Published on June 5th, 2013 | by Danny Roberts0
Crowdfunding, Celebrities, and a Bubble
Just a few years ago, no one had even heard of crowdfunding. These days, however, platforms like Kickstarter and Indiegogo have become the first thing many people think of when looking to raise funds for everything from a new art project to a clever product idea.
The principle behind crowdfunding is wonderful: allow people like artists to complete the projects they want to do but can’t afford to finance themselves by getting internet users to donate to them in return for cool perks and (generally speaking) some version of the final project. Yes, PBS has been collecting money from the masses and giving out tote bags in return for years, but crowdfunding platforms allow anyone to kick-start virtually any project, and offer backers any rewards they want to in return. It gives civic/socialpreneurs a new way to see through socially powerful projects. Even traditional institutions like libraries are being reimagined for the digital age thanks in part to crowdfunding. It is, in a way, the democratization of financing, and that’s a good thing. Sort of.
Before I go any further, I should say that I used Kickstarter and a self-made crowdfunding platform to finance an artistic project of my own once, so I have nothing against the platform itself, and in fact I think it does a lot of good.
However, as great as the platform is for indie artists, it also seems to be becoming a way for established, wealthy artists to drum up investment for their films without actually having to pay anyone back. The most recent example might be Scrubs and Garden State star Zach Braff’s Kickstarter for ‘Wish I Was Here’. Braff presents the Kickstarter as a way to fund a film that he’ll be able to make completely on his own terms, without having to answer to the whims of financing studios, and that may well be why he’s doing it (“Making a tiny, personal art film is not where people go to make a lot of money,” he has said, “This is a passion project.”). That may be true. But there’s a very cynical advantage to stars like Braff taking the Kickstarter approach, too: your project’s “investors” get trinkets, not a cut of the profits, when you succeed.
And on some level, that’s what the backers of large-scale Kickstarter and Indiegogo projects really are: investors. Maybe not the backers of that $2,000 art project your aunt put up there, but the backers of a multimillion-dollar, for-profit film that’s being written and directed by an established Hollywood star? They’re investors. I can’t help but feel it’s a bit unfair that some celebrities are essentially using their fame as a way to secure investment that doesn’t have to be repaid.
Of course, there are crowdfunding platforms that allow for more traditional investment — the kind that comes with financial rewards when the project you invested in succeeds — but they haven’t yet achieved the same level of success as crowd donation sites like Kickstarter, in part because dealing with actual equity investment is much more legally complex (in fact, in the US they’re waiting for the SEC to legislate how they can operate before opening). And it’s not as though backers of projects like Braff’s film think they’re going to be financially compensated anyway. No one is being tricked, everyone understands what they’re getting in return for their contribution.
But even so, I wonder if these platforms are going to engender some ill will as the rich-guy-wants-your-donations-to-do-something-profitable-and-keep-all-the-profits phenomenon becomes more commonplace. It’s going to turn people off. To an extent, it already has. For example, when it was announced that Braff had secured additional financing from Worldview Entertainment, many critics said it violated the spirit of the Kickstarter. After all, Worldview wasn’t buying into the film in return for a signed vinyl; it expects a chunk of the film’s profits. Kickstarter backers may have known what they were signing up for, but it certainly feels less like a group project and more like a scam when someone else is getting millions for funding a film and you’re just getting a t-shirt.
So is this going to lead to a wave of crowdfunding cynicism? That probably depends. Zach Braff is a likeable guy, and he does have a history of pursuing passion projects, so fans are likely to cut him some slack. But I suspect that the more common this becomes, the more skeptical people are going to become. I hope that once the SEC gets its ducks in a row, the rich and well-connected folks will move over to the crowd investing platforms and leave the crowdfunding donation platforms to the starving artists and entrepreneurs — the people who really can’t get enough money any other way.
If they don’t, the “crowdfunding bubble” critics of the platforms have talked about will almost certainly pop as users abandon crowdfunding platforms in their annoyance at projects that feel like scams.