Pay­ing to the Crowd

The mil­lions of peo­ple who have con­trib­uted to past crowd­funded projects have had to keep their expectations mod­est. But a global shake-up means there’s now se­ri­ous money to be made. Ge­orge Hop­kin in­ves­ti­gates

Hong Kong Tatler - - Life -

hen a gar­ment touted as “the world’s best travel jacket” hit a crowdfunding web­site in July last year, stylish geeks around the world couldn’t wait to hand over their money. In launch­ing his ini­tial ap­peal for funds on Kick­starter, Baubax founder Hi­ral Sang­havi de­clared he was look­ing for US$20,000 to help de­velop his mul­ti­func­tional jacket: a Swiss Army knife of a gar­ment with mul­ti­ple pock­ets for a phone charger, ipad and other gad­gets. The de­sign was ap­par­ently ev­ery­thing the global tech­no­rati were wait­ing for—sang­havi reached his goal in just five hours. It didn’t end there, though. He went on to se­cure US$9 mil­lion by Novem­ber, thanks to pledges from 45,000 back­ers, go­ing down in crowdfunding history as the high­est-funded cloth­ing project to date.

Ear­lier in the year, Ex­plod­ing Kit­tens (“a card game for peo­ple who are into kit­tens and ex­plo­sions and laser beams and some­times goats”) had re­ceived pledges to­talling US$8.7 mil­lion from 220,000 peo­ple. The game was cre­ated by Elan Lee, for­mer chief de­sign of­fi­cer for Xbox En­ter­tain­ment Stu­dios. Also in 2015, Palo Alto-based Peb­ble Tech­nol­ogy at­tracted about US$20 mil­lion in pledges from more than 78,000 back­ers when it asked technophiles to fund its new e-pa­per smart­watch with an ex­tra-long bat­tery life.

The 340,000 back­ers of th­ese three projects col­lec­tively handed over nearly US$38 mil­lion, but that’s just a frac­tion of global crowdfunding ac­tiv­ity. Some 9.3 mil­lion oth­ers have pledged a to­tal of US$2 bil­lion on Kick­starter alone. But a typ­i­cal re­turn on a crowdfunding in­vest­ment might be as straight­for­ward as an early dis­count, a lim­ited edi­tion prod­uct or a sim­ple T-shirt—so why would peo­ple back such projects?

“Many back­ers are ral­ly­ing around their friends’ projects,” says the Kick­starter team. “Some are sup­port­ing a new ef­fort from some­one they’ve long ad­mired. Some are just in­spired by a new idea, while oth­ers are mo­ti­vated to pledge by a project’s re­wards—a copy of what’s be­ing pro­duced, a lim­ited edi­tion, or a cus­tom ex­pe­ri­ence re­lated to the project. Back­ing a project is more than just pledg­ing funds to a cre­ator. It’s pledg­ing your sup­port to a cre­ative idea that you want to see ex­ist in the world.”

A seis­mic shift will take place in the crowdfunding in­dus­try this year. In­vestors want­ing more than dis­counts and T-shirts can now hope for a real piece of the ac­tion— an eq­uity share of the busi­nesses they fund. In June last year, the US Se­cu­ri­ties and Ex­change Com­mis­sion an­nounced a re­vamp

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