I don't get it, it's not venture capitalism when you're not getting money back from a successful business. Kickstarter is more like business begging/charity.
By Emily Weiss
By Emily Weiss
By Emily Weiss
By Hannah Sayle
By Emily Weiss
By Emily Weiss
By Emily Weiss
By Emily Weiss
The people have spoken. And they want roast beef. And doughnuts. And popsicles. Time will tell whether they also want soul food delivered to their door or a new Irish pub in downtown Buffalo, Minnesota. If they do, there's an easy way to vote: They can toss $25 or $50 in the hat on Kickstarter.com.
Kickstarter has been democratizing venture capital since 2009. Artists, authors, entrepreneurs, and other creative types post projects; those who want to see the projects come to fruition pledge funding, as little as $1 if they like. In exchange, rather than owning a piece of the business like a traditional investor, they get a little reward—a CD, a book, a T-shirt. But there's no way a plugged-in reader doesn't know that already, because news of Kickstarter has gone seriously mainstream in the past few months, so much so that some bloggers are now begging their artistic friends to stop the "Internet begging."
The participants are big, like ousted New York Times ethicist Randy Cohen, who is raising money for a podcast, and small—tiny-small, like the Delaware poet who was raising $1 (singular) for a poetry project. (That got funded.) While the largest category of projects is definitely albums, followed by small films and photography projects—one-off sorts of things that tend to result in a tangible object—there are also a handful of food projects currently seeking funding in Minnesota. Inspired by the recent success of the Donut Cooperative and Land of 10,000 Licks, both of which achieved their funding goals in August, these entrepreneurs are looking for a little help kick-starting what they hope will be long-lived enterprises.
What I learned from talking to the newbies and to successful Kickstarters is this: It's not about the money—at least not entirely.
Few things are guaranteed in the food business, but of this you can be sure: When the Bloomy's Roast Beef truck parks in downtown Minneapolis or St. Paul for the first time next April, there will be a line down the block. That's in part because owners Katie Johnson and Ryan Bloomstrom are hardworking dynamos. But more importantly, it's because they have savvily used Kickstarter to build an enthusiastic customer base months before they make their first sandwich.
One morning in early November, Johnson opened her laptop and had to stifle a happy scream: Bloomy's Roast Beef had reached its goal of $10,000. Within 30 days, 56 backers pledged an average of nearly $200 each to get the food truck off the ground. Many have become devoted followers of "Bloomy's Blog," chronicling the venture. One even offered up his family's cherished coleslaw recipe for the cause. In exchange for their help, they'll all get some combination of free meals and Bloomy's gear to wear around town, and they'll be invited to a launch party where they'll get to sign the truck itself.
"And when they see that truck around town, they'll think, 'I'm a part of that,'" Johnson says. "Everybody has a desire to belong to something bigger than themselves. A lot of people don't find that in life. I think people enjoy seeing what they've helped us grow." And when customers feel like a part of your business, they just might start doing some of your marketing for you.
"Kickstarter is a brilliant tool to get people interested," Bloomstrom says. "They want to see you succeed, because they're involved. They'll put it on Facebook and shake the bushes for you."
WHEN THE DONUT COOPERATIVE opened in early November, it also had a ready horde of customers before the first doughnuts came out of the oil. More than 150 backers had pledged a total of $12,032, and they—and their friends—were all eager to get their hands on treats like sea-salt potato-chip doughnuts with butterscotch caramel sauce. In fact, the Kickstarter buzz is working almost too well: Lines out the door are still common, and demand often outstrips supply.
Head baker and menu designer Jacob Schumack says Kickstarter was a great way for the Donut Cooperative to test out a business idea before running with it.
"Without Kickstarter we wouldn't be here," Schumack says. And not just because of the capital the cooperative raised online. "Kickstarter helped us gauge whether people were willing to put their money where their mouth is. It gave us hope that people were really excited."
Backers got swag like buttons, T-shirts, free coffee, and free doughnuts. The 15 people who pledged $250 or more get to design a custom doughnut flavor that Schumack has to try to concoct. The lingonberry doughnut was easy (and delicious). But the chili dog doughnut is more challenging: "I've got the recipe to the point where it's palatable when it's hot, but it's not so great when it's cooled down."
But were people giving for the swag or out of the goodness of their hearts? Schumack says neither. "They weren't just being philanthropic," he says. "They really wanted to have doughnuts here. They were asking us to open."
LAST YEAR, Krista Leraas raised $8,200 for Backyard Harvest, an urban farming project of the Permaculture Research Institute. She turned to Kickstarter again this year when she and business partner Dina Kountoupes wanted to add a social justice component to their new farming venture, Harvest Moon Backyard Farmers.
Harvest Moon offers garden design and consultation services and will even do the dirty work of raising edibles in their customers' yards. The pair are seeking $8,900 so they can offer garden coaching to low-income homeowners and create food-shelf gardens.
"It's not like we can't survive as a business without this," says Kountoupes. "We really feel passionate about social justice with food, and this is a part of the business we want to make happen."
"We're not a nonprofit," Leraas adds, "so we aren't eligible for traditional grants."
Most of their backers—44 so far, and growing—are completely unknown to them; some don't even live in Minnesota. And many have given to other food-related projects. That's the beauty of Kickstarter, Kountoupes says. "It's like this cool underground movement, a community built around supporting and doing.'
Leraas compares Kickstarter to the community-supported agriculture mindset. "Especially as the economy stays bleak, people are realizing they need to get more creative," she says. "And they are thinking of economic relationships in different ways."
It's also marketing. "It's been an incredible way to get advertising in a community of people who are likeminded," Kountoupes says. "We may get clients out of this, even if they don't fund us."
KICKSTARTER CAN also be a lifeline for people outside the usual funding loop. Derrick Williams has been cooking soul food ever since he was a child in Arkansas. But since his restaurant, Derrick's Southern Style at 38th and Chicago in Minneapolis, closed last year, he's been a cook without a kitchen. He cooks for friends and sets up an occasional backyard barbecue, but mostly he says he is always thinking, "How can I get back to cooking every day?"
A friend convinced him to try Kickstarter as a way to raise $5,000 to get a meal-delivery service called Soul Food 2 Go up and running. Williams says he was skeptical—"It felt like begging"—but, without a lot of savings, he doesn't have access to many other funding streams. If the project funds, he plans to use produce from a cooperative of small local farmers to cook Southern classics and his own specialties, like smoked meatloaf. He wants to offer healthy options to a customer base prone to food-related diseases and expand options for people in the Twin Cities who love Southern cooking. "You just can't get certain things in the stores here," he says.
ANDY HAYES grew up in a restaurant family. His grandmother owned Stella's Café in downtown Monticello for more than 30 years. Now he's hoping to continue the family tradition by opening Hayes' Public House in Buffalo. He's got his eye on a building but needs to raise some capital so he'll be eligible for business loans.
Hayes says that using Kickstarter seemed strange at first, and he's had to explain the concept to some people, but the reception so far has been positive. With more than a month to go, 11 people have pledged more than $1,000. As the word spreads from close friends and family to the outer fringes of his social group, Hayes says he's been pleasantly surprised to see support from friends of friends and other acquaintances. While he was hoping to open the doors on St. Patrick's Day 2012, he now notes that the clock is ticking pretty fast. "There are people following me who have been really supportive," he says. "That means more to me than making my funding goal.
SO KICKSTARTER is about market-testing ideas, building enthusiastic communities around your project, and about access for nontraditional business owners, but it's also about cold hard cash, too. The money pledged is a gift, not a loan (Kickstarter explicitly forbids repayment of pledges) and backers don't get a stake in the business.
When Katie Johnson and Ryan Bloomstrom first approached banks about loans for Bloomy's Roast Beef, they were expecting to have to put up about 10 percent of the capital themselves. But bank loan practices aren't what they used to be, and the Small Business Association, which has approved their loan, wants entrepreneurs to put up 30 percent of every purchase. The couple turned to Kickstarter to bridge the gap between their savings and what the SBA wanted to see.
Other entrepreneurs might look for venture capital for that, but an investor would get a stake in the business and might want a say in how it was run. "We refused to give up our hard work, blood, and tears for a private investor," Bloomstrom says. "That's where Kickstarter comes in."
That is not to say that Kickstarter is an easy shortcut to business success. Johnson and Bloomstrom have a 65-page business plan to prove that. The couple has spent 10 months working on the plan. "We both have full-time jobs, and then we come home at night and open our laptops and keep working," Johnson says. That included shaking the Kickstarter bushes long before they had a crowd of backers to help them do that. Johnson said they did something every day to keep the ticker on their Kickstarter page growing, using Facebook, blogging, and old-fashioned email pleas.
The couple now have a busy five months ahead of them before they put their first roast in the oven. They'll be planning a launch party, hiring staff, and perfecting recipes for coleslaw, mac and cheese, and sandwiches. One thing they know for sure: At least 56 people are eager for a taste.