Alms for the Creative: Crowdfunding means passing on traditional funding to pass the collection plate 

Move to change securities regulations could mean big changes in the micro-funding model

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While Spinrad sees the exemption as a way for artists to fund projects, Jenny Kassan, co-director of the California-based Sustainable Economies Law Center--who is helping Spinrad with the petition--sees it from a different perspective. For her, this is the only way small businesses will ever be able to get a fair shake.

"If you care at all about supporting small, locally owned businesses in your community, this is a crucial issue," Kassan said. She contends that without it, large corporations will always have an advantage over mom-and-pop stores.

"A lot of people don't understand securities regulations in the first place, so they don't understand why we need to do this," she said. "But the more people realize how hard it is for a small business to raise money legally, and that people are not allowed to go out and ask their friends or their community for an investment, the more excited they get. Especially now, in this climate, when businesses are suffering."

In Kassan's view, the idea that people can freely stroll around dropping money on the lottery or in a casino, but that the government won't let them risk it on an investment is absurd.

"Let's leave it up to the people," said Kassan. "It's their $100. They're not going to die if they lose it."

Kassan sent a nine-page letter to the SEC in late June outlining the proposed changes in detail, including several caveats to ensure it isn't exploited.

No. 1: No purchaser may invest more than $100.

No. 2: The aggregate offering is limited to $100,000 maximum.

No. 3: Offerors must be individuals. Offerors may not be entities and must be United States citizens or legal residents.

No. 4: No offeror may have more than one offering open at any time.

No. 5: All offering materials and communications must contain a disclaimer clearly stating the possibility of total loss of the investment and the necessity of careful evaluation of each offeror's trustworthiness by the individual purchaser.

The letter also includes detailed descriptions of the benefits Kassan expects to see as justification.

"It's a totally crazy long-shot," she said. "Especially in this environment. Unfortunately, a lot of really bad players have made people really nervous about doing anything that would loosen up the rules at all.

"We wouldn't do it if we didn't think there wasn't a chance," Kassan added. "It's a very reasonable request."

Even if Ringelmann and IndieGogo didn't stand to benefit from the potential exemption, she said she'd support it. One of the things that drove her to start IndieGogo was being the child of small business owners and watching them refinance their house and cover business expenses with credit cards for 30 years.

"Ever year, 7 million ventures start," said Ringelmann. The average outlay is $45,000. But the average need is only $4,500. Most businesses are something like a hot dog cart. So people are financing it themselves with credit cards. If there was an easy way for people to raise 10 grand, then that could be the bread and butter of America.

According to Ringelmann, Kassan and Spinrad, a SEC exemption on small-scale investments is that way.

"There are two ways to protect people," Ringelmann said. "Require companies to do risk disclosure or cap investments. Second [option] wasn't used in 1933 because it was too hard to track. The Internet has changed that. So the question becomes what is the appropriate level? $100? $1,000?"

Spinrad, the arts enthusiast, sits at the $100-end of the spectrum. Investors and financiers are pushing for a larger, and therefore potentially profitable, cap.

But even if all the legal minutiae is resolved, there's still the question of why anyone would fork over their hard-earned $20 to someone else's crazy idea rather than their own.

For Megan Egbert, a Boise librarian, it started out as helping her friend Gregory Bayne with his film Driven.

"The platform allows someone not only to ask for money, but to show what they're doing," she said. "Plus, it makes it not awkward if you want to refuse."

Bayne campaigned to fund his soon-to-be-released documentary about mixed-martial arts fighter Jens Pulver getting ready for his underdog shot at the big-time. His effort has been used as a model of how to use crowdfunding.

Bayne first tried to raise money the traditional way, but he started running out of time before Pulver's main event. So Bayne made a trailer and put it on Youtube.

The trailer got more than 10,000 views in one week, which proved there was an audience, so he decided to try crowdfunding. His goal was $25,000 in 20 days, but he ended up with $27,000 and a fanbase itching to see the film.

Bayne was also able to use the contributors as a test audience, sending out clips and rough cuts to see how people responded.

After contributing to Driven, Egbert became curious and looked for other causes to support, giving to several including Travis Swartz's film.

"I wouldn't give money to someone if I had doubts about it. I've donated pretty small amounts to people, so if someone takes my $25 and runs I'm not going to be that worried about it," she said.

Paul Carew, another Boisean who contributed to Bayne and Swartz had similar sentiments. He was friends with both of them, but he also appreciated the efficiency of the process.

"I'm a business owner and a very busy person," said Carew. "In the situations where I used Kickstarter, it was a gut decision, and I knew I could plug in a credit card in 30 seconds and be done with it."

While the ease of donating to a project is attractive to donors, it's also drawing the attention of established organizations, which see it as a way to reach out to a new funding pool. Boise Contemporary Theater's Artistic Director Matthew Cameron Clark said in an age of declining corporate contributions, The Krumblin Foundation wouldn't have been possible without the campaign.

"New work costs more," he said. "Time for development, commissioning, fees, etc. We had to find new way to fund additional expenses."

Those new ways were to offer gifts ranging from free drinks to signed scripts to donors' names being written into the script (only $1,000 or more). The campaign was so well received that BCT raised $12,645 from 178 backers.

Still, crowdfunding isn't always the answer.

After only a few weeks, Swartz decided to cancel his Kickstarter campaign to fund Nobody Cares.

"With Kickstarter, I found I was spending my pre-production time being a fundraiser as opposed to being a filmmaker," Swartz said. "I think if I'd done it earlier and had a different plan for it, it would have worked out well. But I started a bit late, and I ended up spending exponential time on it because you have to hit that goal by a certain date."

Instead, he set up a PayPal account on his own website that people could use to contribute, and found a partner who took care of many of the equipment costs, making it possible to start production. Swartz wrapped shooting in early October and is in the months-long editing process.

To complete the project, he said he will need to continue raising funds, and though contributions have trickled off since the initial push, Swartz feels it will pick up again once he's cut enough of the film to show people what they're paying for.

"[Contributing] seems more a reaction to how much energy people see you putting into the project," Swartz said. "When they see that you have something, as opposed to the promise that you might have something, it has more impact."

At last report, Swartz had raised $3,100, far short of his initial goal of $25,000. But he's not concerned.

"I'm shooting the movie," he said. "That's the most important part."

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