Published May 23, 2012Every would-be entrepreneur on the planet has experienced the following unfortunate realization: "In order to make money, I need a product to sell. In order to make a product, I need money." It's a frustrating catch 22, and can often lead to people abandoning their potentially life-changing ideas in favour of a steady paycheck.
The antidote for this problem, some say, is an approach called crowdsourcing. In a nutshell, it works like this: You create a campaign based around a project or an idea, you ask for the general public to "fund" your project in small amounts, and if your campaign is successful, your project goes ahead, and your backers get perks (often including the product you're trying to get made).
Traditionally, artists have signed with labels to cover the up front costs of their recording projects. As the competition for advances becomes fiercer, many bands are looking to their fan base to help them create new records (and other projects) by using various crowdsourcing services. Here are some things to know and think about if you're looking to raise funds from the general public.
Know your options.
There are literally dozens of options. Kickstarter, IndieGoGo and RocketHub are three good places to start, as is PledgeMusic, a crowdsourcing platform specifically for music projects.
Know if you qualify.
Despite Kickstarter being the most well-known, it's not currently available if you live outside the U.S. There are ways around that for Canadians, like having someone south of the border run things on your behalf, but that's not always possible or practical. IndieGoGo, PledgeMusic, and Rockethub, however, are all available in several countries, including Canada.
Know the deal.
There are generally two structure types for campaigns: "all or nothing" or "keep what you raise." For the former, if you don't raise the amount needed, none of the money comes to you. In the latter, you keep whatever you raise to go towards completing the project. Kickstarter and PledgeMusic both run on an "all or nothing" structure, whereas IndieGogo & RocketHub offer "keep what you raise" options.
It may seem like the "keep what you raise" structure is the better way to go. Keep in mind, however, that an "all or nothing" campaign may be more attractive to backers, since many people will only want to support something if it's fully funded. An added bonus of an "all or nothing" structure is that backers who are passionate about seeing it succeed will help spread the word in order to help you reach your goal.
Crowdsourcing itself is a business, and these sites are businesses unto themselves, so they take a percentage of money raised. Kickstarter charges a 5 percent fee on successful projects, whereas PledgeMusic keeps 15 percent. RocketHub keeps 4 percent if you meet you goal and 8 percent if you don't, and IndieGogo has a similar approach, keeping 4 percent if you meet your goal and 9 percent if you don't. None of these services charge a set up fee, so if you raise nothing, you pay nothing. There are also transaction fees for getting you the money, since most of the pledges are done by credit card.
It's all about the perks.
Before crowdsourcing was even a word, A Perfect Circle drummer Josh Freese created various "support levels" for a pre-release of his solo album, ranging from $7 to $75,000. Seven dollars got you a digital download, whereas $75,000 got you a ride around Hollywood in a Lamborgini, a five-song EP written about your life, a trapeze lesson… you get the idea. Obviously, that's beyond the capacity of most artists, but the point this: get creative. Giving a private concert, a hand crafted piece of art, writing someone a song, or other one-of-a-kind offerings are all good options.
A recent campaign from Amanda Palmer, one half of the Dresden Dolls, has raised $750,000 to date from more than 15,000 backers. Yes, that's right: three-quarters of a million dollars, straight from her fans, to support her in creating more work. [UPDATE: Palmer's campaign has recently crossed the million dollar mark.] As encouraging as this success is, Palmer was only able to do it by being constantly engaged with her fans, year after year, in addition to offering great perks. North of the border, Canadian band Paper Lions also know the value of connection when it comes to crowdsourcing: They recently completed a successful campaign on Indie GoGo, raising $10,000.
"The percentage of our backers who I've personally shaken hands with while on tour is extremely high," says Paper Lions drummer David Cyrus MacDonald. "We gave away our previous album for free in exchange for an email, so when it came time to launch our campaign, we had a lot of people to offer our pre-release to."
But be warned…
There are haters. Crowdsourcing campaigns can help get your project off the ground, but not everyone supports this approach. A recent anti-crowdsourcing article called "Boo hoo, broke bands, quit asking for charity" by Vancouver-based journalist Michael Mann recently caused a tidal wave of controversy.
"The article came out of constantly getting hit with press releases from bands I'd never heard of, asking people to fund their records," says Mann, who insists he remains steadfast in his opinion on crowdsourcing. "Most of them came across as asking for a hand out, asking for charity. These days, there are much better things to donate to."
Crowdsourcing is not charity. (At least, it's not supposed to be.) Remember, you're not asking for donations, you're asking for funders, so focus on giving them perks with real value in exchange for their dollars. If you really know your fans, you should know what they value, so create your perks and support levels accordingly.
It's important to note that crowdsourcing funds to make a record will never replace all of the things that come along with an advance from a label, like marketing support, clout, and a team. But if you're in need, or decide to stay indie, a well-communicated crowdsourcing campaign with valuable perks can help make your projects a reality.
Scott Honsberger is the President and founder of the Toronto Music Industry Association.