A number of Irish tech start-ups have turned to crowdfunding websites over the past year to raise funds from €1,200 to €100,000 as the draw of publicity and an “engaged group of consumers” offer powerful reasons to run a campaign.
US crowdfunding sites such Kickstarter and Indiegogo have pages full of gaming, app and sensor start-ups and now Ireland’s crowdfunding leader, Fund It, is also trying to “work more with the science and technology sectors”.
While Fund It is known more as a fundraising avenue for artistic endeavours, its chief executive, Stuart McLaughlin, says IT start-ups can benefit from crowdfunding as it "gives you a market and allows you to test that market" before going towards "more traditional routes" of funding such as Enterprise Ireland or venture capital groups.
Recent technology-focused Fund It projects include successful campaigns by gaming company bitSmith Games, interactive education website creators DabbledooMusic and smartphone accessibility app designers ClearCall – who looked for €2,000, €4,000 and €1,200 respectively to get their businesses off the ground.
Investors were offered a variety of rewards, from copies of the final product and web development classes to workshops, first dibs on future iterations and even the odd launch party invite.
ClearCall's Maurice Gavin was in the fourth year of his engineering degree when he began the company with a classmate. "We needed a little bit of capital to get off the ground for licensing and some other stuff. Plus we were hoping to get exposure. Crowdfunding gives you all that," he says.
“The thing is, if you don’t succeed it’s not the end of the world because people still see the project,” he says, alluding to the general crowdfunding ethos that if the project doesn’t get 100 per cent funding in an allotted time it’s deemed a failed campaign and the company in question doesn’t receive any money.
According to Gavin, the idea is also becoming more attractive to start-ups for the simple reason that “you don’t have to give away equity”, as opposed to the percentages-focused deals stuck when going “down the traditional VC route”.
DabbledooMusic co-founder Shane McKenna agrees. “When I was talking to people about funding who were more business-orientated it all came down to the numbers, whereas [with crowdfunding] people aren’t too concerned about that, they just want to see if it’s a good idea or not.”
Despite the relatively low figures these Irish companies gathered through Fund It, the concept has become a valued avenue of technology investment for larger companies too. In the past few weeks Ubuntu asked the public for $32 million in funding to create the “Formula One” of smartphones via an IndieGoGo campaign. While last year a $10 million Kickstarter campaign helped push the development of the Pebble e-paper watch.
There are now around 800-plus crowdfunding platforms across the globe, though some of those are based on lending structures or equity deals rather than the rewards-led model favoured by Fund It and Kickstarter.
According to research from enterprise "crowd sourcing solutions" company Massolution, it's estimated that a combined $5.1 billion in transactions will take place across those sites in 2013.
Dublin-based company Galvanic raised $100,000 as part of their Kickstarter campaign to help them build a "PIP wireless biosensor" which combined with a set of apps allow "you to master the art of relaxation through gaming".
“I think, unless you knock it out of the park with crowdfunding it’s not sensible to make it your only source of funding, so we have angel investment as well,” says company CTO Daragh McDonnell.
“We got across the line,” he adds, “it’s a brilliant way of finding out what people think of your product but it’s stressful while the campaign is going on.”
Entrepreneur and venture partner with SOSventures Bill Liao believes that for the moment the "novelty of crowdfunding" makes it "a little bit easier for people to get money than previously".
However, Liao – who is involved in three Kickstarter campaigns at present – also sees the relatively nascent market facing a tumultuous few years during which “the biggies” in the industry such as Kickstarter and Indiegogo may buy up many of their competitors.
Already, he says, “it’s getting rapidly more competitive on the crowdfunding sites and between them”.
One of the projects with which Liao is currently involved is Multipath Networks, which has developed router technology aimed at dramatically increasing broadband speeds. Beginning its Kickstarter campaign in the next few weeks, the company will be looking for €30,000 but hoping to "raise well north of €100,000" according to chief executive Justin Collery.
Collery agrees the packed marketplace means “the bar has been raised” in terms of creating a project that will ultimately reach 100 per cent of funding.
“People look at the video on your page, for instance, and if they don’t like that they won’t read about you or go near investing. You have to get the tone and message of that perfectly,” he says, adding that the company had already gone through two different versions of their video before striking “the right tone”.
The message, he says, has to be “nice and simple – here’s what it is, here’s what it does, this is the problem that it solves, give us your money!”