May 17, 2010

What is the future of crowdfunding? The Crowdfunding Campaign to Change Crowdfunding Law

A lot of savvy independent creatives are using Kickstarter and IndieGoGo to fund their projects via small donations. Instead of asking ten people for thousands of dollars, you ask thousands of people for ten dollars. As seen in the Obama campaign, the internet enables mass communications and mass donations in a way that wasn't possible before the rise of e-mail, social networking, direct deposit, and online credit card forms. I'll be using one of these very sites come July when I launch a crowdfunding campaign for my first feature! But these sites don't offer profit participation in a project, because they can't -- it's illegal in the United States. Now there's a Crowdfunding Campaign to Change Crowdfunding Law, to allow for microinvestments instead of microdonations.

IndieGoGo and Kickstarter's project creators often offer "rewards" for donors -- a t-shirt, a DVD of the film (when and if it's eventually finished) -- and coming up with cool rewards is a big part of running a successful campaign. But there are a lot of potential issues with rewards -- it's up to the creator to deliver on their promise -- and if we're not already seeing it already, eventually people will start feeling "crowdfunding fatigue," where all of their friends are emailing them all the time for money. Hopefully this feeling won't be widespread before July!

However, offering people a chance to invest in a project is a different beast entirely. ((That is, if anyone figures out how to make money on independent film.)) One successful example of microinvestment was The Age of Stupid, which opened simultaneously worldwide and employed a brilliant crowdfunding model -- but it was a British production, and I assume the reason it was able to offer microinvestments was because the laws are different on the other side of the pond. Thus the Crowdfunding Campaign to Change Crowdfunding Law, which states:

Crowdfunding sites like IndieGoGo offer VIP Perks but not shares—because offering profit participation is illegal. Securities law lets you gamble your retirement on investments conveyed through the all-controlling financial system, but you can’t invest $50 in someone you actually know personally, in order to help them start a small business, write a book, make a film, build an iPhone app or develop a new product that you believe has commercial potential. The SEC can change this situation by introducing a regulatory exemption that caps individual investments at $100. I believe that doing this would change everything for crowdfunding, spark innovation, and help vitalize the economy from the bottom up.

The project's already funded -- with 40 days still remaining -- but the minimum donation is only $2 and in exchange you'll be listed as a contributor on the Public Petition for Rulemaking submitted to the SEC. Once the petition is filed with the SEC, the campaign will presumably take off in earnest. This is a complicated legal issue and I spent a good portion of a recent party discussing SEC laws with a financial advisor; I wasn't close to grasping the ins and outs afterwards. As you'd expect the issues are obfuscated by all sorts of legalese, but check out the IndieGoGo campaign and the longer prospectus if you're interested in where crowdfunding might be headed next.

[via Jeff Steele's Film Closings]

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2 Comments

I was wondering why no one had done The Age Of Stupid model stateside yet...

May 17, 2010 at 5:40PM, Edited September 4, 10:26AM

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Amerik

Hi Koo

I am watching you crowd funding venture with great interest and I find your email updates on the digital world very helpful. I will be making a small donation to your film. One thing though - why did you ask for $115,000? I know this is the minimum you probably need to even get the project started but it seems quite a high risk strategy for a first venture into crowd funding? I think many people's reservations about feature films made outside the mainstream is that they will never be seen as the marketing budgets to get a film noticed are huge and the competition for people's time, given the huge amount of quality films out there both domestic and foreign, makes it seem unlikely that any low budget film will get an audience. Perhaps what might be helpful is if you addressed this issue in your appeal for funds. Perhaps talk about all the new ways people can access a movie on the net, going for niche markets ( sports, basketball etc.) rather than hoping your film will compete in the mainstream market place ( which it might - but it will be hard) I really admire your approach to building a user group for your newsletters and asking them for backing but perhaps you need to focus on the back end - what is going to happen to this film once it is made? I shot a feature in the Himalayas in 2008 for $7,000. It has now finished 3 years of post production and I am about to embark on the hard slog of getting it noticed. I am going for niche - people who want to see a film about this region perhaps before they go and visit - we believe the audience to be significant but getting revenue from download equally challenging. I think the internet is the way for people to access the film but getting on itunes seems increasingly difficult. Here's a link to the trailer all being one stating the film was going out last year which colour grading and sound mix issues prevented. If you succeed in reaching your target great - but if not - try asking for less and see what happens. You will still get to make a film, all be it a slightly different one. Best of luck - here's the link to our film http://www.youtube.com/watch?v=mAdYFy28XLs

August 27, 2011 at 8:22AM, Edited September 4, 10:54AM

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Martin