It's not easy for entrepreneurs to secure capital these days - at least that's the received wisdom. But tell that to the American inventors of the Pebble E-Paper Watch, a customisable, smartphone-synching timepiece that launched last year. Seeking a modest $100,000 of investment, the team wound up scoring a whopping $10.3m. In a month.
Another example to hit the headlines recently is the Ubuntu Edge smartphone, which gathered funding pledges in excess of $10m in an equally short time. However, with a target of a whopping $32m, it was ultimately unsuccessful. Unlike the Pebble Watch, which you can now buy. RRP $150.
Stop the clock! What mythical cash pot is this, you may wonder, that happily doles out 100 times the requested amount at a time when you're more likely to encounter a hog on a hang-glider than to secure a decent bank loan?
Welcome to the wacky world of crowdfunding, and to kickstarter.com in particular, a virtual Dragons' Den for the social media generation. Thanks to Kickstarter, the creators of the Pebble Watch were able to present their prototype to potential customers directly and solicit donations to fund production up-front.
These backers were rewarded not only with their own specimen of the watch itself, ahead of the clamouring hordes of regular punters, but also with the warm glow of having helped bring something new into the world.
This is the secret of the burgeoning business of crowdfunding. Research from Deloitte predicts that crowdfunding portals will raise a total of £1.9bn this year, double the £900m raised in 2011, and Kickstarter is one of its foremost proponents. (That failed Ubuntu Edge bid was on another platform, indiegogo.) Since its launch in the US four years ago, 4.6 million folk have coughed up $748m to support 46,000 creative projects on Kickstarter.
'Creators can find backers ahead of time because they buy into the idea,' says Samuel Gee, a technology analyst at Mintel.
'Plus, there's a growing trend in consumer behaviour towards paying what you want, in the way that you want, to get what you want. The band Nine Inch Nails released an album a few years ago at six different price points, from a free download version to a £300 box-set. They made $1.6m in a week. Crowdfunding works in the same way, in that it allows people to buy into the product at whatever price point they wish.'
It's free to list, but the site takes a 5% cut of the money raised by successful projects.
Kickstarter doesn't like to comment on its own success, preferring to let its users tell the story. But a source close to the company explained how its model differs from traditional investment. 'Investors are looking for sure bets to generate profit, which means placing lots of bets on ideas that are safe,' he says.
'With Kickstarter, it's not about profit, it's about seeing ambition brought into the world. It's free to upload a project, so it becomes all about innovation, as people are more prone to experiment and they retain full creative control of their ideas.'
This month marks the first anniversary of Kickstarter starting to accept UK-based projects and it's catching on fast. In its first month, 47,000 people pledged just over £2m to 407 projects, with 30 of those successfully reaching their funding targets.
While the majority of projects have a cultural bent - video games raised $83m on the US Kickstarter last year - the site appeals to entrepreneurs too, both newbies and more seasoned risk-takers.
It's with this in mind that I venture onto Kickstarter to offer my own cash to a handful of UK-based projects.
But which? A quick hunt among the card games and bacon cookbooks yields some interesting products: Pyjama Pajama, a brand promising 'inspirational sleepwear for kids'; Patrona Connectors, an ultra-thin magnetic card wallet that sticks to the back of your phone; and Lightrider, a bike light that illuminates both road and rider.
Of course, Kickstarter is also a haven for left-field projects that even the most red-blooded of venture capitalists won't go near. So it seems only right to throw a few quid at Ciao Chow too, a pop-up bakery catering exclusively to dogs.
Patrona's slick promotional video sucks me in. I want one - trouble is, my £10 pledge is only enough to secure me a branded keyring in the event of success, not the real thing. At least with Pyjama Pajama my tenner will get me the actual kids' pyjamas that we're funding. It's just a shame I don't have any kids.
Perhaps I should have tried Seedrs or Crowdcube instead. These UK-based crowdfunding sites sprang up in the wake of Kickstarter, but rather than giving physical rewards, they offer backers equity in start-up businesses. Crowdcube has provided funding to the tune of £10.16m at the time of writing.
But it seems to be aimed more at traditional investors than at the man or woman on the street, and the stakes are much higher: a project planning to turn The Water Babies into a stage musical has raised nearly £900,000 - from a mere 28 backers. My 10 quid won't go far here.
The other draw of crowdfunding is the vicarious enjoyment derived by donors from all this creativity, thanks to the wonders of social media. Well, that's the theory. There's near-total silence from my projects early on, until the creator of Pyjama Pajama updates her page with the following bit of oversharing:
Please note: The designs in the video and below are not our final designs, which will be much better!!
Patrona, as usual, shows how it should be done. The company is in constant contact, sending snaps of the prototypes in action and showing off packaging designs as teasers. It's engaging. With five days of its 30 to spare, it hits the £15,000 target and I get my vicarious thrill - and my keyring.
But it's not all good news. I happen to visit Ciao Chow's page just as the countdown timer marks off the final dismal 48 seconds of its campaign. It's grimly compelling watching a dream die. Having garnered pledges for a mere £3,678 of its target (also £15,000), this is one dog biscuit bakery that won't be cooking with gas today.
Like most crowdfunders, Kickstarter operates a gated model - if pledged donations fail to match or exceed the started target, no dice.
The bad vibes spread. Three days after Patrona hits its target, I get an email saying its campaign has been suspended. The founders will lose the £15,000 they've raised because they broke the rules, taking a £5,000 pledge in exchange for a bulk pre-order.
I'm sad for them, until they reveal they didn't need the money anyway and have started production without it. I can't help feeling plenty of other Kickstarter folk may have needed my help more.
The day after, Lightrider flickers out too. It managed to lure only 42 supporters and raised just £4,640 of £12,000. This leaves my investment portfolio shredded - only Pyjama Pajama is still in one piece. So it's a good job that the sleepwear campaign suddenly wakes up, showing a marked increase in confidence and communication.
With a few hours to go, it beats its target and Pyjama Pajama has the cash to go into production. I get to bask in the warm glow of my reward - one ill-fitting pair of educational pyjamas.
It may not seem like much of a return, but then 10 quid isn't much of an investment. Anyway, backers don't go on Kickstarter to make money. They are donors rather than investors, and their motives, if not entirely altruistic, are at least based more on goodwill and a desire to encourage others than most commercial funding decisions.
Kickstarter may not have Barclays, RBS et al quaking in their boots just yet, but there seems little doubt that crowdfunding is here to stay. We take a punt on three pitches.
LIGHTRIDER - ARE YOU BRIGHT ENOUGH?
USP: A cycle light that illuminates not just the road but also the rider (42 backers, £4,640 pledged of £12,000 goal)
TUDOR DAVIES: 'I thought I ran a good campaign, but I clearly did something wrong. I am genuinely surprised that we didn't make it, and confused as to why. You'll see an average idea on Kickstarter that raises four times its target, while others that are really clever haven't raised a bean. I can't help wondering what the golden ticket is.
The thing that surprised me most was the lack of help. Kickstarter provides the platform, but it's also the gatekeeper to funding too - and it seems to put most of its effort into highlighting projects that have already made it. You have this golden moment at the start, but the next day you're out into the ether, lost among all the other projects. I remember searching the 'design and hardware' category and had to get to project number 300 before I stumbled on my own.
You need to take to Twitter, Facebook and blogs to drive it. That's where we failed. I held fire on all social media until we went live on Kickstarter, but really we needed two months of creating a buzz. Once it's running, you need to spend all day emailing. I was away at Glastonbury during all this, flat out in my day job as a sound engineer.
It would have been nice to have had the funding and exposure to kick off with a bang, but the show goes on. Someone is now investing in the company - they've been following our progress and they want in. We're now having meetings with distributors. We're desperate to get it ready for this winter. If we miss October, when the clocks go back, that's a big deal for us.
Most people pledging on Kickstarter aren't backing businesses. They seem to be more interested in contributing to £3,000 to hear a band's new CD. Still, if failing on Kickstarter marks the end of your project, then you really shouldn't have started it in the first place.'
CIAO CHOW CANINE BAKERY - A CURATED EXPERIENCE FOR DOGS WITH ATTITUDE
USP: A vintage Italian bakery selling freshly baked dog treats, made with 'human grade' ingredients (47 backers, £3,678 raised of £15,000 goal)
MARK WATTY: 'We wanted a project where we could design, create and brand a product, and curate a shop where we sell it. My business partner (Piper Skillman) and I both bake, and we love dogs, so our idea was to fund a pop-up to launch a line of dog treats that could sell via shops like Waitrose.
We didn't exactly research the likelihood of succeeding with a doggy bakery, but we did look into the sale of luxury dog food. That's gone up 1,000% in 10 years in the UK. But our campaign only reached £3,678 out of £15,000. A year ago, someone could probably get the money on Kickstarter without much work. Now there are 10 times as many people doing it, so to get to £15,000 you really need to be pushed on the 'staff picks' page.
We never really got support from beyond our own network. It actually felt as if we'd run a marathon just getting the campaign ready, and when it started it was a case of starting all over again with the demands of promoting it. We should have brought a PR person in three months earlier.
If I was to do it over I'd aim much lower in terms of scale and set the more modest target of £5,000. I'd also gather a board of 10 influential people who are all into dogs - a journalist, a PR person, someone from Battersea Dogs Home - and run a pre-campaign to help get the word out.
Could I have done without promoting a project that didn't get funded? Definitely. It is a public humiliation in some ways, but you have to adapt for your audience. I saw Joan Rivers trying material out once - her jokes were awful, but the only way to get it right is to put it out there. Thanks to this campaign we've now done 75% of the work, and we've secured private support to run a smaller pop-up in London. Unless you take a risk and put something forward, nothing will ever go beyond a concept.'
PYJAMA PAJAMA - INSPIRATIONAL SLEEPWEAR FOR KIDS
USP: Educational children's pyjamas featuring facts about dinosaurs, owls and bulldozers (115 backers, £12,225 pledged of £12,000 goal)
CAROLINE KENDAL: 'An equity investor once told me they were less impressed by someone raising £12,000 from friends and family than £3,000 from strangers. So I saw Kickstarter as a chance to gauge the appetite of the market before launching.
I'm very relieved to have made it, not least because the final 48 hours were a total panic. I'd heard that everything happens at the end, and two days before the project closed we were still around £2,000 short of the target. Then I received an email saying Kickstarter had detected strange activity on the account and if I didn't sort it out I'd be suspended. I wrote back to find out what on earth it could be and Kickstarter finally responded 16 hours later saying it doesn't discuss details. It was resolved somehow, but I was still too scared to do any promotion in case I did something wrong. I had this whole push prepared for the last three days, but I did nothing. That incident almost finished me off, to be honest, and I still don't know what I did wrong.
At the end, all these pledges came in with no pushing from me, which I see as a great success, but there's an awful lot I wish I'd known before starting - not least that the campaign would become a full-time job. It was hard to spread the word because mothers with small children aren't generally early adopters of new platforms. The best thing I did was to email experienced Kickstarter creators for tips. I was overwhelmed, not only that they responded, but by how much they shared with me.
At one point I had other Kickstarter creators telling me to go back and ask my backers for more money. Maybe I'm just too British: I was happy to go back and ask them to share the story more, but, gosh - I didn't want to end up with no mates at the end of this process. It had already aged me 10 years.'
How to succeed on Kickstarter