Rich and famous adopting crowdfunding

Crowdfundbeat News Wire, With doors throughout Hollywood firmly slammed upon an actor and writer seeking to adapt his short stories for the silver screen, last year the artist turned to the masses to finance his life’s work.

Hoping to raise enough for three separate films, he opened an account with San Francisco-based crowdfunding site Indiegogo and embarked on a campaign to generate half a million dollars — an amount he believed would come more freely $50 at a time from thousands of average citizens than in a check from a single wealthy and potentially demanding investor.

Rich and Famous

After a little more than a month of fundraising, the campaign ended in July 2013, raising only $327,979 of its goal.

However, James Franco was able to dig into his own pocket to make up the difference and make one of the films, “Palo Alto,” a reality. The film was released in New York and Los Angeles in May and to iTunes in June.

Despite the $172,021 shortfall, it’s difficult to dispute Mr. Franco’s campaign had a degree of success. On the other hand, the fact that the actor banked an estimated $7 million from his 2013 film “Oz the Great and Powerful,” according to film database IMBD, made some think his plea for funding would have made more sense if he turned to his own accountants instead of everyday people.

“Yes, people of modest means can give their hard-earned money to whichever cause they choose. But dear God, why give it to a bazillionaire actor?” reads a comment on a Vulture.com story about Mr. Franco’s crowdfunding campaign.

The move toward crowdfunding — an online fundraising campaign designed to draw micro-donations or investments for big-money projects from large groups of people — is an increasingly common source of seed capital among the nation’s creative class for good reason.

A report by Los Angeles-based crowdsourcing research firm Massolution says that in 2012 crowdfunding platforms raised an estimated $2.7 billion for more than 1 million projects. New York City-based crowdfunding site Kickstarter alone has seen 6.8 million people put up $1 billion to fund approximately 67,000 projects since its 2009 debut.

The lifeline for struggling creatives hasn’t gone unnoticed by the rich and famous.

In the last year alone actors LeVar Burton of “Star Trek” and “Reading Rainbow” fame, former “Veronica Mars” star Kristen Bell and former NBA star Shaquille O’Neal have all turned to crowdfunding to raise capital for projects. But when millionaires take up fundraising tactics commonly associated with starving artists and startups, public reactions can range from excitement to indignation that celebrities have the gall to ask for financial help.

For Josh Lucas, who launched Allentown-based Crowdasaurus last year to connect crowdfunding projects to potential investors, the difference between celebrity campaigns that are embraced and those that are universally mocked is often hidden within what the campaign brings to its donors.

Noting that campaigns attached to social media networks that are millions of followers strong is a top indicator of crowdfunding success, Mr. Lucas added that the campaign’s creators must offer an event, product or social service strong enough to turn the legion of followers into backers, celebrities or not.

Using Mr. Burton’s May Kickstarter campaign to revamp his former children’s education show “Reading Rainbow” as an example, Mr. Lucas said the campaign smashed its original funding goal by tapping into donors’ childhood memories and promising to deliver the digitally revamped show to low-income classrooms for free. After initially setting a $1 million goal, by July Mr. Burton’s campaign was able to draw more than $5.4 million from 105,857 Kickstarter donors, plus an additional $1 million in matching funds from “Family Guy” creator Seth MacFarlane.

“The second biggest indicator of whether or not a crowdfunding campaign will be successful is when it has a narrative that is centered around social good,” said Mr. Lucas. “People tend to contribute to crowdfunding projects that help to improve the community and to do something nostalgic.”

Emotional rewards aside, the physical prizes that often come with donations are also make or break factors of crowdfunding campaigns, celebrity or not.

Federal guidelines prohibit individuals who haven’t been vetted as “qualified investors” from purchasing actual equity in a crowdfunded business or campaign.

To make up the difference, campaign founders have offered everything from first dibs on high-end electronics to offers for personal interaction with founders, which for Mr. Franco, ranged from a 15-second personalized cell phone greeting for a $450 donation to a chance to become a featured extra in one of his upcoming films for $5,000.

Getting products to the public prior to launch can help generate buzz, but celebrity-backed campaigns can also help entrepreneurs target their prizes toward customers most likely to support their endeavor, said Anthony Katz, Irvine, Calif.-based founder of sports training equipment company Hyperice.

Hyperice’s Vyper vibrating foam roller trainer is being touted by NFL stars Troy Polamalu and Adrian Peterson as well as NBA star Blake Griffin and Olympic gold medal skier Lindsey Vonn, all of whom are also company investors.

And while the celebrity backing could dissuade owners who think the millionaires should foot the entire bill, it also gives Mr. Katz access to athletes and fitness enthusiasts seeking to recover from sports injuries like the pros. Mr. Petersen credits steady use of Vyper with helping him go from a torn ACL in 2012 to earning the league’s rushing title in 2013.

“We’re trying to tell people this product’s been tested by some of the best athletes in the world. It builds credibility,” said Mr. Katz. “If Adrian Petersen and Blake Griffin use it every day, what does that say about the product?”

Whether there’s a touch of celebrity, the quality of product and the creativity of a campaign’s outreach are ultimately the strongest indicators in whether they will make their goals, said Kickstarter spokesman Justin Kazmark, a sentiment echoed by Indiegogo co-founder Danae Ringelmann.

“In general, projects tend to succeed if they have a compelling idea and thoughtfully crafted rewards, projects with a very well thought-out back story behind it, projects that resonate with people,” Mr. Kazmark said.

“For a great Indiegogo campaign, leaders should share not just ‘the what’ but also ‘the who’ and ‘the why’ as people fund ideas not just for the perk, but also to participate in something bigger than themselves.

This is true whether you’re a couple a couple crowdfunding IVF treatments or Don Cheadle funding a new film,” said Mr. Ringelmann.

The whos, whats and whys are important, but nothing is more critical to drawing new donors than letting them know what’s coming for them in return for their support, particularly with celebrity campaigns, said Mr. Lucas.

“What people want to know is what you are doing for them,” he said.

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