With the recession, many traditional sources of investment capital either turned the taps down to a trickle or dried up completely. With hedge funds, venture capital groups and angel investors scarce, inventors and small start-ups began looking elsewhere. For many, that led to Kickstarter and other crowd funding sites.
Crowd funding draws its roots to the creativity shown by several rock bands in the late '90s which, lacking money to pay for tours and albums, reached out to their fans for support prior to the concert or album.
Indie movies also got into the act, soliciting donations, again from fans and followers, to pay for the movie to be created.
Ten years later, organizations such as Kickstarter began offering inventors and entrepreneurs the platform from which they could pitch their ideas and projects to the general public, focusing on enticing a stranger to invest as opposed to relying on a pre-existing fan base.
Kickstarter is one of the most popular crowd funding Internet sites today.
To get on Kickstarter, an inventor submits a proposal. If the proposal is accepted by Kickstarter (and not all are accepted), the inventor can put up a video or other media describing the product, the inventor, and what they are going to do with the money requested.
Next to the video is a list of different "pledge" amounts and what the investor gets for his or her investment.
The inventor also has to set a time limit for pledges; if the investment requested is reached by the deadline, the project is "funded." If the deadline passes without enough money pledged, the project dies on the vine.
Crowd funding, however, is not without its drawbacks, and there have been many inventors who have either been turned down by Kickstarter or not made their goals.
Another problem inventors face by using crowd funding is that their videos and other promotion would count as "prior art" under 35 USC 102 (yeah, I know, you thought we'd get through an entire article without the boring lawyer citing a boring law), which means that you should really be patent pending before you put this out on Kickstarter.
There also may be a cloud on the crowd, in that the federal government is still trying to figure out if, and how, securities laws may apply to these sites.
As a result, many crowd funding sites are actively (actively sounds better than "frantically", doesn't it?) re-working their terms to try to stay within the law, but inventors should be keeping a wary eye on new federal regulations and interpretations thereof.
At the same time, crowd funding is alive and well, at least for now, so if you have an invention or are trying to get a start-up off the ground, it is definitely worth considering.
Hanscom can be reached at [email protected]
Crowd funding draws its roots to the creativity shown by several rock bands in the late '90s which, lacking money to pay for tours and albums, reached out to their fans for support prior to the concert or album.
Indie movies also got into the act, soliciting donations, again from fans and followers, to pay for the movie to be created.
Ten years later, organizations such as Kickstarter began offering inventors and entrepreneurs the platform from which they could pitch their ideas and projects to the general public, focusing on enticing a stranger to invest as opposed to relying on a pre-existing fan base.
Kickstarter is one of the most popular crowd funding Internet sites today.
To get on Kickstarter, an inventor submits a proposal. If the proposal is accepted by Kickstarter (and not all are accepted), the inventor can put up a video or other media describing the product, the inventor, and what they are going to do with the money requested.
Next to the video is a list of different "pledge" amounts and what the investor gets for his or her investment.
The inventor also has to set a time limit for pledges; if the investment requested is reached by the deadline, the project is "funded." If the deadline passes without enough money pledged, the project dies on the vine.
Crowd funding, however, is not without its drawbacks, and there have been many inventors who have either been turned down by Kickstarter or not made their goals.
Another problem inventors face by using crowd funding is that their videos and other promotion would count as "prior art" under 35 USC 102 (yeah, I know, you thought we'd get through an entire article without the boring lawyer citing a boring law), which means that you should really be patent pending before you put this out on Kickstarter.
There also may be a cloud on the crowd, in that the federal government is still trying to figure out if, and how, securities laws may apply to these sites.
As a result, many crowd funding sites are actively (actively sounds better than "frantically", doesn't it?) re-working their terms to try to stay within the law, but inventors should be keeping a wary eye on new federal regulations and interpretations thereof.
At the same time, crowd funding is alive and well, at least for now, so if you have an invention or are trying to get a start-up off the ground, it is definitely worth considering.
Hanscom can be reached at [email protected]