Busting a few myths for KS starters

1. Forget about fully funding your game (in our case) with crowdfunding alone.

You have to be a household name, a Big Name studio or a celebrity.

2. Forget about being honest with your final price goal.

Ask less and you will get more! If you go for the honest and true budget, you are just going to scare people away.

3. Prepare to invest a lot in Promotion (FB ads, forum banners, reviews and press coverage)

Unless you are making a potato salad :) of course

4. Don’t start a KS campaign if you do not have at least alpha or even beta of your game.

But don’t tell anyone about it promise it soon and only to high-bidders.

That really has shaken the ground under our feet at first, but then again, even if your parents tell you that fire hurts - what do you do? Right! First you try. Assuming that the quality of our kickstarter page, artwork, concepts as well as our own passion seen in the video will help us explain the high budget we decided to do it anyway.

Speaking of budgets, here is an honest graphic pie chart of what we need to make our game named Game Master in its core version:

Our honest goal is £130,000.

As a matter of a fact the budget is not high at all especially, if you create the game of the proposed magnitude and scale.

There is absolutely no realistic way this game can be done cheaper than with at least 100k budget. Otherwise it will be a mere shadow of the vision and detailed plan we have. It won't be a worthy game for our supporters and admirers at all.

It is really nice to see that there are a lot of beautiful and successfully funded projects on Kickstarter recently. The bar is high for all the ones that are going to follow, but will it be possible to make a complete game from scratch and just for a mere 50K budget? Based on our calculations and experience - We are not convinced!

How do you spot an honest indie starter from a camouflaged pro?

There is nothing bad with making Kickstarter a marketing platform for a given title as long as you deliver the final product of decent quality. The main problem here is that thanks to the recent surge in professional studios posing as indie developers and asking for pennies, life became really hard for the real dreamers.

Fundamentally, an indie going to Kickstarter is looking for funding. For capital and budget to make the whole game from scratch. A professional studio is going to Kickstarter only as a marketing exercise.

In no way are we trying to discriminate other great campaigns that started lower than 50k goal. We even backed them, but the idea of "ask less to receive more" - feels somehow sad and even wrong. What happens if you only get 50k? Are we going to lie to the people and make a low quality half-game on the budget? Are we going to desperately search for investors, which are in most cases going to impact the game development with purely commercial aims in sight? We can't afford that.

Despite all those dream-breaking facts we still decided to try our luck on Kickstarter while being honest. The start was hard, as only friends and family supported us. Then the tide changed as slow but steadily people started to back. The campaign hasn’t even passed the middle point and we are receiving tons of fan mail (the majority of which found us on Kickstarter accidently) and they love the concept with all their hearts! That assures us that we are on the right path and the only thing that is left is to get more people to know about us.

It is very hard to get in touch with the leading press and media channels for people like us - ordinary folk, without any celebrity or famous game studio status. The only thing we can do is to storm all the forums we can get our hands on. We do that 24/7 now. The really comforting fact is that the majority of feedback we get is short and colorful, with “amazing” being the most widely used word.

There is still quite a long journey ahead but now we know one thing for sure. Being on Kickstarter, no matter how good your campaign is, is just the tip of the iceberg. You have to prepared the community and press long way in advance. The real hard work only begins when you press the green Kickstarter launch button! Say goodbye to your friends and family, food and sleep are a luxury your trade for your successes :)

It is always hard to start something from scratch. We are ready for any outcome and yes; there may be some changes we would make if we had to start Kickstarter today. But being honest is what we will never change. In the beginning it was only us, a group of geeks from basement with some experience making art and simple games. We love this game and we we will eventually make it anyway. Kickstarter is probably the faster way, but there are always other paths to glory. Keep you fingers crossed and help us spread the word! Game Master is a title you would hate yourself all your life if missed.

P.S. If only telepathy could work on Felicia Day or Will Wheaton. That would help much better than e-mails and tweets.  :)

Posted from: http://arcticstartup.com/2014/09/15/honesty-on-kickstarter-is-a-mistake-we-willingly-made

Deloitte predicts that crowdfunding portals will raise $3 billion in 2013,  double the $1.5 billion raised in 2011.

Crowdfunding portals are websites that enable large numbers of individuals to financially support a project or company, with each backer contributing just a small percentage (generally less than one percent) of the total funding.  A typical crowdfunded project has thousands of backers.

Crowdfunding’s growth matters to TMT for two reasons.  First, some crowdfunded projects raise funds for new technological devices and media content such as computer games. Second, the portals themselves are likely to become a new type of Internet portal.

Media coverage of crowdfunding tends to focus on its role as an alternative to traditional venture capital (VC); however, there is much more to the concept. In fact, there are four distinct categories of crowdfunding that vary by type of portal and capital raised. 

Crowdfunding generally involves small contributions at the individual level. Although the top pledge packages can be more than $10,000, on average the individual contribution is likely less than a thousand dollars in almost every category³. The funds raised for a particular project or investment tend to be in the thousands or tens of thousands of dollars, although on rare occasions they can be in the millions. For example, on one of the better known crowdfunded reward sites only 17 projects raised more than a million dollars and only two raised more than $ five million⁴.

Still, across tens of thousands of projects and investments, the total funding can really add up. In the past five years, the 30 largest lending portals raised more than $1.5 billion⁵. The largest reward platforms collected nearly half a billion dollars cumulatively.  Donation sites raised hundreds of millions of dollars. Venture capital portals raised just tens of millions of dollars, but that number is expected to rise dramatically in the near future⁶. In aggregate, crowdfunding portals are already a multi-billion dollar industry, growing at more than 50 percent a year.

That being said, the $3 billion that crowdfunding is expected to raise in 2013 remains small compared to comparable funding mechanisms. Traditional venture capital raises about $40 billion annually⁷; charitable giving was almost $300 billion in the United States alone in 2011⁸, and the pay day loan market in the United States was worth more than $50 billion in 2008⁹. In each category, crowdfunding is growing much faster than traditional sources of funding, but still represents less than one percent of the total.

Given crowdfunding’s impressive growth rate, it is worth looking at some illustrative examples. The reward-based market is expected to have the greatest impact on technology and media developers. In May 2012 a company sought $100,000 via a popular reward-based portal to make 1,000 programmable watches, but ended up collecting $10.3 million from 68,929 people – an average of $150 per investor¹⁰. Most reward-based projects have tended to be for consumer products such as watches, smartphone accessories or games. In one recent survey, seven of the top ten products fell into these categories¹¹. But there are many exceptions. Some non-consumer technologies, such as multiple-core chip architectures, also use the platform¹².

Equity-based crowdfunding is often discussed as an alternative to VC for small to mid-size firms. Growth is accelerating as new platforms are launched, investor interest rises and regulatory constraints are reduced.  In the United Kingdom, there are several platforms that provide equity-based financing for startups and growth capital¹³. In the US, a large crowdfunding portal raised $15 million in venture capital to pursue expansion into equity crowdfunding¹⁴. In Canada, an alternative stock exchange has publicly stated its support for crowdfunding¹⁵ and a provincial government is contemplating an exemption to the accredited investor rule for crowdfunding sites¹⁶.

Despite these advances, and even if VC portals become larger due to beneficial regulatory changes, they may still only capture a small share of the VC market. Startup companies value the intangible contributions such as knowledge and networks that an experienced VC provides. Also, regulations protecting casual (non-accredited) investors may remain in place for many jurisdictions. Finally, investor enthusiasm may be dampened once crowd investors experience their first ‘burn’. 

Crowdfunding will more likely have a role in complementing traditional VC, generating additional capital at the ’friends and family’ stage of funding that generally precedes VC involvement. Indeed, crowdfunding could benefit the ‘A round’ market (where startup companies usually first try to access institutional money; typically for one to three million dollars) by helping more start-ups establish proof of concepts and secure their first paying customers. Further it could enable VCs to skip the riskier and more laborious early stage investing that many would rather avoid. In a recent survey, seed financing from VCs was down almost 50 percent year-over-year¹⁷, indicating that there may be a funding gap for crowdfunding to fill. Crowdfunding also brings the potential for more democratic or broader access to capital for startups and innovators without personal connections to capital.   

The Jumpstart Our Business Startups (JOBS) Act in the United States has added to the excitement surrounding  equity-based crowdfunding by requiring that the US Securities and Exchange Commission (SEC) consider the creation of new classes of investors who could participate in venture-like financing, in addition to the existing ‘accredited investor’ class. The SEC could decide to significantly loosen the rules, which would likely attract billions of dollars. However, there are many concerns about investor protection, disclosure and the potential for fraud77. If regulators don’t alter the rules in a meaningful way, or if they add new barriers, the equity crowdfunding market is likely to remain small.  It is unclear at the time of writing what the outcome of the SEC process will be, or even when a decision will be made: it was supposed to be by January 2013, but by mid-December there were media stories suggesting that deadline will not be met¹⁸.

Bottom Line:

If regulations around equity crowdfunding are relaxed, there are likely to be increased risks -- and not just for investors.  While crowdfunding may open the floodgates, capital will largely flow to inexperienced inventors and project managers.  Crowdfunded projects have a history of unanticipated delays as inexperienced teams struggle with project deadlines and manufacturing details¹⁹.   Some research suggests that crowdfunded opportunities are a bigger risk than traditional IPOs, and that the potential for the average investor to misunderstand or misinterpret the promises of an early-stage startup are higher than for an experienced accredited investor²⁰. 

There are also risks for those who participate in reward-based projects. The time elapsed between contributing money and receiving the reward or product may not be very long, but it is longer than scooping a similar item off the shelf of a retail store, and during those few weeks or months the funded product may become obsolete, as happened for some iPhone-related projects when Apple switched to a new kind of connector²¹.

In the computer gaming industry, crowdfunding portals could be an important source of funding –primarily for smaller titles that need millions of dollars, not hundreds of millions²². But given the uncertain nature of the creative process, many game projects never get finished, take longer than expected or need more money. Crowdfunders are unlikely to be happy with any of those outcomes²³.

Image credit: Shutterstock

The crowdfunding industry is already growing rapidly, and as that growth accelerates, several crowdfunding niches are expected to really take off.

Last year, 308 crowdfunding platforms across the world raised $2.7 billion, an 81 percent increase over the amount raised in 2011, according to the annual report released today from the Los Angeles based research firm, Massolution. The growth in 2012 represents an acceleration, up from 64 percent growth in 2011. Looking ahead, growth is expected to reach $5.1 billion raised in 2013, representing an expected 89 percent increase in the dollars raised, the report predicts.

While this data is global, crowdfunding is centered in North America and Europe. More than half of the funding raised last year, $1.6 billion, came from North America and $945 million was raised in Europe, the report says.

Related: JOBS Act, One Year Later: Hang Tight, Equity Crowdfunding Is Coming

As it exists, the majority of money raised with crowdfunding is still on donation or reward-based platforms, where an entrepreneur or artist raises small sums from a large group of people in exchange for a product sample or experience. Of the $2.7 billion raised in 2012, $1.4 billion was on these platforms, made popular by brands such as Kickstarter or Indiegogo. Lending-based crowdfunding, where campaign leaders have to repay their investors, equaled $1.2 billion.

Equity-based crowdfunding, where investors receive a share of the company in exchange for funds, was the smallest sector the market in 2012, totaling only $116 million. Startups in the U.S. are able to crowdfund from accredited investors. Also, in a handful of countries, like the United Kingdom, equity-based crowdfunding is already legal. In coming years, the distribution of funds raised from donation-based, lending-based and equity-based crowdfunding is likely to shift.

Related: Crowd-funding Platform Connects Entrepreneurs With Consumer-Product Giants

Part of what is expected to drive acceleration in the U.S. is the implementation of the forthcoming Securities and Exchange rules for allowing U.S. entrepreneurs to raise money by selling equity in their company more easily to non-accredited investors.

Crowdfunding is in its infancy. Here’s a look at three trends expected to emerge.

1. More groups use crowdfunding to support innovation challenges to solve complex, social problems. Communities will increasingly come together to raise a pot of money to award to an entrepreneur that solves a problem, says Chance Barnett, the co-founder of Crowdfunder, a Venice, Calif.-based crowdfunding platform. “That might be solving poverty in an area, it might be building a mobile solution for people in developing countries who don’t have the ability to do accounting in a very basic level,” Barnett says. “We will see a lot of innovation come out because of crowdfunding because people are willing to put dollars up to solve big problems.”

Related: Raising Money Through Crowdfunding? Consider These Best Practices for Success

2. Increased popularity of local, crowdfunding communities. Amateur investors often prefer to meet the entrepreneur they are backing face-to-face, says Barnett. That’s the idea behind his newest venture, CROWDFUNDx, which launched last week. It’s an online network that brings together leadership boards in 11 cities across the U.S. and in 12 cities in Mexico to run 120-day startup challenges culminating in a pitch contest. The local community then funds the winner through crowdfunding.

3. Women entrepreneurs stand to raise more investment dollars. Women get 5 percent of all investment capital, says Barnett, but they will have increased access to funding with crowdfunding. “Not only are women more active on social media, they are often more collaborative when they do invest, so it is going to be a really interesting space and it is going to be the perfect place for women to gain a lot of traction,” Barnett says.

Drake: How do you feel about the progress the crowdfunding for equity portion of the JOBS Act has taken to date and where are the three industry areas for this new regulation?

Barnett: When I sat down with you at the SEC April 20 to our pleasure and surprise both leadership and the staff expressed their sincere desire and interest to meet the staggered rulings throughout the 270 days timeline.Unfortunately the big boss was not present.  While key staffers have worked diligently on crowd funding they have also drafted proposals for commenting on regulation D 506 c which removes the general solicitation ban. Neither of those rulings are making the deadline the SEC had. In an ideal world Walters Chair of SEC would accelerate the ruling on these underlying JOBS Act bills.

What could you ask readers to do to accelerate implementation of the rules?

Reach out to your congressmen and ask how they care for job creation, capital access for small business owners by writing the SEC.

How is Reg D 506 important to you? Give us your secret sauce.

 The truth is crowdfunding for equity won’t be around till 2014. Accredited investors are the only game in town for security transactions. We are now getting our hunting gear ready. The more public message is that this is a more crowd funding like environment prior to ruling on the SEC rules where we circulate offerings to accredited investors. Accredited investors are the best “trial group” to solicit as FINRA and SEC would agree.

Guess at a date by which crowd fund equity will be legal in the U.S.?

January 30, 2014

Who should pay attention to companies like CrowdFunder?

People interested in this newly forming capital market for early stage investments. While these investments might carry significant risk, not unfamiliar to traders, but along with that comes potential for large returns for successes. At CrowdFunder we are serving three name areas: small businesses, social enterprises and technology startups.

What’s going to be the total cost for issuers to do crowdfunding for equity before a campaign launches when it is legal?

Gaining to raise any investment round can be costly. Raising investment in crowdfunding will include legal background checks, external accounting reviews and any cost associated with your legal agreements. For less than $500,000 would cost up front $12,500.  For above $500,000 raises would cost an additional $25,000 in audits if you have a history of revenue.

How can large companies get involved in Crowdfunding?

Strong brands with large communities and strong following have a huge opportunity to use crowdfunding to use it as a marketing vehicle for their products and services. Crowdfunding offers unique and innovative ways to make people more closely aligned with the brand.

What are else would you advise an issuer on crowdfunding for equity to be cognizant of?

Work with a crowdfunding platform that will protect your proprietary information.  CrowdFunder does that by having a private layer to your deals and documents and requiring that each investor has a personal profile connected to their social networks and proof to accredit investor profile. This way you can accept or reject potential investors.

How many investors do you have now and how many are foreign investors?

12,000 and 10% foreign.

What are the fears and pitfalls of crowdfunding for equity?

That inexperienced investors don’t understand the difference between fraud and failure in an early stage company. Crowdfunding portals are required to do things like review disclosures and do criminal background checks. Making an offering you still don’t understand as an entrepreneur and still receiving funding would be my second.  The choice of equity or debt is a critical one and entrepreneurs don’t understand this enough.

How big an industry will this be in 2014?

$10.5 billion

How will broker dealers and angels be affected by this law and how can they best leverage it?

Broker dealers will be the sole security participants and beneficiaries of the crowd funding legislation of 2014.  Angel investors will have new and unique opportunities on platforms like CrowdFunder to have access to deal flow they would have never had otherwise.

Posted From ; http://www.forbes.com/sites/groupthink/2013/02/28/what-entrepreneurs-need-to-know-about-equity-crowdfunding/

While 2012 was an amazing year for crowdfunding, 2013 should outdo it. Here are my half dozen predictions for the year – and why this new form of capital formation will continue to soar.

1. The Global Crowdfunding will double in annual revenue to $6 billion in 2013

Crowdfunding was exploding quietly in 2012 for the non-believers and loudly for the embracers between March 8, 2012 and President’s Obama signing of the JOBS Act into law on April 5, 2012. Some of the largest sites in the world for rewards and donations – Kickstarter, Indiegogo, Grow VC and Rockethub – saw their daily traffic and donation amounts double within a few months. Kickstarter has had its issuers raise a cumulative $200+ million in sales 2008-2011 to reach an addition $145+ million to a total of $345+ million by year end 2012. To give you an example, LendingClub reached $75+ million per month in debt lending as a crowd funding platform in November 2012.  It is the largest U.S. peer-to-peer lender and will hit an additional $1 billion in loans 2013 vis-a-vis the cumulative $1 billion it lent since inception 2007.

The global predictions in 2013 for the debt crowdfunding industry are strong. LendingClub will add almost $1 billion in 2013 to the total of $3 billion reached in 2012. There are 34 additional debt crowdfunding firms growing globally, including Zopa ($400 million since inception) and Prosper ($250 million). The balance of the $1.25 billion will come from donations and rewards-based crowdfunding, which will provide the bulk of growth in 2013 and 2014.

2. The EU will embrace crowdfunding laws

Led by the Directorate General for Enterprise and Industry, the EU Commission will have a couple more workshops Q1-3 2013 and create a proposal towards making crowdfunding for equity a legal option by Q4 2013. It will take EU 1,000 days to make such a law legal from the day a proposal is created. My prediction is that the EU is lethargic in pan-European law implementations.

3. Crowdfunding platforms will turn into a commodity

The 700+ crowd funding sites today will increase to 1,500 by Q2 2013 and quietly contract under the hood to 200 well-financed and revenue-generating sites by Q1 2014. Sites like Crowd Valley with 300 plus private label crowd funding platforms offered free to organizations will start charging for these services. These private label extensions will lead to the growth of more community sites using crowd funding but the back end technology will be run by a few dozen leading platforms. In parallel we will see 1,000 more sites using crowd funding with free API technology from firms like CrowdTilt which allows any site to start group charging and collecting money from several projects and thousands of donors.

4. M&A will not fuel Crowd Funding in 2013, but international expansion will

Crowdfunding firms are poorly funded, with few assets to be purchased. The lack of standardized valuations for crowdfunding sites makes 2013 a year where we see growth but M&A will mature to grow fastest in 2014. M&A in 2013 will probably kick up little dust, just as it failed to do in 2012. We have seen some acquisitions but those are more of acquiring the liabilities of running sites and spending more money to drive traffic. Crowdfunding platform assets will not mature in 2013. Crowdfunding has one inherent challenge – a bottomless pit cost requirement to drive traffic to your site. Nextyear will see a the gold rush: International expansion firms will grab market share and organically grow with innovation being the discernible advantage. Kickstarter launches in the UK, Indiegogo is already in Germany and several other countries. We will see more international expansion by US companies in the field. Meanwhile, more leading international firms, like Crowd Valley and Give2Gether, will push into the US, while Kickstarter and Indiegogo get as much as 30% of their revenue from abroad.

5. Broker-dealers will lead the “Rich Man’s Crowd Funding” strategy

The smallest broker dealers will consist of crowdfunding for equity players licensed with FINRA that use “Rich Man’s Crowd Funding.”

What’s that? Currently you raise private capital mainly through SEC exemptions. Most common is Regulation D, 506 which allows you to have only 35 non-accredited investors and an unlimited amount of “rich people” allowed to invest.  To be accredited you have to have earned $200,000 ($300k for married couples) the last 2 years or have a net worth over $1 million (and you must exclude the value of your home). Reg D, 506 as we call it, stood for $900 Billion in capital raised in 2011.

The large distribution online promised by crowd funding technology will empower broker dealers to differentiate and use the crowdfunding as a tool for their clients. It was presented to the National Investment Banker Association Spring 2012 and today we have seen recent movements of SoMoLend and CrowdFunder, which signed up with the leading broker dealer Gate Technology whose back end crowd funding platform is run by visionary CEO Vince Molinari. We will see the two to three dozen crowdfunding-for-equity pure plays partner up with broker dealers in Q1 2013 and start pursuing SEC broker-dealer transactions under the Rich Man’s Crowd Funding option, as everyone waits for crowdfunding to become legal.

We predict Crowd Funding for Equities will not become a legal SEC / FINRA regulated program in 2013 but rather by January 2014 because of the byzantine processes required for the SEC and FINRA to interpret the JOBS Act and implement the law. See Obama’s 10 Steps with SEC & FINRA to Legalize US Equity Crowd Funding.

6. By July we will see issuers raise $1 million in capital per week

By year end we will see a total of 104 startups in 2013 having raised a minimum $1 million through crowd funding in 2013. Crowdfunding will be a generally accepted tool to raise capital and the general public explosion will come in 2014 when corporate America officially embraces it.

Posted From ; http://www.forbes.com/sites/groupthink/2012/12/27/crowdfunding-will-make-2013-the-year-of-the-gold-rush/