About 2.2 million Internet users pledged more than $300 million toward various projects this year on the crowdfunding site Kickstarter, well-known for connecting artists, developers and designers to large groups of small contributors.
About 88 percent of the dollars pledged were actually paid out — the
site’s model only allows people to collect money if they meet their funding goals. The money helped fund 18,000 projects in 2012, according to Kickstarter.
Of the 2.2 million who backed a project, a small segment — about 50,000 users — backed 10 or more projects. Across all project categories, such as technology and food, backers pledged the most ($83 million) toward games, featuring independently created computer games.
Seventeen projects on the site raised more than $1 million — a fact which could hint at the future success of crowdfunding, said industry analyst Carl Esposti. Many of these highly funded campaigns, such as the Pebble E-Watch, a water resistant digital watch, feature tangible consumer products about which backers were particularly enthusiastic, he said.
“These campaigns are raising the equivalent of Series A and Series B funding, without having to give equity away,” Esposti said.
Though Kickstarter has stated it does not plan to participate in equity-based crowdfunding, many other platforms are poised to allow start-ups to sell small stakes to large groups of investors, once the Securities and Exchange Commission draws up regulations for the practice. The SEC has already missed deadlines for presenting drafts, but it is expected to deliver regulations this year.
Despite its success, this new model of raising capital is “substantially outpace[d]” by traditional angel investments, according to Daniel Gorfine, Director of Special Projects and Legal Counsel for the Milken Institute, an economic think tank based in Santa Monica, Calif.
He noted that by some estimates, U.S. angel investments exceeded $20 billion last year — but that numbers like Kickstarter’s are “becoming meaningful in the context of capital access for start-ups and small businesses.”
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