PBT Consulting

HOW KELLY ANGOOD RAISED 35K POUNDS FOR THE VIDERE PINHOLE CAMERA MADE OF CARDBOARD ON KICKSTARTER UK

Angood solved some of the problems that plague homemade pinholes: “The key moving part is the internal mechanism where the 120 film feeds into the empty spool. The mechanism has a slightly curved film plane to help ensure the exposures are evenly exposed,” she explains. “This is because when you have a flat film plane, light fall-off from centre to edge (caused by the increased distance from pinhole to edge, effectively increasing the focal ratio) causes the exposures at the edges and corners to be less than at the centre. This was the most complicated part of the design, but ultimately the most rewarding to get right.” (Click Image To Enlarge)

WHAT HAPPENS WHEN YOU MIX A PINHOLE CAMERA WITH A VINTAGE TWIN REFLEX, THEN CRAFT THE WHOLE THING OUT OF STIFF PAPER? WE DON’T KNOW, BUT WE’D SURE LIKE TO FIND OUT.

At a camera shop in Edinburgh, I spotted it: A vintage, bellowing lens camera with crystal clear glass and a pricetag within my reach. I’d been eBay-stalking these old beauties for months. Now, one was mine, complete with the original leather case and a few free rolls of film. For the next week, swapping 12-frame rolls in mud, mist, and high winds beneath nothing more than the tenuous shelter of my raincoat (and the infinite expanse of my wife’s patience), I experienced more fun taking photographs than I’d had in years. And when I finally got the photos developed, even my mistakes reminded me of the place and time.

The Videre pinhole camera is a celebration of vintage cameras, papercraft, and medium format film photography in one (Click Image To Enlarge)

The Videre is a pinhole camera by Kelly Angood, decorated with an intricate, cardboard twin lens reflex camera body (so it looks like a TLR, but it’s not). Like my bellowing lens camera, the Videre celebrates expensive, limited-exposure medium format film. But in every other way, it’s even more rudimentary. The pinhole camera is the world’s simplest camera, after all, consisting of little more than a hole in a box that allows light to strike the film. To take a photo, you essentially open up that hole, for anywhere from five seconds to several months. The results, however, can be impeccably detailed and wonderfully ephemeral.

 

What makes Angood’s creation so weird is how it’s mixed two styles of vintage camera into one exceptionally quirky cardboard construct--a construct that took a lot of love to make into a relatively high-performing camera (that, incidentally, has been designed to capture shots somewhere between 8 and 40 seconds). And at the same time, she solved an engineering problem that plagues most homemade pinhole cameras.

Kelly Angood’s Videre pinhole camera is decorated with a twin-lens reflex camera body to look like a TLR (Click Image To Enlarge)

Angood explains.

“The key moving part is the internal mechanism where the 120 film feeds into the empty spool. The mechanism has a slightly curved film plane to help ensure the exposures are evenly exposed. This is because when you have a flat film plane, light fall-off from centre to edge (caused by the increased distance from pinhole to edge, effectively increasing the focal ratio) causes the exposures at the edges and corners to be less than at the centre. This was the most complicated part of the design, but ultimately the most rewarding to get right.”

There are other premium touches, too, like a light-filtering red acrylic window that lets you check how many photos you have left, or a viewfinder that folds down onto itself--like a real TLR camera--even though that viewfinder actually has no practical purpose to a pinhole camera.

There are other premium touches, too, like a light-filtering red acrylic window that lets you check how many photos you have left, or a viewfinder that folds down onto itself--like a real TLR camera--even though that viewfinder actually has no practical purpose to a pinhole camera. (Click Image To Enlarge)

Angood explains. 

“To me it’s really important to get these little features right.  You’d never guess it but the leather texture on the camera body also took nearly a week to create through various (and highly analogue!) printing methods. “

Indeed, it’s Angood’s perfectionism for artifice that elevates the Videre beyond mere gimmick to a nostalgic reboot, a celebration of vintage cameras, papercraft, and medium format film photography in one. It’s not designed to make photography simple; it’s designed to make photography fun. And if you’d like to pre-order a Videre kit of your own, you’d better act fast, as the offer expires soon. It’ll run you about $40 on Kickstarter.

Portraits taken with the Videre pinhole camera (Click Images To Enlarge)

Order it here.

COMMENTARY:    The Pop-Up Pinhole Project on crowdfunding site Kickstarter UK raised 35,165 pounds from 881 individuals.  This far exceeded the goal of 15,000 pounds   Congrats to Kelly Angood, the inventor of the Videre pinhole camera cardboard kit for exceeding goal. Let's hope that she can successfuly deliver the units on a timely basis.  This is fun, new idea that could start a new tren in cardboard cutout products.

Courtesy of an article dated May 16, 2013 appearing in Fast Company Design

 

 

 

CROWDFUNDING GROWTH EXPLODES IN 2012, $2.7 BILLION RAISED WORLDWIDE, UP 81% OVER 2011, KICKSTARTER NO 1

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

Last year, 308 active crowdfunding platforms (CFPs) 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.

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 donation or reward-based 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.

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.”
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.

COMMENTARY:    Crowdfunding is getting so much bigger than Kickstarter. Last year alone, it generated 1 million successful campaigns and $2.7 billion across the globe.

Crowdfunding World Map - Massolutions - 2012 (Click Image To Enlarge)

Research firm Massolution gathered that data from 308 active crowdfunding platforms (CFPs) worldwide via the website for its 2013 Crowdfunding Industry Report.   Crowdfunding nearly doubled last year, with an 81 percent increase over 2011. North America and Europe, taking second, dominate the market, with a more than 95 percent stake.

Massolution, which specializes in the crowdsourcing and crowdfunding industries, is predicting these figures will reach $5.1 billion this year, with North America contributing 72 percent.

Last year saw significant milestones for crowdfunding. In January, the Elevation Dock became the first to pass $1 million. Then in April, the Pebble smartwatch beat this achievement in only 28 hours, going on to raise $10 million total.

Massolution chief executive Carl Esposti said in a press release. 

“While lending-, donation-, and reward-based crowdfunding have thus far been leading this global financial revolution, equity-based crowdfunding is about to take center stage in the U.S.”

It’s expected to reach $166 million in 2013, up from $116 million this year.

Esposti said.  

“The JOBS Act, which will allow non-accredited investors to make investments in exchange for equity, is expected to go into effect by the end of 2013.” 

President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law a little over one year ago. It gives regular people the chance to become investors.

This is an “untapped funding source” that will help entrepreneurs who need funding,  Massolution analyst and research director Kevin Berg Kartaszewicz-Grell told VentureBeat.

He said.

“Crowdfunding offers a great opportunity for everyone to leverage their social networks and transform social capital into financial support.  Clearly, companies that already make use of distributed networks — such as software developers, media companies, Internet companies, etc. — are in positions of relative strength because the communication networks have already been established, and reaching out via crowdfunding campaigns is thus a natural extension of their networking activities.“

Massolution found that crowdfunding volumes grew 105 percent to $1.6 billion in North America and 65 percent to $945 million in Europe. All other markets expanded close to 125 percent. Most of this growth came from donations (680,000 campaigns) and lending (about 250,000), the latter stemming mainly from crowdfunded microloans and community-driven loans to local small- and medium-sized entities (SMEs), along with the adoption of reward-based campaigns, like those on Kickstarter.

Crowdfunding Financings - Successful and Unsuccessful - By Platform Type of Financing and By Geography Locality - Massolution - 2012 (Click Image To Enlarge)

Social causes drive 30 percent of all activity, which Massolution expects to change as more startups and SMEs begin leveraging the platform. The graphic below shows the 10 most active categories by percentage.

Video games were also huge beneficiaries of crowdfunding last year, raising $83 million on Kickstarter alone.

Kartaszewicz-Grell said.  

"Most game developers would fall under Software and Smart Apps, which is an emerging category I personally expect to see growing rapidly. Software development — especially video games — is a perfect match for crowdfunding because this space has a relatively high portion of its transactions done online and because developers are more used to communicating their state of development via social media.”

Massolution composed its report from survey responses received in the first six weeks of 2013. It was unable to reveal which participating crowdfunding platforms were the most active.

Crowdfunding Platform Activity Across The Top 10 Categories - Massolution - 2012 (Click Image To Enlarge)

Courtesy of an article dated April 8, 2013 appeared in Entrepreneur and an article dated April 8, 2013 appearing in VentureBeat

REAL ESTATE CROWDFUNDING STARTUP REALTY MOGUL WINS SILICON VALLEY'S "FOUNDER SHOWCASE" PITCH COMPETITION

Click to visit the Realty Mogul homepage 

Last week, a young startup called Realty Mogul took home top honors at “Founder Showcase,” a Silicon Valley pitch competition and networking event hosted by TheFunded.com, in which eight early-stage startups showed off their wares in front of 400 investors and founders.

Realty Mogul won the top prize from a pool of over 50 seed-stage companies, beating out email optimization startup Embarke, which came in as the runner-up. This isn’t the first time that Realty Mogul has caught the attention of investors or judges at a pitch competition — or of those at accelerators.

 

The startup is a graduate of both the Founder Institute and Microsoft/TechStars’ accelerator in Seattle, and recently announced its $500,000 seed round raised from a handful of angel investors, including Gust CEO David S. Rose, Gordon Stephenson and serial entrepreneur Sky Kruse. Not only that, but Realty Mogul also won the HATCH Pitch Competition at SXSW in early March, where it was selected as the top startup from over 100 applicants.

Why the buzz? The Los Angeles-based startup has been attracting attention of late for its mission to make real estate investing simple and accessible to all. At least, that is the startup’s long-term goal. As Anthony wrote at the startup’s launch last month, as of now Realty Mogul is a platform where accredited investors “can pool their money to back real estate deals” and buy shares of pre-vetted investment properties, including apartment buildings, office buildings and retail centers. Accredited investors can invest as little as $5,000, without having to worry about the rest of the hassle that come with being an investor in those properties.

The company is currently working with over 1,000 investors, who are using the platform to access a dashboard where they can manage their investments, browse a marketplace of potential investments, sign paperwork and submit payment for deals they want to be involved in and are charged only if the total funding goal is reached. Once reached, investors can track their investments using the site’s dashboard.

And, yes, as Anthony wrote, Realty Mogul is focused exclusively on accredited investors at this point, and qualifying as an individual will require a net worth of more than $1 million. But co-founder and CEO Jilliene Helman thinks that the excitement over equity-based crowdfunding has big potential and that the startup’s model could work beyond this set of accredited investors.

After all, it’s one of the ways that investors can still see returns on their investment, she said, as investments can begin providing returns in the short term (in a few months, via rent checks or loan payments), rather than over years or decades. As to its own cash flow, Realty Mogul makes money by way of administrative fees associated with these investments and by giving real estate firms access to a pool of pre-qualified (and vetted) investors.

When we asked Helman to tell us a little bit about how Realty Mogul is looking to stand our from the competition — from related sites like FundRise and Prodigy Networks, she tells us that, in comparison to the former, Realty Mogul is working with operating partners who have local market knowledge within specific property types, whether that be multifamily, retail or office, for example. Fundrise thus far has raised money for all their own development projects, she says, and while “they are in the acquisition and development business, we are in the business of curating best-in-class operating partners.” Realty Mogul investors can diversify across locations, operating partners and property types, she continued.

In turn, while Prodigy Networks has a sexy product and looks to invest in “trophy properties,” she says, “we are more interested in properties that kick off healthy cash-flow and provide steady returns for our investors … we are 100 percent cash-flow investors and look to provide distributions to our investors in the first quarter after they invest in a property with us.”

The other big difference, the CEO says, is that Realty Mogul allows investors to invest in both loans secured by real estate and equity. In loans, the investor is “always in a first lien position,” which is the safest position position to be in on debt, and the startup’s loans pay fixed interest payments, while its equity transactions pay preferred percentages and allow investors to participate in appreciation and upside.

Furthermore, in terms of traction, Realty Mogul has invested over a quarter of a million dollars since launch, and just closed a transaction in Washington that involved a loan “paying 8 percent to investors on annual basis,” she says.

And, in terms of targeting that wider audience? Hellman says they’re still waiting on the final regulations to be determined by the SEC on equity crowdfunding, but “we’re interested in opening this model to a wider audience” as soon as they can.

Founder Showcase runner-up, Embarke, which also impressed the panel of investors at the event, is an email optimization product that analyzes individual user behaviors and interests (as opposed to aggregate user data) in order to ensure delivery of the right message to the right person at the right time. Embarke has created over two million user profiles and is sending over 13 million emails a month, helping marketers to increase opens and clicks by 10 percent to 25 percent, the company says, and counts SendGrid as an integration partner. The startup is based in Seattle.

Below you’ll find Realty Mogul’s pitch from Founder Showcase. Let us know what you think.

COMMENTARY:   I tend to agree with the panel of investors that Realty Mogul can become a very successful crowdfunding marketplace for raising capital for real estate investments.   Real estate is a very popular form of capital investment with high potential returns.  There are 7 million accredited investors to pick from, and the market for privately-owned real estate exceeds $150 billion, so there is a huge upside.

Realty Mogul has eliminated most of the investment risk, too.  Realty Mogul runs background, criminal and credit checks to mitigate the risk of fraud and reviews every transaction in-house.  Realty Mogul provides no assurances to investors that investment objectives of any given investment will be reached, but only a small percentage (we estimate less than 2%) of investments we review will be included in the Realty Mogul marketplace.   

Realty Mogul allows investors to become equity holders in real estate opportunities that were historically difficult to access. Through the use of the Realty Mogul web platform, investors can browse and screen real estate investments, view details of an investment and sign legal documents online.   Here's how Realty Mogul works:

1. Create an account - A Realty Mogul membership is free and gives you insider access to invest in real estate that is pre-screened by the Realty Mogul team. You will also benefit from low minimums, starting at $5,000, compared to $50k - $100k for traditional real estate investments. Realty Mogul is currently open to accredited and international investors. To be an accredited investor requires a minimum income and/or net worth. The sign up process for Realty Mogul verifies the accreditation of its members.
2. Select an investment - Members of Realty Mogul can browse the marketplace and learn more about specific investments. For every opportunity, there is detailed information including estimated length of the investment, estimated annual return, property and location information and a profile for any companies or individuals involved in the investment. Realty Mogul also moderates a Q&A forum and provides email updates.
   
3. Finalize your investment - Once you decide which investment you are interested in, you can easily and securely sign legal paperwork online and submit payment for your investment via check or wire. Realty Mogul may also request additional information to verify that you are an accredited investor.
   
4. Wait for the funding process to be completed - In order to finalize your investment, the full amount for the opportunity must be reached. Realty Mogul will keep you up to date via email and your investor dashboard. In the event the investment is oversubscribed, the first investors who have funded their portion of the investment will have preference.
   
5. If Funds Raised 
   1. Reach Goal - You are officially an investor and can expect to receive frequent updates and your share of cash distributions. You will also have access to your investor dashboard to watch how your money is working for you and receive exclusive invites to Realty Mogul events.
   2. Do Not Reach Goal - 100% of your money will be returned to you with no fees or hidden charges.

Whether a sufficient number of accredited investors will be satisifed sharing an 8% return on real estate investments is questionable, so I can understand Javelin's concerns.  Many angels and accredited investors prefer 25% and 30% annual returns.  You are not going to get those kind of returns on returns given the nature of today's real estate markets. 

There are some definite advantages of being first in the market, but if Realty Mogul's business model proves successful, it will take very little time before competitors enter the market.  The JOBS Act was been signed into law in early 2012, and investors are waiting for the SEC to issue final regulations.  Once this happens, crowdfunding is going to really takeoff, so Realty Mogul better be ready.  

Courtesy of an article dated April 7, 2013 appearing in TechCrunch

THE PIAMO ESPRESSO MAKER, AN INGENIOUS AT-HOME ESPRESSO MAKER FOR YOUR MICROWAVE IN LESS THAN ONE MINUTE

The Piamo is a charming, microwave espresso maker (Click Image To Enlarge)

HAS THE IMPOSSIBLE HAPPENED? HAS SOMEONE BUILT THE FIRST AMAZING MICROWAVE ESPRESSO MAKER? POSSIBLY.

Brewing world-class coffee is fairly inexpensive. All you need is a grinder and a kettle and some sort of combination of a funnel and filter. Good espresso ups the ante by about tenfold. You need pressure. Pressure is expensive, it’s counter-suckingly bulky and still requires a level of finesse to pull a perfect shot. Since the 1930s, the solution has been the moka pot, but a moka pot needs a stove.

In 30 seconds, it will turn your water and grounds into a very strong shot of coffee (Click Image To Enlarge)

The Piamo Espresso Maker, designed by Christoph and Hendrik Meyl, along with Lunar, is an elegant, microwaveable entry in the world of at-home espresso. It’s essentially a microwaveable moka pot, inverted. You pour water in a reservoir up top and fill grounds in the middle. Then you set the microwave for 30 seconds. Steam pressure builds in the reservoir, pushing water through the grounds into a cup. You’re done.

 

Lunar’s lead project designer Roman Gebhard told Co.Design.

“We really strived for creating a simple, on-the-go espresso experience that is communicated with a clear, unique, and iconic design expression.  There was a need and opportunity to form a brand new product icon/archetype that has the strength to become a symbol for this category.”

The Piamo has already been awarded a few patents based on its ingenuity, but its most brilliant move was to play off the already-iconic shape (and mouth feel) of the espresso cup. Because while I was able to find some “microwaveable espresso makers” on Amazon, their plastic construction oozed gimmick. And all their parts looked fragile and tough to clean. Even though I’ve never tasted Piamo espresso, I’m inherently drawn to the authenticity of that espresso cup. I trust it, and I want to drink espresso out of it.

The top (left) is the water reservoir. Then you have the compartment for the grounds--complete with metal shielding to stop them from burning. At the bottom is the cup (Click Image To Enlarge)

Of course, the larger design challenges had nothing to do with the branding. The team had to figure out, how do you toss ground espresso into a microwave for 30 seconds without burning away the intoxicating aroma? The solution was to implement metal shielding around just the grounds compartment of the Piamo. But don’t metal and microwaves not mix?

Steam pressure builds, pushing through the middle chamber’s grounds into the cup itself (Click Image To Enlarge)

Gebhard explains. 

"Any metal part in a microwave acts as an antenna. It needs to be designed in a way that its geometry is soft, rounded, and doesn’t have any pointy, sharp areas that create problems with the electrical fields that would result in the well-known sparks.  Furthermore, these metal parts need to be designed in a way that they are aligned with the standardized microwave wavelength and frequency."

Coupled with that espresso cup, which was actually built of ABS plastic to reinforce the metal’s shielding (better than ceramic would), the espresso grounds are kept safe from overheating. Ironically, moka pots are often chided for burning espresso before the water pressure mixes with the beans. Piamo’s design team may have solved this age-old problem despite the indiscriminate science of microwaves.

And it only takes 30 seconds (Click Image To Enlarge)

But before the snobs call me on this, it is worth noting that moka pots may not be the ultimate standard of espresso. Coffee consensus agrees that you need 8.8 bars (atmospheres) of pressure to pull an ideal shot. Moka pots, and the Piamo, both generate about 1.5 bars. So will the Piamo prove to be a replacement for your four-figure counter beast, brandishing a name that could be mistaken for an Italian sports car? Probably not. But could the Piamo be the all-around most convenient way ever to make a drinkable shot of super strong coffee at the inlaws’? Absolutely.

The Piamo is available for pre-order now. It’s $55 on the German equivalent of Kickstarter.

Order the Piamo Espresso Maker here 

COMMENTARY:   I'm not an espresso coffee drinker, but the Piamo Espresso Maker definitely appears to be a very simple alternative solution to what has become a complicated and fairly expensive solution to brewing a great cup of espresso coffee.  It's sort of a no-brainer if you want a quick cup of espresso coffee, and don't want to use one of those espresso machines.   

Courtesy of an article dated February 6, 2013 appearing in Fast Company Design 

 

TWINE: A KICKSTARTER PROJECT THAT RAISED TOO MUCH MONEY, THEN SHIPPED LATE DUE TO POOR PLANNING AND "MURPHY'S LAW"

Twine, a gadget that promises to make your your washing machine tweet when the laundry is done and your basement send an email when it floods, raised more than $500,000 on Kickstarter in 2011 (Click Image To Enlarge)

When Twine's creators signed up for Kickstarter, they thought they'd make about 200 devices using the same $20 toaster oven they had purchased for the prototype. Then they raised more than $500,000.

Twine is exactly the type of sensor-stuffed, Wi-Fi-connected gadget you would expect to take off in Kickstarter's tech section. The device promises to make your washing machine tweet when the laundry is done and your basement send an email when it floods. Blogs called it “the future” within a week after debuting. Nobody was surprised when it raised more than half-a-million dollars--except for its creators.

Supermechanical expected to make about 200 Twines after running its Kickstarter project. Instead, it ended up shipping 4,000 of them to Kickstarter backers (Click Image To Enlarge)

When John Kestner and David Carr posted Twine on Kickstarter in November 2011, they had set their fundraising goal at $35,000. Their plan was to produce about 200 units using the same process that created the prototype. But six weeks later, having raised $556,541, they were now committed to shipping almost 4,000 units. The homemade wax mold used to create Twine's prototype was no longer going to cut it, and there wasn't another plan. Kestner tells Fast Company.

“We were definitely not thinking of the risk of being too successful.” 

Twine's creators, John Kestner and David Carr, who call their startup 'Supermechanical,' prototyped Twine in the basement of a dorm (Click Image To Enlarge)

In scaling their manufacturing process, tasks the team of two hadn't considered--customizing a $15,000 set of tooling, designing packaging, communicating with backers, and searching for components--added up to an unmanageable number of full-time jobs. Twine’s estimated delivery date of March quickly became unrealistic.

Despite the disproportionate attention that superstar Kickstarter projects like Twine get, they're rare. Most projects raise less than $10,000, and until last year, none had raised more than $1 million. But as Kickstarter's scale rockets, breakaway projects like Twine are becoming not only more visible but more common. Seventeen Kickstarter projects passed the $1 million (or euro equivalent) milestone last year. Six of them, like Twine, were gadget projects, which are arguably left in the most awkward position after breakout success. When a Kickstarter project involving hardware takes off, what started as a dream and a prototype can morph into a mass-manufacturing commitment within a couple of weeks. It’s something of a Cinderella story--but one in which Cinderella must learn how to navigate mass manufacturing overnight. Here is how it worked out for Twine.

Twine's prototype cost just a few hundred dollars to create. Its first version's outer casing baked in a $20 toaster oven (Click Image To Enlarge)

Stage 1: Prototyping

Prototyping Twine cost a few hundred dollars. Recently graduated from MIT’s Media Lab, Kestner and Carr “squirreled away” a space to work in the basement of a Harvard dorm. Carr already owned a soldering iron and the electronics equipment for Twine’s circuit board, and he carved a wax mold for Twine's blue outer casing using a milling machine that he had built himself. Silicone and urethane cost about $100 at a local supply shop, and the toaster oven where Twine's first casing baked for six hours cost another $20.

Carr made the wax mold for Twine's outer casing with a homemade milling machine (Click Image To Enlarge)

It wasn't until the third day of the Kickstarter project, when Twine's funding passed three times the original goal, that the pair of inventors realized Twine had scaled past this manufacturing process.  Kestner says.

“If we had done 4,000, it would have taken months just to physically manufacture them. That’s not including all of the development time.”

Carr already owned the soldering iron and electronics equipment he needed to create Twine's prototype circuit board (Click Image To Enlarge)

3-D printing, Github-type sites for creating hardware such as Upverter, and makerspaces like Boston-based Artisan Aylum have all made the path to creating a functional prototype or a small batch of gadgets easier.  Scott Miller, the CEO of a production consultancy called Dragon Innovation that has about 20 Kickstarter projects as clients says. 

“But the big gotchya is that is really just the beginning, and there’s a tremendous amount of work to do after that. Because the entrepreneurs have a lot of unknown unknowns, they don’t really know how far along the timeline they are. And typically they will think they’re a lot closer to getting volume on the shelf or e-commerce than they actually are.”

The tooling for Twine's outer casing wasn't as easy to 3-D prototype, and the resulting component wasn't usable the first time around. Had the Supermechanical not gotten a refund for a mistake with the factory's software, it could have cost them $15,000 (Click Image To Enlarge)

Stage 2:  Surprise Scaling

Though Kestner had studied industrial design as an undergraduate, he had never actually produced a physical object on a large scale. “To be honest, I Googled a lot,” he says.

All of Twine’s manufacturing partners and most of its component sources are located in the United States, which successfully avoided the problems with language, time, and cultural barriers that Kickstarter projects such as Pebble and LIFX have dealt with while manufacturing their products in China. Even without overseas manufacturing, however, there were plenty of unanticipated challenges.

The company that manufactured Twine’s outer casing, for instance, didn’t design the tooling it used to shape them. Kestner did. Whether or not his designs ended up being functional, they each would cost $15,000. Twine’s gut, the part that holds its circuit board, is made of hard plastic and was easy to test with a 3-D printer before putting money down for the real deal. But only one 3-D printer would prototype the tooling for Twine’s rubber casing, and the results weren’t nearly as accurate as the gut prototypes. When the actual metal tooling arrived, it was a disaster. The case was too tight, and it looked terrible. Problems with the manufacturer’s preview software got the team a refund, but the lost cost could have killed the project. Even with the refund, it cost time. All together, it took five months to just design Twine’s outer casing.

Twine’s gut, the part that holds its circuit board, is made of hard plastic and was easy to test with a 3-D printer before putting money down for the real deal (Click Image To Enlarge)

Meanwhile, Twine’s first employee coordinated the delivery of 100 components to the factory that assembled Twine’s circuit boards--a job that was part scavenger hunt and part logistical Olympics. Kestner worked on a design for Twine’s packaging and put together a website for managing Twine backers’ new addresses and international shipping costs.

By the time the casing and circuit boards began arriving in June, the team had moved to Austin. Boxes started piling up in their new workspace (Click Image To Enlarge)

By the time the casing and circuit boards began arriving in June, the team had moved to Austin. Boxes started piling up in their new workspace.

By the time Twine's parts were ready for assembly, the team had moved from Boston to a workspace in Austin, TX (Click Image To Enlarge)

The casing arrived from an injection molding plant in Minnesota. Circuit boards came from a manufacturer in New Hampshire. And the 8-piece boxes that Kestner designed himself came from North Carolina in large flats.Supermechanical, the company behind Twine, had already spent nearly all of its Kickstarter money. It had overshot its estimated shipping date by three months, and it hadn’t even started putting devices together.

A factory in New Hampshire assembled Twine's circuit boards. Its cases were made in Minnesota, and its packaging manufactured in North Carolina (Click Image To Enlarge)

Stage 3:  Missing The Deadline

It isn't just first-time hardware entrepreneurs that struggle with the manufacturing demands of surprise scaling via Kickstarter. Pebble Technology's CEO, Eric Migicovsky, has been working on smartwatches for four years. The company manufactured about 1,500 units of its first product, InPulse, at a Bay Area manufacturer. But the 85,000 Pebble smartwatches the company owes Kickstarter backers after raising $10 million on the site required a shift to an overseas manufacturing process, and--though Migicovsky says this plan B existed in advance--the company missed its September estimated delivery date.

In fact, most breakaway hardware projects have missed their deadlines. iPhone station Elevation Dock shipped about six months late. Virtual reality headset Oculus Rift initially set its expected delivery date for October, but announced recently that it now expects to be delivering developer kits by March 2013. By one estimate, only 25% of Kickstarter’s design and technology products deliver on time.

Twine technician tests each finished Twine for quality control issues.  This is a very time-consuming procedure, but a necessary evil in order to avoid returns for defects, requests for refunds and the resulting bad publicity (Click Image To Enlarge)

Being late is not necessarily a big deal. Kickstarter is, after all, designed to support unfinished projects. A bigger problem is reaching a Kickstarter funding goal only to realize that the funding can’t come close to covering your costs. Twine, for instance, set its goal at $35,000—aiming as low as possible in order to avoid missing it. 

Kestner says.

“If we had gotten less than we did, but still met our goal, that would have really hurt us; we would have lost money.  There’s an uncomfortable valley between hand-making stuff and being able to have the capital to invest in tooling and all the stuff that goes into mass manufacturing that you just can’t get good prices on without mass production. So what do you do? You can’t afford to hand-make 1,000 of something.”

Dragon Innovation’s Miller says he often gets panicked calls from Kickstarter project creators who can't feasibly complete their projects. Their creators did not understand the manufacturing costs when they set their goal. Their timeline is unreasonable, or their design isn’t actually manufacturable.

Miller says. 

“They’ve also spent the money, and Amazon and Kickstarter have taken their cut.  They can’t even give back the money. It’s kind of a really unfortunate position to be in.”

Stage 4:  Delivering Against The Odds

Kestner asks at some point while describing Twine's journey from Kickstarter funding to shipping,

"What’s that quote that says,  'If I knew how hard it was to do it, maybe I wouldn’t have started in the first place?'"

Kickstarter doesn't provide any warnings. While it approves projects before they go live on the site, the process is more like filling out a college application than an investigation into the project’s feasibility. In September, however, the platform took its biggest step in preventing hardware projects from drowning in their own success (and the phrase "Kickstarter vaporware" from entering the vernacular) by banning renderings and simulations.  it advised in a blog post.

“The best rule of thumb: under-promise and over-deliver.”

Earlier that summer additional guidelines for design and technology products required information about creators' relevant experience and a manufacturing plan. Kickstarter has also advised against posting finished products on the site, remind its users that "Kickstarter is Not a Store." So what is the appropriate amount of risk?

No matter how overwhelmed by their projects, all six of the Kickstarter gadget creators I interviewed for this article talked about the opportunities Kickstarter gives entrepreneurs to solicit input and test demand for a product at an early stage.  Kestner says.

"It’s okay that you have the chance to fail.  That’s how good stuff gets made. You’ve got to have the chance to fail."

Some did say they wished they had waited until later in the development process before putting their gadgets on Kickstarter.  Some couldn't have afforded to get further along in the process before their Kickstarter campaign. Alex Hawkinson, the CEO of the company that makes SmartThings, a platform for connecting objects to the Internet that raised $1.2 million, said his product was already on track to ship when the campaign first went live. He set the reward thresholds knowing that he'd pretty much break even.  He told Fast Company.

“We were on track to launch the product at the end of this year anyway, but we were all Kickstarter users, and thought it was a great way to get the word out and sort of build on that three-legged stool.” 

Even without being prepared for it, Twine’s creators successfully navigated the mass manufacturing process by picking up new skills as they went. Now with a staff of five, Supermechanical started snapping units together last summer. Each of the 4,000 units took about 10 minutes to assemble, test, and package: A total of about more than 650 hours.

Supermechanical finally shipped its first 25 Twines in September--about six months after the estimated delivery date.

Kestner and Carr celebrated with a nice dinner.  Kestner says. 

"We didn’t cry.  But it was a great, great weight off."

The next day, they dove into what is sure to be a never-ending series of unexpected challenges: The circuit board assembler couldn’t keep the schedule it had agreed to, some of the shipped Twines returned in the mail, and, with the Kickstarter project behind them, it was time to address the small task of turning Twine into a sustainable business.

Kestner says.

“I’m a workaholic.  I’ve always been a workaholic, but this is the hardest I’ve ever worked in my life. It’s not free money. That’s for sure.”

COMMENTARY:   The thing I see happening with a lot of entrepreneurs building something is their lack of knowledge and understanding of the intricacies of manufacturing.  Developing production-ready prototypes, preparing precise engineering drawings and bills of materials, and exacting tooling is extremely important.  Several of my former clients didn't both to provide manufacturer's with precise engineering drawings or a bill of materials, or take into account the useful life of the tooling, or factor in additional tooling as production qualities scale.  

My recommendation for startups is to avoid assembling the finished product yourself, not unless you care about your family and kids, don't have much of a social life, and you have a high tolerance for pain and frustration.  Do what the big boys do.  Work only with individuals experienced with the manufacturing process from start-to-finish.  They are familiar with the material specifications, and whether the finished product will holdup during regular use.

If you can afford to produce several working prototypes, do so, then conduct a thorough A/B market test in order to determine if the product satisfies customer needs, provides a great overall experience, and provide you with the feedback to make any last minute changes to the prototype before you go into production on the final finished product.  Again, I can't tell you how many times entrepreneurs dive right into manufacturing without conducting an adequate market test, only to encounter quality control issues and huge numbers of product returns.     

Courtesy of an article dated February 5, 2013 appearing in Fast Company 

 

KICKSTARTING: THE THINNEST WATCH EVER MADE AT ONLY .008 MM THICK, WITH AN E-LINK DISPLAY

THE CST-01, A FLEXIBLE, MINIMALIST TIMEPIECE FROM A PAIR OF IDEO DESIGNERS, USES AN E-INK DISPLAY AND IS LESS THAN A MILLIMETER THICK.

As laptops continue to become smaller and smaller rectangles and smartphones, illogically, continue to become bigger and bigger ones, another high-tech product segment is evolving with far less predicability. High-tech gizmos intended to be worn on the body, from the Nike+ FuelBand to the Fitbit One, are already staking out the next frontier of consumer tech, and even though the CST-01 is just a watch--no Internet connectivity, no fancy sensors, no pedometer--its design, and the technologies that make it possible, are worth getting excited about.

Click Image To Enlarge

The CST-01 is a thin, stainless-steel cuff, just over an inch wide. It looks more like one of those '90s slap bracelets than anything resembling a typical wristwatch. It’s also incredibly thin--less than a millimeter thick, which is almost impossible to believe--and it’s physically flexible, bending ever so slightly to wrap snugly around wrists of all sizes. The timepiece has no buttons whatsoever. Even changing the time has to be done from an included dock, which doubles as a magnetic charging station. A single 10-minute charge will power the watch for about a month.

Click Image To Enlarge

What makes the unique design possible--and what allows it to claim the designation as the thinnest watch ever made, according to the designers--is its novel use of an e-ink display, the same kind of low-power tech used in e-readers like the Kindle. The CST-01 isn’t the first watch to tap e-ink, but previous units tried to apply the technology to more conventional smartwatch designs. It was never a very compelling match.

Click Image To Enlarge

The duo behind the CST-01--Ideo designers Dave Vondle and Jerry O’Leary--have wisely tried to build a watch around e-ink, not the other way around. Having worked with the technology for a number of projects at Ideo, Vondle and O’Leary agreed that they hadn’t seen a timepiece that "really celebrated its uniqueness," O’Leary explains.

"We appreciated how it looked but became more fascinated with its other values. E-ink is thin, flexible, low power, and robust."

Click Image To Enlarge

So the watch, too, would be all those things. And after finding the other necessary componenets--a Thinergy energy cell and a Seiko Epson microcontroller--they realized that in addition to being flexible and low power, their watch would be very thin indeed. O’Leary explains.

"We explored adding as little mechanically and aesthetically, so that the qualities of these partners could shine through."

Click Image To Enlarge

Next they made the bold decision to remove the ability to change time from the watch itself. O’Leary says. 

"This would only add complexity and thickness to the watch, and all for the sake of an interaction that was rarely used by the owner."

So, continuing down the button-free path, a stainless-steel band was decided on as the foundation for the timepiece, and a thin polycarbonate mask was added as a face. Total thickness: 0.8mm

The designers, which are launching their new venture under the moniker Central Standard Timing, sagely launched a Kickstarter campaign for the watch right in the middle of the mega-trade show CES, which they attended with their working prototype. In a sea of uninspired new gadgets and chintzy accessories, the CST-01 was something truly novel, and it blew past its funding goal of $200,000 (the watch is slated to retail somewhere around $170). Currently, with over a month left in the campaign, the watch has reached nearly half a million dollars in funding.

Aesthetically, the CST-01 will not be for everyone. Though decidedly minimalistic in functionality, it definitely makes a statement (and you wouldn’t be wrong in thinking that statement might be something like "I love Star Trek!"). But at a point where it’s hard to get excited about new gadgets, where most new consumer electronics products are noteworthy for being a little smaller or a little faster or a little sharper, the CST-01 is a peek at some exciting things around the corner.

For one thing, it hints toward the arrival of flexible devices, like e-ink readers we could roll up like paper newspapers (fly swatting discouraged, maybe, until things get even a bit more robust). It also continues the exciting trend of exploring new ways to put technology not just in our pockets but on our person. But most notably, it takes an evolving technology, in e-ink, and imagines an entirely new design around its unique qualities, instead of relying on old forms and outdated thinking. And whether you’re keen on wearing a Star Trek snap bracelet or not, that type of innovation is a good thing.

Check out the Kickstarter page and find out more on the Central Standard Timing website.

COMMENTARY:   Now that's what I call a watch for the 2nd Millenium.

Courtesy of an article dated  January 18, 2013 appearing in Fast Company Design

HOW PAUL SAHRE SUCCESSFULLY RAISED $15,973 ON KICKSTARTER BY HONORING HIS DAD WITH A SATURN V RELAUNCH PROJECT

Saturn V rocket on the launching pad - Official NASA photo (Click Image To Enlarge) 

Nowadays, Kickstarter has evolved into a platform for launching big ideas and even bigger businesses. But for Paul Sahre, the crowdfunding platform is about launching a model Saturn V rocket his late father lovingly built 40 years ago.  After months of preparation, the rocket never deployed its chute and instead crashed to the ground. It was never flown again.

It’s a powerful story of the Sahre family that resonated with the crowdfunding audience as captured in this color photo from 1969 (Click Image To Enlarge)

Through a Kickstarter campaign, Paul Sahre is continuing a storyline from his youth (Click Image To Enlarge)

Sahre writes on his Kickstarter page. 

“It struck me that this was the first time I remember seeing him fail at ANYTHING.  It reminded me of a time when our fathers were omnipotent; when any dispute with the kid down the block could be settled with ‘I’ll ask my dad.’”

 

Now, Sahre plans to try again. He’s going to build and launch a Saturn V of his own alongside his children and family. He’s already bought a vintage kit off eBay, and through Kickstarter funding, he’ll be documenting the experience in a photobook and short documentary video. The goal?  To recreate a place and time in both his life and our society.

The idea isn’t just an opportunity to rewrite history in the present …

… but for Paul’s children to get to know a grandpa they never met (Click Images To Enlarge)

Sahre tells me.

“It’s easy to forget but there were seven missions to the moon over a four-year period between 1969-1972. It was a collective experience unlike anything happening today. All my friends wanted to be astronauts and many of them were into model rockets.  My dad was an aerospace engineer (but his specialty was flight simulators). He built his 1/100 scale Saturn V and made it an event so we could relate in some small way to what we were watching on the TV every night.”

His father spent months building the rocket (or “years” according to his mom), photographing the progress all the while. But when the rocket failed to deploy its chutes, the photos stopped and the story ended. Sahre wants to continue with his photobook where his father left off.

A 40-yr old Centuri Saturn V rocket kit like the one Paul Sahre's father launched was found on eBay (Click Image To Enlarge)

The sheer amount of details make it a specific memory to be sure. Not everyone’s father was an aerospace engineer. Not everyone’s father built toy rockets. But there’s something about Sahre’s story--maybe it’s the golden age of the Space Race, maybe it’s every man’s quest to understand his father, maybe it’s just the extreme sincerity behind the whole project--that’s resonated with the crowd. Sahre’s family project has already exceeded its $14,000 goal, and there are still a few days left to back it.    

Sahre says. 

“The project is really about shared experiences and the nature of memory. And about loss of course. Why do certain things stay with us? And how do these experiences form the future you? Why do I remember this particular event with such clarity 40 years after the fact? And what effect might a do-over have on that memory?

“While I don’t necessarily expect answers, I like the idea of re-enacting this event, engineered by my father, for my two sons who never knew their grandfather. And seeing if i can make this experience stick for them.

“Or maybe I just simply miss my dad and this is a way to collaborate with him.  Either way, I think he would have liked the idea of giving it another try.”

Support the project here.

COMMENTARY:  Click this link to view a list of YouTube videos about CBS NEWS Coverage of the launch of Apollo 11 (Parts 1 through 11).   The video series is narrated by CBS News correspondent and icon Walter Cronkite.   For your convenience, I have included Part 1 below:

 

I remember the launch of Apollo 11 to the Moon very well.  It was a historic event, something you did not want to miss.  People throughout the world were glued to their TV sets to watch the launch including the historic landing on the Moon, and witnessing U.S. astronaut Neil Armstrong's memorable words:  "That's one small step for Man, one giant leap for Mankind."

I think the Saturn V Relaunch project is a wonderful and fun idea and 507 Kickstarter donors thought so too, and they generously donated $19,753.  This easily exceeded the goal to raise $14,000.  I have a feeling there are going to be a lot of happy amateur rocketeers and families with young children when they receive their Saturn V rocket kit.   Congrats to Paul Sahre for conceiving it, designing the Saturn V rocket parts for the kits, and posting it on Kickstarter.

He’ll rebuild a Saturn V model rocket his dad had built over 40 years ago (that crashed when it was launched) (Click Image To Enlarge)

Courtesy of an article dated November 13, 2012 appearing in Fast Company Design

HOW JOHN MCGINNIS IS USING KICKSTARTER TO RAISE FUNDS TO BUILD A DIY PLANE WITHOUT WINGS AT 1/10TH THE COST

KICKSTARTER IS A NEW MODEL IN FUNDING IDEAS, BUT IS THE SKY REALLY THE LIMIT?

John McGinnis may or may not be a little crazy.

He’s a designer, a manufacturer of composite products, and a self-proclaimed expert in fluid dynamics. But beyond a few profiles on experimental aviation sites, the only resume he’s offering the world is the Synergy, his aircraft that promises “10X the economy of a bizjet with greater range, at 10% the price.” It’s currently raising funds on Kickstarter.

 

As a kit plane, the Synergy wouldn’t be such an anomaly, except that it bucks conventional aircraft design: It doesn’t actually have wings. Instead, the Synergy deploys McGinnis’s own invention, a “double box” tail that he calls a “modern magic carpet," promising groundbreaking reduced drag to create “a big, fast, roomy airplane with double the usual speed or triple the usual economy.” This is no ultralight. McGinnis says the final product would be roughly the size and cost of a luxury SUV, but the plane would actually get better gas mileage. It’ll run on diesel.

McGinnis tells Co.Design.

“There are millions of pilots and millions more who’d like an excuse to [fly every day]. Flying an airplane is the easy part, and it could be a whole lot easier if we weren’t 90% occupied with nursing our obsolete tech through the air.  Think about what [aviation would] be like if we went back to 1973 and put airplanes on the same track we put our telephones on.”

To McGinnis, that track is a plane in every garage, the Jetsonsonian future we all long for, the thus far fruitless desire that squeezes at least one flying car on the cover of Popular Science each year.

There’s just one catch, and it’s the catch we always see in this industry: The plane hasn’t been built yet. Right now, McGinnis has a ¼ scale R/C model in the air, and he’s raising money to build a full-scale prototype. And while there’s at least some debate as to whether or not his concept could actually work as advertised, there is no one to confirm nor call BS on the design (Kickstarters are no more aerospace engineers than Co.Design writers.)

A 1/4-scale version of the full-size Synergy (Click Image To Enlarge)

Yet the idea is resonating all the same. The project has already raised half of its $65,000 goal. And most interestingly, McGinnis is raising funds, not from people who expect to land a five-seater plane for a $250 deposit, but from enthusiasts--dreamers, even--who are are willing to just give away their money to see such a plane developed. A $10,000 deposit will get you no closer to the cockpit than a $10 one.

The 1/4-scale Synergy flys beautifully through the air after take-off.  Reminds one of an eagle in flight (Click Image To Enlarge)

McGinnis says.

“We’re building a prototype, not taking orders for vaporware.  How about we create a company that can live up to unprecedented demand first, that doesn’t beg their customers to front their risks in advance and then never delivers the goods?”

McGinnis and his team of designers are building the first full-scale Synergy prototype (Click Image To Enlarge)

McGinnis’s project is simultaneously inspiring and depressing. On one hand, we’re all drawn to the possibility of a brilliant garage inventor out-designing industry giants. But on the other, what the heck is everyone doing in the aviation industry, if McGinnis’s vision is remotely possible? And should such highly specialized technical designs be up to all of us normal people to gamble on?

If I fund one of Kickstarter’s clever iPhone cases, worst case scenario is that it just doesn’t fit my iPhone quite right. If I fund McGinnis’s plane, worst case scenario is that a plane actually crashes. But I guess, that’s exactly why the Synergy has been designed with a nose-to-tail rocket-deployed parachute.

COMMENTARY:    As a young lad, I built a box kite.  I thought the damn thing would never fly, but out Chinese neighbor's son said it would.  And, yes it did.  If you watched above video of the 1/4-scale Synergy plane it flew beautifully.   It soared into the sky gracefully like a graceful eagle swooping for the kill.  The 1/4-scale Synergy plane may not be 100% conclusive to armchair skeptics and even some aeronautical engineers, but it's good enough for me.  I like the fact that the Synergy will come in kit form and will be made of composite materials making it lighter, but very strong.  I just looked at McGinnis' project on Kickstarter, and he has 628 backers who have donated $74,759, putting him $9,759 over the $65,000 goal.  However, I have a feeling that he will need more money to make Synergy a reality.   Give John McGinnis the extra money I think he will need to build a full-size working prototype.   I want to see Syngery fly and prove neysayers all wrong.

Courtesy of an article dated May 25, 2012 appearing in Fast Company Create

CROWDFUNDING GROWTH EXPLODING, 452 WORLDWIDE IN 2011, GROWING TO 530 IN 2012, OVER $1.5 BIL RAISED IN 2011

On Thursday, April 6, 2012, President Obama signed the JOBS Act which makes it easier to raise funds online. (Although not as easy as the original bill would've made it.)

Every day we hear from yet another crowdfunding site crowing about the situation.

Most of them were alive and well before the JOBS Act and they built their sites with the previous legal restrictions in mind. Project owners couldn't sell pieces of their company or pay back the money.  Instead they gave away rewards for different levels of investing like copies of the product, limited editions or weird things, like dinner with the inventors.

But a few new sites are in the works that will let investors get a financial return for their money.

All told, we know of seven sites to help you raise seed money online:

• Crowdfunder: A new site in beta that will take advantage of the new law. Although it's not open for business yet, its founders claim it has 1,121 investors ready to spend $15.44 million on projects. It says 1,055 companies already lined up to grab those funds.
• Wefunder -- Another new crowdfunding site in beta. It claims the site already has 3,649 funders who will invest $8,972,400 in startups.
• Funding Launch Pad: This site, also in beta, has a different angle. It will be geared towards Colorado companies. Boulder, CO, has become a regional hotspot for startups, so why not a crowdfunding site that focuses on them?
• Rock The Post:  A free network that helps entrepreneurs meet professionals and investors who can help turn their ideas into successful projects by offering funds, time or materials. (Named among The Hottest 10 Startups To Watch In NYC This Year)
• Indiegogo: This site specializes in creative ventures, like movies, music, theater, fashion, even sports. But its got its share of products and tech, too.
• AngelList: This site doesn't do the actual crowdfunding, but it helps a startup get discovered by angel investors.  Hopefuls post info about their company and the angels call them.
• Kickstarter: The granddaddy of crowdfunding sites. So far in 2012, two projects have raised over $1 million on Kickstarter. Several others have surpassed $250,000. (Here's a list).

COMMENTARY:  massolution(TM), a research firm specializing in crowdsourcing and crowdfunding solutions, released its first comprehensive Crowdfunding Industry Report. After collecting data from more than 170 crowdfunding platforms (CFPs) and other sources, the results revealed that CFPs raised almost $1.5 billion and successfully funded more than one million campaigns in 2011. The majority of these campaigns were in the donation-based category totaling 1,067 campaigns, and North America was the largest market for fundraising at $837 million.

As of April 2012, there were 452 crowdfunding platforms active worldwide; and massolution projects there will be more than 530 by the end of 2012. The report also found that the crowdfunding market is growing at the rate of 63% CAGR in terms of total amount of funds raised.

Massolution identifies, defines and tracks the market growth and composition of four categories of crowdfunding platforms:

1. Equity-based (for financial return): Platforms grew at 114% CAGR, primarily in Europe, and raised largest sums of funds per campaign; over 80% raised $25,000+
2. Donation-based (motivated by philanthropic or sponsorship incentive): Platforms raised the most funds at $676M, but are the slowest-growing at 43% CAGR
3. Lending-based (P2P, P2B, and social): Platforms represent the second largest category raising $552M, and grew at 78% CAGR faster than donation-based
4. Reward-based (for non-monetary rewards): Platforms show very high growth at 524% CAGR, but from a low base of close to $1.6M in 2009

Carl Esposti, CEO of massolution and founder of Crowdsourcing.org said.

"As large sums can be raised via crowdfunding, it has become a viable alternative for capital formation for new commercial ventures, projects and both social and community-based initiatives. Driven by equity-based and reward-based crowdfunding, our forecasts indicate total funds raised will nearly double this year.  Additionally, the signing  of the JOBS ACT by President Obama on April 6, 2012, will have a profound effect on the growth of crowdfunding in the U.S. In 2013, we expect securities-based crowdfunding to bring new sources of funding to many startups and early stage businesses."

Research Methodology Survey respondents were asked more than 30 detailed questions relating to the participants on their platforms, the functionality of their platforms and their fundraising activities for the calendar years 2009, 2010 and 2011. This was validated by direct communications with 170 Crowdfunding Platforms (CFPs) and significant secondary research. Crowdfunding platforms that participated in this research represent all key regions and all categories of the crowdfunding market. Massolution ensured the accuracy of the analyses by excluding questionable data and incomplete responses.

To obtain a complimentary copy of the abridged report or to access the full report, click HERE. Broad distribution of the report was made possible by Founding Research Sponsor EG&S and Research Sponsors GATE Technologies and J. H. Cohn.

Courtesy of an article dated April 2, 2012 appearing in Business Insider and an article dated May 8, 2012 appearing in MarketWatch

CROWDFUNDING RULES NOW IN THE HANDS OF THE SEC, IT HAS 270 DAYS TO MEET THE DEADLINE MANDATED BY CONGRESS

The future of crowdfunding is now in the hands of the Securities and Exchange Commission. When Congress passed the law making it legal to sell small stakes in private companies to the general public online, lawmakers left it up to regulators to determine the mechanics of how such transactions will actually work.

In the crowdfunding portion of the Jumpstart Our Business Startups Act, there are 22 places for the SEC to make rules, Karen Kerrigan, president of the Small Business and Entrepreneurship Council, said Thursday at the first Crowdfunding Conference in New York. That’s just one section of the law. The agency, which raised concerns about aspects of the statute as it was debated, has 270 days from its April 5 enactment to make rules. That means they should be in place by Jan. 1, 2013. The SEC started taking public comments last week.

The commission will have to make rules for crowdfunding websites—”intermediaries” in the law’s jargon—including, for example, what disclosures they must make to investors, how they’ll make sure people don’t invest more of their money than the law allows, and how they’ll vet the people behind the companies selling shares.

For Kerrigan, who was among the law’s most vocal backers, it means the SEC might tie up the industry in red tape.   She told the conference.

“There is a lot of opportunity for the SEC to do more regulatory damage, if you will, to this space.” 

The law puts a lot of new work on the table for securities regulators who are already behind on implementing the Dodd-Frank reforms, says Joan MacLeod Heminway, a law professor at the University of Tennessee who spoke on a panel with Kerrigan. It’s not clear if the agency has the resources to police a new class of unregistered securities and the websites that will connect issuers and investors. Says Heminway:

“I think the SEC’s got a big problem on its hands.”

COMMENTARY:    The Crowdfund Intermediary Regulatory Association will commit to providing investor protection and market integrity through effective and efficient regulation of those within the crowdfunding industry. CFIRA will create rules, oversight and a united voice for the CrowdFund Investing platform companies as the industry is formed. CFIRA announced today that the founding partners will be:

• Startup Exemption, The CrowdFund Investing authors that wrote the framework for the Crowdfund legislation passed by Congress.
• The SoHo Loft Capital Creation (TSLCC) Events, the definitive event platform for the private markets aimed at facilitating capital formation and job creation.
• Gate Technologies & GATE Impact, a platform and electronic marketplace and that provides regulatory compliant private market transactions.

CFIRA is a membership organization that includes members of the CrowdFund Investing and donation-based crowdfunding community as well as representatives of related industries including angel and venture capital firms.

CFIRA will provide intermediaries with regulation, reporting, and compliance oversight and will provide investors with educational tools to help make more informed decisions about the opportunities and risks of CrowdFund Investing. CFIRA is committed to working with the SEC to create reasonable and appropriate regulations and oversight to reduce fraud and protect investors.

The JOBS Act now allow entrepreneurs to directly solicit investors, something that Regulation D of the SEC forbid, provided that investors are fully-accredited.  It does exempt startups from filing financial disclosures the SEC once they reach 500 individual investors.  The limit has now been raised to 2,000 individual investors, but 1,500 of those investors must be fully-accredited investors as defined by the SEC.  Employees issued stock under employee benefit plan securities (stock options) are excluded from the 2,000 investor limit.

Overview of Crowdfunding Exemption Component of JOBS Act

In a blog post dated April 6, 2012, I described in  great detail the major compoents of the JOBS Act as it relates to the new crowdfunding exemption.  

The JOBS Act establishes the new crowdfunding exemption, which is designated as Section 4(6) of the Securities Act, with the following parameters:

• The aggregate proceeds from all investments in the issuer, including amounts sold under the crowdfunding exemption during the preceding 12 months, must be less than $1,000,000.
• The aggregate amount invested by any investor in all issuers pursuant to the crowdfunding exemption must not exceed a limit determined on a sliding scale based on net worth or annual income. The limit is 5% of net worth or annual income that is less than $100,000 (or $2,000, if greater than the 5% calculation), and 10% of net worth or annual income that is $100,000 or more. No investor may invest more than $100,000 in an issuer pursuant to the crowdfunding exemption. Income and net worth are to be calculated in the same fashion as the tests for accredited investors. Accordingly, equity in a principal residence is excluded from net worth.
• The transaction must be conducted through an intermediary that is either a registered broker-dealer or “funding portal.”
• Funding portals are not required to register as broker-dealers, but are subject to SEC registration and must be members of a national securities association, such as FINRA.
• The intermediary must provide disclosures, including disclosures related to risks and other investor education materials (as determined by SEC rules).
• The intermediary must ensure that investors review investor-education information (as determined by SEC rules).
• The intermediary must ensure that investors answer questions demonstrating that they understand the risks of investing in startups, including the risk of loss of the entire investment, and that each investor can afford such loss.
• The intermediary must provide the disclosures to the SEC and to investors at least 21 days prior to accepting any investments.
• The intermediary must take fraud-prevention measures to be determined by SEC rules, including background checks of officers, directors and 20% holders.
• The intermediary must ensure that proceeds are not released to issuers until a set target amount is reached and must allow investors to withdraw their commitment in accordance with SEC rules.
• The intermediary must take steps to be determined by SEC rules to ensure that each investor has not exceeded its crowdfunding limit in a 12-month period, which as noted above applies to all investments in all issuers under the crowdfunding exemption.
• The intermediary must take steps to ensure the privacy of information collected from investors in accordance with SEC rules.
• Intermediaries cannot pay finders fees.
• Directors, officers and partners of the intermediary may not have a financial interest in the issuer.
• The issuer must make the following mandatory disclosures to the SEC, the intermediary and investors:
  • identifying information about the issuer, including its website
  • the names of officers, directors and 20% shareholders
  • a description of the business and the anticipated business plan
  • a description of the financial condition of the issuer, with scaled requirements depending on the target amount of the offering.
    • For offerings of $100,000 or less, the income tax return for the last completed year and financial statements certified by the principal executive officer to be true and correct
    • For offerings of $100,000 to $499,999, financial statements reviewed by an independent public accountant
    • For offerings over $500,000, financial statements audited by an independent public accountant
  • the intended use of proceeds
  • the target offering amount, the deadline to meet the target offering amount, and regular updates regarding the progress of the issuer toward the target
  • the price or the method of determining the price, and if the price is not fixed, a reasonable opportunity for the investor to rescind its commitment once the price is determined
  • detailed information about the capital structure of the issuer, the securities being offered and the risks associated with those securities
  • how the securities being offered are being valued, and how they might be valued in the future in connection with a corporate transaction
• The issuer may not advertise the terms of the offering except for notices which direct investors to the intermediary.
• The issuer may not compensate finders except in accordance with SEC rules that will ensure the recipient clearly discloses such compensation.
• The issuer must file annual reports of results of operations and financial statements with the SEC and provide to investors, in accordance with SEC rules.
• No resales are permitted for one year except to the issuer, an accredited investor, a member of the investor’s family or pursuant to a registered offering.
• The exemption is available only for U.S. issuers that are not investment companies and are not subject to periodic reporting under the Exchange Act.
• The issuer and its directors, partners, principal executive officer, principal financial officers and controller/principal accounting officer will be liable to investors for any material omissions or misstatements unless they can sustain the burden of proof that they did not know, and in the exercise of reasonable care, could not have known, of such untruth or omission.

CFIRA Update

On Monday, April 23, 2012, there will be a live chat  at 9 am PST / 12pm EST / 5pm BST with CFIRA leadership group, the group organizing to develop a self-regulatory framework for the crowdfunding industry.  The chat will provide updates from a recent leadership group meeting held in NY on Wednesday, April 18 and meetings with FINRA and the SEC on Friday, April 20. You can submit your questions for this panel of experts right now in the comments at the end of this post, or to eric.mack@crowdsourcing.org.

It's was a busy and fruitful week with well attended meetings held in NY on Wednesday, April 18. The group agreed on two important mandates.

• Firstly, the efforts to work with the SEC to guide the development of a framework for the regulation of the US crowdfunding industry. 
• Secondly, the need to work to coalesce the industry in order to form a united group that could represent the needs of the industry, beyond the development of a workable regulatory framework.

In this weeks Live Chat Crowdfunding.org will be providing updates on the progress that has been made including details of meetings held with FINRA and the SEC.

Crowdfunding.org invites you to join members of CFIRA's leadership group and its securities attorney's for this week's live chat in order to learn of the progress that has been made and to invite you to continue to ask questions and provide input.

Please post any questions you have for this next Live Chat as comments to this post or to eric.mack@crowdsourcing.org. We will field the questions.

As I indicated in my blog post dated April 6, 2012, the crowdfunding exemption is going to require that the SEC establish regulations that insure investor disclosures, qualifications and protection.  

Courtesy of an article dated April 19, 2012 appearing in Bloomberg Businessweek