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Capital crowdfunders help you beat smart elite

As a new video game receives more than £2million in funding from the public, are crowdfunding websites the future for raising capital? Ross McGuinness talks to those leading the revolution.

The days of marching up that famous flight of stairs and into the Dragons’ Den could soon be over. Why waste time pitching a business idea to five people when you could sell it to thousands online?

That was the thinking that turned an idea for a new computer game into a million dollar windfall. To help raise the cash for its upcoming downloadable point-and-click game, San Francisco-based developer Double Fine Productions harnessed the power of the internet to raise £250,000.

The company pitched the idea for the game on US crowdfunding site Kickstarter, which has been helping creative projects find backers for three years. What happened next was nothing short of phenomenal. Within only eight hours, thousands of backers had helped the developer raise the required amount for its game called Double Fine Adventure.

And then things got really exciting. A few weeks later, the final total reached $3.3million (£2million) from more than 87,000 backers.

It is the biggest success story in Kickstarter’s short history.

The game will now be developed for the next six to eight months and will be available on PC, Mac, Linux, iOS and android.

Those who pledged money will be given a role in its development. Backers will be able to give feedback on its progress and can suggest and vote on ideas. They will also receive a free copy of the finished title.

‘We’ve been completely blown away by the amount of support we’ve seen from our fans,’ Greg Rice, the producer of Double Fine Adventure, told Metro. ‘We always hoped this would be a success but we never imagined it would be anything on this level.

‘Kickstarter allowed us direct communication with our fans and ultimately means we’ll be able to make the game we want and also directly benefit from it financially.’

Those pitching their projects on Kickstarter retain complete creative control but if the pitch reaches its target, Kickstarter takes five per cent of the total funds raised.

If a project doesn’t reach its funding target before its deadline, no money exchanges hands and backers’ pledges are returned.

Kickstarter is one of a wave of crowdfunding websites out there and Mr Rice believes they have changed the playing field for businesses.

‘I think they’re getting more and more important,’ he said. ‘It’s truly amazing that people with a great idea now have a way to fund making those ideas come true and are able to do that by speaking directly to their customers.’ Kickstarter specialises in film, art and design and aims to bring backers and business together.

‘There’s always a value exchange between creators and the backers that pledge financial support to a project,’ said Kickstarter’s communications director, Justin Kazmark.

‘In exchange for pledging, backers receive creative rewards, one of a kind experiences and behind-the-scenes access to the creative process as the project comes to life.

‘Kickstarter was founded on the idea that there is value in the world beyond things that can make money. Ideas should be able to exist because people feel an affinity toward them, not because of the promise of profit.’

Crowdfunding has come to the fore in the US, with the House of Representatives backing a new law, the Jumpstart Our Business Startups Act (Jobs), which supporters say will make it easier for people to invest in small firms.

It will allow backers to own equity in the companies they invest in and let those businesses raise up to $1million (£600,000) through crowdfunding.

But in Britain, one crowdfunding website is already offering equity to investors. Exeter-based Crowdcube launched last year and has already funded 15 projects and raised £2.8million.

The biggest of those was £1million for the Rushmore Group to build a new private members’ club in London.

Like Kickstarter, Crowdcube takes a five per cent fee on pitches that reach their target.

‘We’ve completely democratised the whole investment industry,’ said Crowdcube co-founder Luke Lang. ‘We’re trying to make investing in business easy and inclusive rather than it being the exclusive preserve of the elite who have got lots of money or lots of experience.

‘We’ve broken down those barriers and enabled ordinary people with modest amounts of money to get behind small businesses.’

Once a company’s business plan is vetted by Crowdcube, it presents its idea on the site in a video clip.

‘It’s like an online Dragons’ Den pitch,’ said Mr Lang. ‘You can show the potential investors the whites of your eyes.’

He said Double Fine Adventure’s success on Kickstarter was ‘a great example of the power of crowdfunding’.

However, James Bailey, co-founder of a smaller London-based crowdfunding site, PleaseFund.Us, which has raised about £100,000 for projects since it launched last September, is more sceptical about the Double Fine phenomenon.

He said: ‘It’s all incredible stuff and the fact they can get that exposure is unreal but it kind of goes away from what Kickstarter was all about in that it was a fairly well established company setting it up.

‘It was a little bit of a split from what Kickstarter is supposed to be all about, but at the same time it was very cool and it’s given the whole industry massive exposure.’

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