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Food entrepreneurs using Kickstarter to raise funds, but is it a good business model?

Andi McDaniel wants to sell gourmet ice pops to yuppies at local farmers' markets. And she hopes donations will help her do it.

McDaniel and her colleague, Sarah Newberry, have set up a Kickstarter page for their business, 10,000 Licks, in hopes of raising $10,000 to purchase a commercial kitchen and new equipment and to pay off their licensing fees.

They're following in the footsteps of the Donut Cooperative, a media-savvy group that raised $10,000 last summer to open a store in the fall. A year later, the co-op still hasn't opened its doors for business. Which raises the question: Does Kickstarter work for funding a food business?

McDaniel argues the benefits of using Kickstarter are twofold: First, the owner of a small business doesn't have to take out a loan to get started.

"It's an opportunity to not borrow," she says of the site. "It's free and clear. It's essentially a gift to invest in your business."

But, she says, that isn't the main reason to use Kickstarter. She sees the site as an opportunity to "crowd source" her business by presenting the company's vision to the public and asking for their support.

"This is what we want to do, and this is the brand," she says of Kickstarter's appeal. "If that resonates with you, if having this gets you excited, then here's a way to help."

The Donut Cooperative knows the attention-grabbing power of Kickstarter. The co-op, run by Dawn Otwell and Laura Kennedy, has been hailed in all the major local publications, from Heavy Table to Twin Cities Business and City Pages. It even made Metro magazine's Best Of list, which was a little premature, since the doughnut shop doesn't actually exist yet.

Otwell echoes McDaniel on the benefits of using Kickstarter.

"Kickstarter is wonderful," she says. "It definitely made what we're doing a community effort."

Otwell says the co-op's failure to open isn't a problem with the Kickstarter model--it's that the co-cop underestimated some of its expenses.

"It didn't go as far as we thought it would," she says of the $10,000. "There were a lot of hidden costs that I guess nobody really anticipates."

She admits that some donors have been unhappy with the endless delays of the shop's opening.

"There have been a few people who contacted us and asked what was taking so long. That's understandable. I didn't realize it would take as long as what it had."

Still, she says that she has no regrets about using Kickstarter to raise their money.

"Being a startup small business, it is very difficult to receive funding through banks and loans," she says. "The one thing we really liked about Kickstarter is that it was a really good way to test the market and see if our idea that we had was a good idea."

And now, over a year later, she hopes to make the idea a reality: Otwell told City Pages she plans to announce a location later this week.

McDaniel, for her part, says the popsicle business is different from the Donut Co-Op. "They're trying to open a storefront," she says. 10,000 Licks aims to be a seasonal thing.

Check out McDaniel's Kickstarter if you're interested in making a donation. She's raised over $8,000 and needs to raise $10,000 by the end of the week or else she won't get any money.

But be advised: once Kickstarter turns over your donation, it becomes the business' money, as one frustrated investor-donor in the Donut Cooperative recently pointed out on Facebook:

Food entrepreneurs using Kickstarter to raise funds, but is it a good business model?

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