Is crowdfunding really here to stay? YES
I recently sat down with David Branin of Film Courage to discuss the latest Kickstarter campaign sensation, Veronica Mars. As of this writing, the campaign has received $4.1 million in pledges backed by over 62,000 people. It is even notable that if one Google’s Veronica Mars Kickstarter, press mentions overshadow the actual campaign page showing its power to generate mainstream press coverage that will not only widen its donation pool, but also further raise the profile of crowdfunding and Kickstarter, in particular.
No, this kind of reception is not to be expected for the unknown indie artist, especially one that has done little to nothing to cultivate an online base of support and who does not have a project that would entice mainstream press coverage. But is crowdfunding really here to stay? Is this type of funding becoming the new default for indie artists? I think it is and will continue to be. Crowdfunding is not a fad that will pass quickly into history. It is on the rise and becoming an acceptable, if not preferable, means to raise money for arts related projects.
In 2011, over $1.5 billion was raised via crowdfunding worldwide. Estimates for 2012, a mere one year later, say this grew to $2.8 billion. The National Endowment for the Arts, the largest annual national funder of the arts in the United States founded in 1965, has an annual budget of $146 million that it distributes to many organizations and individuals every year. They are perpetual targets for funding reductions and if you have ever applied to grantmaking organizations, you know the reams of paperwork it takes just to apply, let alone receive a grant.
Kickstarter, since its inception in 2009, has collected $450 million in donations for arts related projects, over $85 million just for Video and Film projects as of January 1, 2013. Artists still have to submit their campaign proposal and there are 2 main guidelines for acceptance. One MUST submit a project, something that will be completed and produce a result (a film, a game, a performance, a book etc). And the platform is only open to Art, Comics, Dance, Design, Fashion, Film, Food, Games, Music, Photography, Publishing, Technology, and Theater projects. It cannot be used for causes or to sell shares! The well prepared projects can receive an answer of acceptance within a week.
But Kickstarter is not the only game in town..as of April 2012, 452 crowdfunding platforms were operating globally.
If we are all honest with ourselves, earning a living from making art is pretty rare. I see many middlemen making good livings, but the artists themselves…not so much. And a lot of the money used to make the art comes from the artist or from grants and sometimes from investors who are not likely to ever see that money again. Crowdfunding (donation, not investment) offers a far less risky antidote to all of this. From the start, the artist determines a budget based on what she is willing to risk personally and on what she should expect to raise in donations. This is better than taking all of the financial risk personally (credit cards, remortgages, life savings etc) or asking others to do this because with donations, no one expects the money back. Taking investment means she has to make a good faith effort (and ideally show in a business plan how) to repay the investor and, often it means, having to compromise on the work in order to ensure its commercial prospects. Creating with debt hanging over one’s head is probably not as healthy and productive as creating with the knowledge that the pressure to conform to market expectations is lifted. The artist can still make money on the project by selling to those who did not donate. Her profit could start at dollar one!
So what of these donors? What motivates them to support, if not the prospect of making money? It seems that they are drawn to donation, not just because of perks, but because of altruism. Indiegogo reports they recently have seen a rise (33%) of all contributed dollars in excess of perk amount or without any perk requested. This is compared with 23% in 2011. Personally, I believe sites that are trying to mix crowdfunded donation and crowdfunded investment are not going to be successful. The motivations are vastly different.
There are 2 other components of a crowdfunding exercise that aren’t often talked about. One is asset protection. Since digital goods (films, books, music) can be easily reproduced at zero cost, crowdfunding helps insulate against piracy loss. The creator agrees to provide content only if enough people commit themselves to paying for it in advance. This also overcomes the “big talker problem,” whereby people say they are interested in seeing a project created, but then don’t actually purchase. This does put the onus on the creator to put out spectacular projects and would be successful mainly for those with a track record of doing so. As consumers, we like to have an idea of what we are buying into.
The second is market proof. Say that the scope of the project is so large that it is going to be a candidate for investment, but, as with most films, the investors want concrete evidence that the project has interest in the market. Crowdfunding would serve in testing the market for upcoming productions. If enough people express interest and are willing to pay in advance, even in small amounts, this shows a strong reason to go ahead with the production. The Veronica Mars campaign is an example of this. Warner Bros studio agreed to allow the making of the film and to distribute it, ONLY if Rob Thomas reached a minimum funding goal.
For a producer that has an interesting concept, but needs to entice outside investment, a crowdfunding exercise helps to gauge interest in a way that can be demonstrated to potential partners as well as widening the audience net beyond their personal circles. I have also suggested this as a way for foreign film commissions to decide which producers will receive ever shrinking government arts funding. If audience can be demonstrated through a crowdfunding effort, it shows that the producer (or distributor/sales agent because typically they receive the funds first so they should also prove they can reach an audience) is committed not only to making the work, but making sure it will be seen. In this case, money may not be the primary objective, but audience interest is still shown through the number of backers. That audience can come from anywhere in the world, not just the home country.
With the knowledge that crowdfunding IS here to stay, then we must also agree that creators need to be mindful of their audience and how to cultivate it online. The amount of money one can raise depends on how many supporters one already has and how many potential supporters can be reached with supporters’ help. “Crowdfunding is really about your social-media network. Make sure you have built out your Facebook fans, your LinkedIn connections, your Twitter followers, your email list. All of that is your social currency,” says Geri Stengel of Venturneer. We at TFC are continually consulting with producers about how to get active online and keep their audiences maintained. This is not a skill to use for one project, but an ongoing process to use throughout a professional career. The sooner that is embraced, the more prepared for the future of filmmaking. Film schools the world over should have training in audience building as a requirement to a degree and those who don’t attend film school should be studying how to do it right now. There is an abundance of workshops, seminars, online courses teaching these skills and tools. The longer artists (and their schools) resist, the more they are resigned to falling behind or obscurity.
For information on crowdfunding tips, see here, here and here
For more on my thoughts regarding crowdfunding, view these videos.
Sheri Candler March 29th, 2013
Posted In: crowdfunding, Social Network Marketing
Tags: crowdfunding, David Branin, donation, donor motivation, Film Courage, financial risk, grants, indiegogo, investment, Kickstarter, National Endowment for the Arts, Sheri Candler, The Film Collaborative, Veronica Mars
Introducing TFC’s new fiscal sponsorship program
The Film Collaborative recently started a fiscal sponsorship program to help filmmakers get access to funds they would not be able to obtain without 501c(3) status. The program is now fully up and running, headed by Lynnette Gryseels, former Fiscal Sponsorship Director at Film Arts Foundation in San Francisco. We have been getting lots of questions from interested filmmakers so here are the answers to many of them. There is also a lot of information available on our website.
What is fiscal sponsorship and how does it benefit artists?
Fiscal Sponsorship is used primarily when a non-profit film/video project or event wants to secure funding from private, foundation, government or corporate sources that give only to nonprofit organizations with IRS tax-exempt status. To be considered exempt, an organization must hold a current 501(c)(3) certificate from the IRS.
What are the benefits to the filmmaker that they couldn’t do on their own?
Many funding opportunities are not available without tax exempt 501(c)(3) status
What does TFC look for in projects to grant fiscal representation?
Projects must be consistent with the Film Collaborative’s charitable purposes. This means that any project you are proposing must be noncommercial and represent an imaginative contribution to the film or video art form. Project can NOT be a “work for hire.” Once that criteria is met, we look for projects that are well thought out and have a good chance of getting funding and being completed. Prior filmmaking experience is helpful or if you are new, it helps to have a production team of experienced people; an advisory board with experience mentors is helpful as well and will help make up for a lack of experience with new filmmakers. A polished proposal is essential. Send us your best effort following the directions and if your project looks promising, we will help guide you to develop your proposal further.
If I apply, am I guaranteed to get accepted?
No. The Film Collaborative is not obliged to supply fiscal sponsorship. We will sponsor projects that are in alignment with the TFC mission and have strong, fundable applications. When we agree to become your fiscal sponsor, we are allowing you to use the TFC name to show support for your film. Therefore, we will only approve a project when the proposal is ready to be submitted to funders.
Is it only for US citizens or those operating within the US?
You do not need to live in the United States or be a citizen to apply for fiscal sponsorship. As long as one of your project’s named project directors has Social Security Number (SSN), Employer Identification Number (EIN), Independent Taxpayer Identification Number (ITIN) or other type of IRS registration. See the IRS for more information on obtaining the correct tax registration for non-residents.
Does one have to be a member of TFC to apply?
Yes. Applicants need to be a TFC member at the minimum Contributor level. See http://www.thefilmcollaborative.org/join.html to sign up.
How does one qualify?
To qualify, you must have
-A film project; documentary, narrative or short in any stage of production;
-You must join the Film Collaborative at the Contributor level or higher;
-Your project must be consistent with the Film Collaborative charitable purposes, is noncommercial and/or educational and represents an imaginative contribution to the film or video art form;
-The project may not be “work for hire”;
-You must be seeking donations in the form of grants from public agencies, foundations, corporations, or individual donors including fundraising benefits.
What is the submission process?
1. Join The Film Collaborative;
2. Pay the $35 fiscal sponsorship application fee;
3. Fill out and submit the online application form, and upload a PDF of your project proposal.
The application you submit to the Film Collaborative will also serve as a blueprint that you will use to secure funding by applying for grants or present to prospective contributors. Our goal is to help you build the best possible proposal in order to go forward and successfully raise the necessary funds to realize your project. Therefore, we accept projects with proposals that are ready to go.
What is the submission deadline?
There are no submission deadlines. Applications are open.
After I receive backing from TFC, what happens?
Once accepted, we will send you a copy of the Fiscal Sponsorship contract, a W9 form, a welcome package which includes a fiscal sponsorship support letter, tax ID number, a copy of your signed contract and information on how to set up online donations. Donors to your project can contribute online using a credit card or write checks to the Film Collaborative. Donations will be disbursed at the end of each month.
Once your project is accepted you can now apply for funds from public agencies, foundations, corporations, or individual donors. TFC will provide you with the necessary documentation to show that your project is fiscally sponsored.
Can I apply to the NEA, NEH, NSF or other government agencies?
The Film Collaborative cannot submit applications on filmmakers’ behalf to the National Endowment for the Arts (NEA), National Endowment for the Humanities (NEH) and National Science Foundation (NSF). Ask us about all other government agencies.
What are the administrative fees involved and what do they pay for?
Applicants must join the TFC and pay a $35 non-refundable application fee. After that TFC takes 5% of funds donated to your project. These fees pay for overhead such as staff time processing applications and donations.
Is there a reporting process?
Yes. You must report to TFC twice a year on all funds received for your project, monies spent and any significant budget changes. Failure to comply with the reporting process will result in project termination.
Does TFC provide advice on contacting donors and soliciting funding?
We can provide some advice and answer questions. You are responsible for applying for your own funds and sourcing your own donors.
Is there a difference between this service and others like Fractured Atlas?
Yes. TFC only sponsors film projects, Fractured Atlas sponsors many other types of projects in addition to film. The 5% TFC fee is the lowest of any known film project fiscal sponsor.
How long does the fiscal sponsorship stay active?
Your fiscal sponsorship will remain active as long as your reports to the TFC are up to date and you are still working on your film. Projects that fall behind on reports will be terminated and will require a fee to reinstate. Any funds donated to a dormant or terminated project cannot be dispersed until the project reporting is brought up to date.
Is the TFC fiscal sponsorship program exclusive?
Yes and no. Your project can have another fiscal sponsor that is not a film project fiscal sponsor, for example, a community organization or something related to your project is fine.
Can name changes or change of control happen under the sponsorship?
Yes, on a case by case basis, depending on the change required. Please ask.
Can I change my project or have more than one project entered into the program?
Depending on the nature of the change it may be considered a new project. Multiple projects by one filmmaker are possible.
What is your background with fiscal sponsorship/grant funding applications?
The TFC fiscal sponsorship program is headed by the former director of fiscal sponsorship at the Film Arts Foundation in San Francisco. We are used to reviewing proposals, have relationships with funders and can advise you on creating an attractive funding application.
Lynnette Gryseels
Lynnette is passionate about film and helping filmmakers tell thought-provoking stories that entertain, assist social change and support their filmmaking aspirations. She has over 15 years experience working with independent filmmakers, non-profit film organizations and several local and international film festivals. She has previously assisted filmmakers in learning their craft through educational program development and project development support. At Film Arts Foundation in San Francisco Lynnette headed the Fiscal Sponsorship and Grants Program, one of the oldest fiscal sponsorship programs in the country. She brings a depth of knowledge from this experience to her role as head of TFC’s fiscal sponsorship program.
Orly Ravid July 3rd, 2012
Posted In: fiscal sponsorship
Tags: 501c3, charitable contribution, documentary, donors, financial reporting, fiscal sponsorship, Fractured Atlas, grants, independent film, Lynnette Gryseels, non profit, noncommercial, private funding, tax exempt, The Film Collaborative