Click here to subscribe today or Login.
WILKES-BARRE — Looking to raise cash for business endeavors or community events — crowdfunding may be the answer.
Crowdfunding websites, such as Kickstarter, GoFundMe and Indiegogo, provide a method other than obtaining a loan from a financial institution to fund a project, business start-up or product. This online method of collecting donations for a designated and defined purpose began hitting mainstream America around 2009.
“Crowdfunding allows anyone with time and a clear vision to see how much funding they can gain from donors,” Charles J. Pierce, acting director of the Wilkes University Small Business Development Center said. ” In this area, many people have a tough time applying for a loan as they are not in a solid financial situation.”
Local businessman, Mark Heisler, owner of Plains Airsoft LLC, used Kickstarter to fund a portion of his new business after seeing how difficult it was to apply for a bank loan.
“It is very difficult to get a business start-up loan without having any (business) tax returns,” Heisler said.
Crowdfunding is not based on the user’s credit score and does not require collateral, Pierce said. Conventional funding through a financial institution can take months, if approval is granted. Crowdfunding is faster.
“I have seen many instances of people using a crowdfunding account for a few days or a week and are able to raise needed funds,” Pierce said.
Heisler set a goal of raising $5,000 in 35 days for lumber to construct indoor obstacles for his compressed-air gun course.
Heisler, 41, said he had the capital to pay for inventory, first month’s rent and liability insurance for the business. But he could not swing the cost of the lumber.
The tight knit Airsoft playing community did not let him down. Donors regionally and in New York and New Jersey helped Heisler reach his goal and exceeded it by $600.
Plains Airsoft LLC opened Jan. 3 in the former Luzerne Products Warehouse in Plains Township, thanks to the support of fellow Airsoft players.
Something for nothing
Crowdfunding is not a “something for nothing” concept. Most users offer some type of compensation to donors.
“Anyone that donates is typically given something for their investment,” Pierce said. “This can range from a discount or coupon, a few hours of personal usage of a business; all the way up to partial ownership.”
Heisler offered free playtime for Kickstarter investors.
“I had one group donate $1,000 and received a whole day of play,” he said.
At the end of his campaign, Heisler said Kickstarter charged him a four percent fee on the funds pledged, plus Amazon applied transaction fees associated the collection of donations.
“I expected the Kickstarter fees,” Heisler said. “I did not know about the Amazon fees.”
If a Kickstarter member does not reach their financial goals by the determined time-frame, designated donations are not collected and fees are not applied.
Kingston residents, Paul and Shari Kantor, owners of Mine! Get Your Own! Cookie Butter, attempted to raise $5,000 to rent a commercial kitchen to manufacture their desert cookie spread. They were unsuccessful on Kickstarter but some investors reproached the couple to fund their product.
Shari Kantor said they spoke with representatives at Kickstarter who encouraged the couple to try again.
“They said many first time users do not achieve their financial goal,” Kantor said. “They advise us to get some public exposure for the product and try again.”
Following the Kickstarter advice, the couple leased a smaller commercial kitchen and secured shelf space at The Lands at Hillside Farms in Shavertown to sell their cookie spread.
Kantor said they plan to try crowdfunding again in the spring to raise funds for a larger commercial kitchen.
To make the most of a crowdfunding campaign, Justin Kazmark, spokesman for Kickstarter, advises potential users to explore a crowdfunding site.
“One thing an aspiring creator should consider before launching a project is explore Kickstarter, find a project they’re inspired by, and back it,” Kazmark said. “Get a sense of the whole experience.”
Several key components crowdfunding campaigns share are a detailed business plan or purpose for the funding, pictures or video of the project or product, and rewards for investors.
“Tell a compelling and visually engaging story,” Kazmark said. “Articulate clearly and sincerely what you’re trying to bring to life and how others can join you on that journey. Offer thoughtful crafted rewards that draw backers in more closely to the creative process.”