Bridger Dopp, Zen Float Co.
SALT LAKE CITY — Utah is among the leaders nationwide for entrepreneurial endeavors. But for some, getting started without deep pockets can be challenging.
When you want to start a business or develop an idea but don’t have the money, one of the more increasingly popular trends is to ask “the crowd” for help. Thousands of new innovations and artistic endeavors have received major financial support through Kickstarter — a New York-based crowdfunding platform that has helped scores of local startups get on their way.
Over the past five years, 1,762 Kickstarter projects from Utah have together attracted more than $18 million in pledges from people willing to help bring those ideas to life.
“Utah obviously has a proud history of tech innovation, so there are lots of great tech projects in the mix. But we've also seen projects from creative people in fashion, games, film and more,” said Kickstarter spokesman David Gallagher.
According to the Kickstarter website, every project creator sets his or her project's funding goal and deadline. If people like the project, they can pledge money to make it happen. If the project succeeds in reaching its funding goal, all backers' credit cards are charged when time expires. However, if the project falls short, no one is charged. Funding on Kickstarter is all-or-nothing.
Thus far, the top Utah fundraiser has been a Springville company called Invent-A-Part that developed the RigidBot 3-D printer. Founder Michael Lundwall designed a customizable 3-D printer that is easy to use and affordable, he said.
3-D printing or additive manufacturing is the process of making a three-dimensional solid object from a digital model. 3D printing is achieved using an additive process, where successive layers of material are laid down in different shapes under computer control.
When Lundwall set up his Kickstarter campaign, his original goal was to raise $31,500 in 45 days. To his surprise, that goal was reached in just 12 hours. By the time his campaign was over, he had received nearly $1.1 million in pledges from 1,952 backers.
“I had no idea it would hit over a million (dollars),” he said. When the pledges reached the low six-figure range, the company expanded to a “stretch goal” — an unofficial target beyond a project's original funding goal — that promised rewards or other incentives if it was reached. Using funding raised through the campaign, Lundwall said, the company was able to offer improved versions of its original RigidBot device. With so much extra capital at its disposal, he said, the company would be able to develop a truly exceptional product.
“We basically took all that capital and threw it back into research and development to develop a better RigidBot,” he said. “The machine that people pledged for on Kickstarter and the machine they are receiving (now) is 10 times better.”
Thanks to crowdfunding, Lundwall and other entrepreneurs are now able to raise capital without having to incur massive debt or give up significant stakes in their businesses.
Crowdfunding — also known as crowd financing, equity crowdfunding or hyper funding — is an approach to raising capital for new projects and businesses by soliciting contributions from a large number of stakeholders. Financial contributions are typically made by online investors, sponsors or donors to fund for-profit or nonprofit initiatives or enterprises.
There are four major types of crowdfunding platforms — equity-based, lending-based, reward-based and donation-based, according to crowdsourcing.org, an industry website. The classifications are based on the funders' primary motivation for engaging in crowdfunding.
An equity-based crowdfunding platform is a model in which investors receive an interest in the venture they support. Another equity position could include revenue or profit-sharing arrangements.