Indiegogo Bucks Trend Toward Niche Crowdfunding

12/11/12Follow @tanseyverse

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“democratize” fundraising for creative artists, non-profits and entrepreneurs, she says.

“We firmly believe everyone has an equal right to raise money for their idea,” she says.

In her earlier career as a fledgling financial analyst covering entertainment companies, Ringelmann concluded that many people secure backing for their projects because they have the right connections, not because their ideas are more brilliant than others’.

As a 23-year-old securities analyst at Cowen & Co., she signed up on a whim to attend a conference called “Where Hollywood Meets Wall Street.” The junior investment bank staffer expected to fade into the background. But Ringelmann was one of the few finance people to attend, and she was soon surrounded by film professionals.

One veteran filmmaker later sent the young Ringelmann a script and an appeal for funds for his next film. “He was so accomplished, yet he was still begging me for money,” Ringelmann says.

Such experiences led Ringelmann to look for alternatives to traditional for-profit investors in theater productions, films, and other creative work.

In 2006, Ringelmann pursued her interest in social entrepreneurship at UC Berkeley’s Haas School of Business, where she met Schell, a fellow MBA student. In 2008, they joined with Schell’s friend Rubin to launch Indiegogo for the independent film industry, and expanded it in 2009 to cover all fields.

Slava Rubin, co-founder of Indiegogo

Slava Rubin, co-founder of Indiegogo

The company raised $1.5 million from early investors in Sept. 2011. In June, Indiegogo raised $15 million in a Series A round from venture firms including Insight Venture Partners and Khosla Ventures.

Ringelmann says Indiegogo tries to empower clients even if they’re not already tech-savvy enough to use social media tools such as Twitter and Facebook to attract supporters. Members of the company’s “Customer Happiness” team will even give instructions on setting up a Facebook page, she says. The support team members now include speakers of French and German.

The campaigns featured prominently on the Indiegogo site are not chosen by staff, because the company doesn’t want to act as a subjective gatekeeper, Ringelmann says. Instead, projects shown at the top of the page are picked by an algorithm called the gogofactor, which measures how hard campaigners work to engage their audiences and respond to their questions.

“They earn their success,” Ringelmann says.

Indiegogo was the first crowdfunding site to form a partnership with the arts service organization Fractured Atlas, which helps public-benefit projects navigate tax issues. The New York non-profit’s executive director, Adam Huttler, says well-meaning crowdfunders are often stunned to learn they can end up paying personal income taxes on the money they raise for their favorite causes, if they don’t understand IRS rules.

Fractured Atlas manages the money raised by arts organizations for projects with a public service mission, such as free music lessons for impoverished kids. A qualified arts group can receive grants, donations, and crowdfunded contributions through Fractured Atlas, without the need to acquire its own status as a tax-exempt charitable organization under the IRS code section 501(c)(3).

Indiegogo accepts lower rates for campaigns sponsored by Fractured Atlas, Huttler says. Those crowdfunders not only avoid a tax bite, but their supporters may also be able to … Next Page »

Bernadette Tansey is a freelance journalist based in Berkeley, CA. Follow @tanseyverse

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