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Fare from the madding crowd: a new way of drumming up business

The financial crisis has prompted entrepreneurs to look online for funding, bringing together hundreds of diverse investors

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W hen Jonás and Adriá Sala began looking for investors to back a documentary they wanted to make in 2009, they soon came face to face with the harsh reality of the global financial crisis. In short, money was, and remains, too tight to mention. Then their father Joan told them about a new way of bringing investors together that he had heard about on the internet: crowdfunding.

The idea is simple: bring together dozens, even thousands, of people interested in backing a project, whether a small business or a movie, and get them all to put a small amount of money in. The concept originated in the United States, through sites like Kickstarter.com and Indiegogo, set up in 2008 and 2009.

Once they started looking into how crowdfunding worked, the Sala brothers put their documentary idea on hold and decided to set up their own site. "We all want to continue enjoying the arts, and this offers people the chance to be part of something they admire," says Jonás Sala, who eventually went on to make his film.

With a little help from their local business start-up unit in Mataró, close to Barcelona, the Salas set up Verkami.com. "We looked at the projects on these US sites, at the way that the creator and the public interacted, and how this was a way to get really exclusive deals going," says Jonás. Over the last 14 months, Verkami has helped get more than 200 projects off the ground. This month, with some 75 initiatives underway, the site celebrated having collected a total of one million euros.

So far, Verkami is small scale, but the potential for big, commercial projects has been shown by Kickstarter, where Tim Schafer and Ron Gilbert, the creators of legendary LucasArts videogames Indiana Jones and the Monkey Island saga, recently garnered 2.5 million euros for their latest idea from some 87,000 sponsors.

But Verkami functions along the same lines. Anybody with an idea can approach the site to put their proposal online. In return for cash for their idea, they can offer any number of returns, ranging from a copy of the film or recording they are trying to put together, concert tickets, or exclusive downloads.

Would-be investors pay using a credit card or PayPal, but the payment only goes ahead once the total amount being asked for has been reached. The host site typically keeps a proportion of the money raised of between four and eight percent.

"People feel that they are getting involved in something they are part of, that they see as something of their own," says Bruno Teixidor, who, along with Carola Rodríguez and Nicolás Alcalá, set up Riot Cinema Collective to fund their movie projects. So far the team has persuaded more than 4,000 people to part with a total of 245,000 euros of the 860,000 euros they need to make The Cosmonaut. Investors in this project are offered a share in any profits the movie makes, or the chance to offer their services instead of putting up cash.

"Last year, a Russian production company that was part of the project went bust. We had already made our travel arrangements to go to Latvia for shooting." The team had a 30,000-euro shortfall, but managed to raise four times that through another Spanish crowdfunding site called Lánzanos.

Lánzanos also helped Javier Peláez get Amazings, a scientific magazine that he started as a blog, make the move to print format in November 2011 by bringing together hundreds of readers prepared to pay the nine euros cover charge up front.

RE#15M is a book published by the Barcelona-based cooperative Ciutat Invisible and the 15-M movement made up of photographs and tweets from 450 people involved in the protest organization, and funded by the 13,000 euros raised via Verkami. Jero Romero, a former member of indie pop group The Sunday Drivers, managed to raise 10,500 euros in just 13 hours to edit his new record. He went on to garner a total of 18,320 euros.

"But crowdfunding isn't a magic solution," says Jonás Sala. "It's not some kind of showroom full of people just waiting to part with their money. We are simply a bridge between the creator and his or her community. Somebody looking to get their first book published and who has no track record, not even a blog, is going to find it hard to attract investors. But if you already have a community of a couple of hundred followers, of people who know and like your work, and who want you to continue with whatever it is you do, then crowdfunding can work. It's not so much about somebody trying to get a single project off the ground, as about continuity, about being known, getting known, about connecting with other media, with specialist blogs," he says.

Antoni Gutiérrez-Rubi, a sociologist and communications consultant, says that crowdfunding is changing the way that we interact with art, involving the consumer in the final outcome: "co-deciding; co-creating; co-consuming," he says describing a "democratic process whereby it doesn't matter where I am, nor how wealthy I am, but what I think, what I feel, what I want."

He sees crowdfunding as meritocratic and innovation driven. "We don't just need customers, but users, as well as others who neither buy nor use, but provide input through their opinions and thoughts. It is important to incorporate these two groups into the creative process. If companies see people simply as customers, then they will eventually lose them."

Set up in November 2011, Goteo is the most recent Spanish crowdfunding site and puts interaction at the heart of its operations. The idea, says Goteo's Enric Sanabre, is to harness what he calls collective intelligence, rather than just asking people to part with their money, bringing together crowdfunding with crowdsourcing - which for many is simply a way of getting a bunch of people to solve your problems free of charge.

Sanabre sees it as "a return to the collective, and that allows us to share resources, as well as acting in benefit of the greater good. But it has to have a digital aspect to it, something that shows how it has been done, a video, a diary... otherwise we are losing the opportunity to do something similar somewhere else."

Among the initiatives that Goteo has managed to help get going so far are a mobile WiFi unit that can be used by groups such as the 15-M or by other large organizations working in the open air. Infinit Loop, a reusable gift packaging made by disabled people, has managed to raise more than 8,000 euros from around 160 people. "And thanks to its quick-response bar code, the packaging tells you how many times it has been re-used, and the amount of paper that it has saved," says Didac Ferrer of Tarpuna, the cooperative that came up with the idea. "It is like a game that is creating a community of people who are concerned about responsible consumption."

For the moment Goteo is based solely in Madrid, but hopes to set up "local nodes that will run themselves and that will help people to work together on ideas," says Sanabre.

Gutiérrez-Rubi says that crowdfunding's success is due to four main ideas: "It has found a way to make use of small amounts of money: my 10 euros isn't much, but when a thousand others join in... Then there is the participation aspect: that if I want to make a difference I should put my money where my mouth is, even if it's a small amount. People are also attracted to getting involved in something in its early stages, and particularly something that they believe in. Finally, crowdfunding helps create communities of people with shared interests. It's about sharing something with other people."

Fundraisers are given a limited amount of time on crowdfunding sites: Verkami's is 40 days, while Goteo's is twice that. Lánzanos recommends short campaigns: "It depends on the community you have behind you; if it is big, you might be better off running a quick fundraiser," says the site's co-founder, Rafael Cabanillas.

Jonás Sala says that those looking for finance need to be put under pressure: "Setting a time limit is very important to push people to organize themselves, to get motivated and to try to reach their goals."

Most sites attract arts and creative projects, but they are also keen to work with people and organizations looking to raise money for charity and aid initiatives, such as the Brazilian group Let's, which works with a range of community-based projects. Through Lánzanod, it raised 2,000 euros to help the Boskimanos, an ethnic group from Namibia, as well as a further 3,000 euros for a potable water project in El Salvador. In such cases, Lánzanos is prepared to reduce its commission to one percent. Crowdfunding is taking off around the world, with sites like Zooppa and Nextstyler specializing in advertising and fashion, or even adult content such as Brazil's Quero Na Capa.

Juan José Martínez is the founder of Partizipa. Set up in 2007 and currently in the midst of an overhaul, this was Spain's first crowdfunding site, and has been more oriented to business than the arts: "Our investors are supporting businesses in the hope of turning a profit, a certain percentage of the money that these companies make," says Martínez. He says that the crisis has changed his original concept.

"In 2007 the environment was highly speculative, and although the idea is still to turn a profit, those taking part in projects are aware that there is a need to help repair the country's productive network by supporting small businesses and the self-employed... They are helping the country to emerge from the crisis; that is our goal, and to seek help from government backed institutions where and when we can."

Nevertheless, Partizipa is open to those looking to fund arts projects. In 2009 it helped filmmaker Lucina Gil, who won a Goya in 2007 for her short film El hombre feliz (The happy man), with filming Los amores dificiles (The difficult loves). "People can contribute anything from 24 euros up to 2,000 euros; investments above 1,000 euros allow for a share of profits and prize money, or if it is sold to television," says Martínez.

The sharing approach at the heart of crowdfunding has so far captured people's imagination. Last year Kickstarter found funding for 11,836 projects, a fourfold increase on 2010, raising a total of 76 million euros, up from 21 million the previous year while attracting more than 30 million users. In Spain, aside from Verkami's one million euros, Lánzanos has raised half a million euros, while Goteo has managed 50,000 euros in just under four months.

Meanwhile, Gutiérrez-Rubí is working on a book, Manifiestocrowd, with multiple contributions, and based on a project set up by Madrid business school ESADE at its Creápolis business incubation unit. "We write the article, prepare the material and then do a presentation in schools. Then comes debate, questions, all of which helps us to improve the text, chapter by chapter. The book has been written, but it's not finished: I'll use stuff from the debates to enrich the text," he says.