News & Opinion » Feature

Fund-Raising for the Facebook Generation

Crowd-funding sites help entrepreneurs kick-start their businesses, but are these new platforms too good to be true?



Page 3 of 6

Cortt Dunlap, the owner of Oakland's Awaken Cafe, first learned about crowd-funding on Facebook, where a few of his friends posted links to their projects. At the time, Dunlap was starting the process of building out a new space for his cafe, and he saw potential to use one of these sites as a way to mobilize supporters of the cafe — the same folks who'd e-mail him asking when Awaken would reopen and whether there was anything they could do to help. He ended up using IndieGoGo to raise more than $3,500, which covered the cost of the security deposit on the new space, though the sum was largely symbolic as it amounted to only a tiny fraction of the total amount needed to open the cafe. That said, Dunlap felt it was a nice way to give agency to folks who wanted to make some small show of support to his business — "to activate this group of people who are fans and supporters of the cafe, but didn't have the resources to buy a $500 gift card or become an equity partner."

For Dunlap, the real innovation of crowd-funding is the way it democratizes the fund-raising process, giving consumers a tangible way to "vote" for the kinds of businesses they want to support — small, independent, socially conscious businesses, for instance. "If you want to see businesses like ours in your community, and not multinational, big-box kinds of things," he said, "there is a way that the community has to come together and say, we want to see this here."

In that way, the crowd-funding phenomenon taps into another byproduct, or symptom, of the Facebook Age: the intense desire people have for personal connections — with friends, with celebrities, and now with those they do business with — however fleeting and insubstantial those connections might be.

Jennifer Kaplan, an expert on marketing and social media, and the person who first told the owners of Toast about Kickstarter, put it this way: "My guess is because we've become so disconnected — because we all sit in front of our computers in our homes and we don't have to see people nearly as much as we used to — that virtual connections, virtual communities, are very, very strong, and people take them very seriously and are very engaged in them. And these crowd-funding movements and activities tap into that need for people to connect."

In some instances, people might choose to fund a project because they want to receive a certain product — a bag of coffee beans or a copy of a CD. The most famous example is the design studio that raised more than $940,000 — probably a crowd-funding record — from people who wanted to be among the first to get their hands on the TikTok, a kit that turns an iPod Nano into a sleek wristwatch. But in many cases, it's the power of the project owner's narrative that pushes folks to get out their credit cards. It's whether you can get potential donors to feel passionate about your passion; it's about making them want to make your dream come true.

One of the early online crowd-funding pioneers, and the one that has perhaps used the power of storytelling to best effect, is the nonprofit DonorsChoose, which provides a vehicle for public schoolteachers to ask for donations to pay for needed classroom supplies (everything from textbooks to laptops) or to fund special projects (a field trip or a guest speaker, for instance). Of course, the story each teacher tells is key, in terms of establishing the worthiness of his or her specific request, and the only tangible "perk" a donor might receive is a handwritten "thank you" note from the students and maybe some photos that show the money was put to good use. According to the organization's internal statistics, more than $26 million were raised on the site in 2010 alone.

For teachers at cash-strapped schools facing budget cuts and the like, the web site has proven to be an invaluable resource, as it has been for teachers at Oakland's Lighthouse Community Charter School, which has even set aside meeting times to allow the staff to work on DonorsChoose proposals along with other grants. Dawn Fregosa, a high school science teacher at Lighthouse, says she's not sure she would be teaching anymore if it weren't for DonorsChoose — items she's received for her biology classroom include eight laptops and the past two years' supply of dissection creatures (which included fetal pigs and baby dogfish sharks), along with more mundane things like markers and pencils. She's in the process of trying to use the site to get lab tables for the classroom.

Sara Ellberg, who teaches first grade at Lighthouse, explained, "Obviously, the 'powers that be' in our school want our kids to have things like field trips and books, but simply can't help with these things considering the economy and state budget cuts."

This past fall, Ellberg put in a request for a large set of listening centers and books on CD. Almost the entire amount was provided by one "mustached stranger" through a promotion the site sponsors each fall in which men grow mustaches and ask friends and family members to "sponsor" them by donating money to classrooms in need.