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Kickstarter gains traction

Ray Sands is all about Chicago.

Sands, of Sherman, Conn., is seeking to open a mobile food truck in the Danbury area that would serve Windy City fare, ranging from hot dogs to cheese dogs, chili dogs, Italian sausages and soda – or pop, as they call it in the Midwest.

In order to help raise the $80,000 Sands estimates it will take to repair and outfit his food truck, hire and train employees and obtain the necessary state licenses, he went to Kickstarter.

Founded in an apartment on the Lower East Side of Manhattan, Kickstarter Inc. is a web-based crowd funding platform that launched in April 2009, aiming to connect inspiring entrepreneurs with motivated financial backers.

The catch?

Kickstarter is not an investment platform, and cannot be used to offer financial returns or equity of any kind, or to solicit loans. And there are few guarantees.

The platform allows benefactors to make pledges ranging from $1 to thousands of dollars toward causes, artists, and budding business owners in exchange for gifts based on the level of any given donation.

The theory is simple: If a project meets its fundraising goal within a set period of time, the credit cards and checking accounts of the individuals who pledged their support are charged, according to the company.

If a project fails to meet its fundraising goal, no one is charged and no gifts are delivered.

To date, 76,500 projects have been launched on Kickstarter, including hundreds in Fairfield County.

About 44 percent of all projects that are launched have successfully met their fundraising goal, raising a total of $348 million, Kickstarter says.

Of the 32,049 successful projects, 3,772 raised less than $1,000; 21,736 raised between $1,000 and $9,999; 3,858 raised between $10,000 and $19,999; 2,344 raised between $20,000 and $99,999; 324 raised between $100,000 and $999,999; and 15 raised more than $1 million.

In an October interview with Time magazine, Kickstarter co-founder Yancey Strickler said the typical project raises $5,000 and is supported by about 85 people. “So you can learn the first names of the people who got you started,” Strickler told Time.

The company has continued its rapid expansion, announcing Oct. 31 that the platform is now open to projects based in the U.K.

In the case of Sands’ Chicago Beef & Dogs venture, a benefactor who pledges $25 or more is promised a Chicago-style sandwich, with increasingly valuable gifts for pledges all the way up to $5,000.

Benefactors who give $5,000 or more to Sands’ venture will be treated to a home visit where Sands will personally demonstrate how to cook and prepare his various menu items.

“The mobile kitchen I am purchasing is in need of a bit of help, and that is why I am here asking all the amazing people that support this website and the projects (passions) that are developed through their generosity (for assistance),” Sands wrote on his Kickstarter posting.

Sands’ project launched Oct. 15 and fundraising concludes Nov. 14.

Prior to having their ventures listed on Kickstarter, project sponsors are required to set a fundraising goal – often ranging from a few hundred dollars to $10,000 or more – and to determine a specific time window during which they may solicit pledges.

If project sponsors meet or exceed their fundraising goal, contributors’ credit cards and checking accounts will be charged and project sponsors will theoretically proceed to deliver on their promised gifts.

There are no mechanisms built into Kickstarter that compel project sponsors to deliver on the promised gifts if their project meets its fundraising goal.

According to Time, a company called ZionEyez, which planned to market a pair of eyeglasses with a built-in high definition video camera, raised more than $343,000 from 2,000-plus benefactors in the summer of 2011.

However, the company fell off the map and while it issued an apology to its backers, it neither delivered pairs of the eyeglasses that were promised nor issued refunds.

Based on a study conducted by the University of Pennsylvania’s Wharton School, those instances are rare, with just 3.6 percent of those projects studied resulting in refunds or project sponsors that ceased communications with their backers altogether.

 

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Patrick Gallagher

Bio: Fairfield County Bureau Chief Staff Reporter Westchester County Business Journal Covers: Economy, energy, government, infrastructure and public works projects, law, media, technology Phone: (914) 694-3600, ext. 3017

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