.

It may be the birth of a new kind of funding, a more direct relationship between producer and consumer, without the need for major backers like investors or record labels.

Fixing the system?

In music, which has long been enamoured with the fan-funding model, recognisable names like Cornershop, The Subways, Gang Of Four and Funeral For A Friend are amongst the big acts employing the model through PledgeMusic. Marillion and Idlewild have done it themselves independently. Public Enemy financed its last effort through Sellaband.

It may be no coincidence that, as the incumbent entertainment industry contracts and breaks down, out-of-contract major-label artists are increasingly turning to such platforms

“We’ve been witnessing first hand the struggles of the independent artist,” says Jamie Lokoff of FeedTheMuse.net, an artist-funding site started out of Lokoff’s Philadelphia recording studio, itself bootstrapped using borrowed cash in May 2009. “The music industry is in such a state of disarray, with no real concrete answer, that we felt it important to at least get our hat in the ring, to be part of the solution.”

After years of engaging with fans through social media and gathering their email addresses, artists are increasingly betting they have a readymade constituency of potential financiers.

Says SonicAngel founder Bart Becks: “Our goal is to launch three artists per quarter per country. We will continue to involve fans in every step.”

New entrants are still coming

Though the market is headed by these popular platforms, that’s not stopping smaller crowdfunding sites from emerging to offer their own spin, nor expanding in to new countries.

One such site, 8bitfunding, launched in January, to fund independent game developers specifically. Ulule, which launched from Paris in October, is already planning a Portuguese launch, despite not yet taking any commission.

But newcomers should be warned. The popularity of the likes of Kickstarter and IndieGoGo may suggest room in the space for smaller niche platforms, which may well go on to support many more small creatives – but it’s not yet clear that even crowdfunding’s biggest exponents are yet successful businesses in their own right.

    1. There are a few UK based crowdfunding companies coming through and having some good success in getting creative projects crowd funded (we are http://www.PleaseFund.Us). If you have a chance, look through http://www.Sponsume.com, http://www.WeFund.co.uk and http://www.Crowdfunder.co.uk. They are probably the best UK based crowdfunding websites!

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  1. Do you know the German crowdfunding platforms VisionBakery?

    http://www.VisionBakery.de

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  2. I think Robert hits the nail on the head, thanks for the piece. While the jury is still out on these nascent industries, the current revenue model (flat commission) does not hit a home run just yet.
    Maturing companies will need to seek out ancillary revenues to make crowdfunding and its fan-generated brethren a scalable win (at least for the investment community). The good news is that these and emerging companies are experimenting with a very powerful mix of fan/faith generated revenues attached to very interesting projects. It’s an exciting time to be devoted to this pursuit.

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  3. Thanks for the citation. Nice article.

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  4. Nice article, I founded SellaBand, the site that helped public enemy raise their funds. I recently launched a new crowdfunding platform: http://www.africaunsigned.com So far two artists raised enough funds to hit the studio :-)

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  5. Michael Bogatzki Wednesday, February 16, 2011

    Sellaband is run by thieves. Beware.

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  6. I’m Rob, one of the founders of getitmade. We’re a crowdfunding site but totally focussed on products. We’d like to see products that satisfy niche markets getting the same kind of love and attention as mass-market products.

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  7. Thank you for this article, Rob! Plus, the data is really useful. It makes it easier for anyone to choose the crowdfunding site that they will help them make their dreams or goals a reality. Because of your researched data, the public can easily compare and contrast the various sites.

    To learn more about crowdfunding, here’s another interesting read, http://www.crowdsourcing.org/l/506

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  8. Hi Robert,

    I came across this article while searching ‘crowdfunding’, very nice by the way. I work for My Major Company which is a crowdfunding record label and thought I’d say a few word about what we do. At MMC we sign artists and our members raise the investment to record, market and tour their albums, a percentage of the revenue goes to the investors. We launched in Oct 2010 and have had 2 UK acts reach the full £100,000 investment with one album set to be released in the coming months. Hope you find this info interesting. Keep up the good work.

    Chris

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  9. Another link for you – this time the Czech Republic’s first fund-raising website of its kind. Fondomat is the Czech Republic’s first crowdfunding website enabling its users to realise their dreams, help those in need or fund their next big project via its social networking tools. In English and Czech language versions at: http://www.fondomat.com

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