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Crowd-Sourced Funding Provides 'Kickstart' to New Business Ventures

Crowd-Sourced Funding Provides 'Kickstart' to New Business Ventures
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Yael Krigman is equal-parts baker and businesswoman. She sells her treats through her company's website. She was a lawyer but she knew she was onto something when her homemade cake pops - balls of cake and frosting dipped in candy-coating that sit atop lollipop sticks - thrilled colleagues at work.

"I made them one week, and people got so excited, they just went nuts," she explained. "They thought they were so delicious, and I started selling them that same week."

Now, Krigman wants to expand her Washington-based business by opening a shop that specializes in cake pops.

"I was talking to a friend of mine, and we were discussing the different options for financing my storefront, and we talked about bank loans and investors and he told me about Kickstarter," she said.

Connecting a Baker and Backers

Kickstarter is a platform for crowd-sourced funding. Entrepreneurs such as Krigman post their projects and funding goals on, and people around the world pledge money. Backers and Kickstarter don't get a share of the business, but there are incentives. In Krigman's case, most levels of backers will get cake pops.

Kickstarter is just one of the ways Krigman hopes to get funding for her store. She says the website makes it easier to think about expanding her business.

"Bank loans are difficult to get, especially for small businesses with not many assets, and investors, you know, you have to give away part of your company, and I'm really proud of what I've built and I want to continue to grow it," she said. "I don't just want to be a manager at a bakery."

Krigman's goal is to raise $70,000. But if a project doesn't meet its goal in time, no money changes hands.

"I've really been sending out a lot of e-mails to everybody that I've ever known and anybody who has ever ordered from me, and I've been telling my friends and just trying to get people to spread the word," said Krigman of her Kickstarter campaign.

She hopes her shop will join the more than 40,000 projects that have been funded through Kickstarter.

Kickstarter's Broad Appeal

But it's not just upstarts that are taking to Kickstarter. Hollywood has taken notice, too.

Rob Thomas, the creator of the canceled television series Veronica Mars, turned to Kickstarter to fund a Veronica Mars movie, and he made a playful video with the show's cast.

Fans of Veronica Mars flocked to the site.

"Our Kickstarter page went live, I think about 45 minutes ago, and we already have $123,000," the show's star Kristen Bell said in a video update she posted on Kickstarter.

The Veronica Mars movie project broke records, raising $5.7 million. That inspired actor, writer and director Zach Braff, who used Kickstarter to raise $3 million for his film, Wish I Was Here.

"Maybe this could be a new paradigm for filmmakers who want to make smaller personal films without having to sign away any of their artistic freedom," Braff explained in the video he posted on Kickstarter. He noted he could get funding in Hollywood, but he feared investors would want control over casting and creative matters.

Kickstarter Stats

As of June 2013, people had posted about 100,000 projects on Kickstarter. Less than half reached their funding goals. The successful ones raised more than $500 million combined. Kickstarter, which is based in New York City, takes a 5 percent fee from successfully funded projects.

Some projects on Kickstarter don't get a start at all. One-in-10 projects don't receive a single pledge.