Life is filled with challenges. Some challenges (pinning the tail on the donkey) are relatively easy to overcome, while others (starting a business) are much more complex and time-consuming. New business ventures also often require a substantial investment of funds to launch the enterprise.
For those budding entrepreneurs without a rich uncle or deep pockets, a new source of needed capital might be found online in crowd-funding platforms such as Kickstarter. In fact, Kickstarter has helped launch 1,762 Utah projects over the past five years with more than $18 million in pledges.
A Kickstarter spokesperson notes that Utah has supplied “lots of great tech projects” but has also had people from “fashion, games, film and more” develop ideas that received funding.
Deseret News reports that the Kickstarter concept is simple: project creators decide on their own funding goal and deadline to meet the goal. People who like the proposed project pledge support.
If the project hits its funding goal by the deadline, supporters of the project have their credit cards charged for the amount they pledged. If the project fails to hit its goal by the self-set deadline, no one’s credit cards are charged.
“Funding on Kickstarter is all-or-nothing,” Deseret notes.
One Utah entrepreneur sought funds on Kickstarter for a customizable 3-D printer he had invented. His original Kickstarter goal: $31,500 in 45 days. But he hit that figure in a mere 12 hours. By the time the 45 days were up, he had racked up almost $1.1 million in pledges from 1,952 people.
He said he “took all that capital and threw it back into research and development to develop a better RigidBot (the name of the printer).”
The pledges are made in one of four forms: donations, reward-based funding, equity-based and lending-based. So some who pledge support receive an interest in the business or repayment of their pledges, while others get rewards and still others make donations.
After enough capital is raised to launch an enterprise, it’s a good idea for a businessperson to discuss business organization, regulation, taxation, intellectual property protection and other considerations with an experienced business law attorney.
Source: Deseret News, "Free money? Utahns making successful use of Kickstarter," Jasen Lee, June 10, 2014