Crowded funds

CAREERS AND EDUCATION ISSUE: The ups and downs of entrepreneurship on Kickstarter

The founders of FAZE Apparel crowd funded the label's jump into fall-winter clothing by way of Kickstarter.

CAREERS AND ED Regan Long and Sarah Fenson have been brewing beer in San Francisco for seven years. It's their passion, but they didn't think it could be their business until recently. Friends and family kept insisting that their beers were pub-worthy, so last year they began the first steps toward opening a brewery.

They began hauling kegs to Dolores Park for free weekend tastings on the hill, leading small homebrewing workshops at the Underground Market, and getting as much feedback from locals as they could. In fact, they decided to call the venture Local Brewing Co.

Nowadays, the brews can be found on tap throughout the city. Due to the duo's limited equipment, they sell out quickly — even at their appearance at an SF Beer Week event back in February.

"We had restaurants asking us, 'where can we get more of your beer?'" Long told the Guardian. "So now here we are — with the demand but no real supply, until we can get our own brewery."

Enter Kickstarter, one of many new websites dedicated to an innovative online method of financing projects called crowd funding. The site began in 2009 as a place where creative types could go to pitch a project and ask others to pledge small or large amounts of money to see it through to completion.

So far, more than 10,000 projects have been funded and over $70 million pledged on the site.

Lenore Estrada, one of the three eponymous babes from SF's Three Babes Bakeshop, says that Kickstarter support determined their bakery's future. Estrada, Anna Derivi-Castellanos, and Katrina Svoboda began by selling pies on weekends in a shipping container behind a local café. After successfully raising $10,000 through Kickstarter they're now doing home delivery, selling through farmers markets, and considering opening in a storefront.

The plan worked, says Estrada, because Kickstarter's model forced the Three Babes to connect with San Franciscans who don't know about their pie-filled shipping container. "In the process of raising money we were putting out the word for our business and generating future sales and interest," she says.

But it doesn't work for everyone. Kickstarter projects must have a goal amount of money to raise and a time period in which to raise it (usually a month). People who want a so-called "creative project" to succeed pledge as much as they would like — but no one shells out anything unless the project reaches its goal. No achieved goal, no project funded.

Long and Fenson needed to raise $69,000 by July 25 to be successful but only drummed up $18,536 in pledge money. Most Kickstarter campaigns aim for $10,000 or less, but commercial brewing equipment does not come cheap.

Kickstarter's reliance on social networking to get the word out proved to be a problem for Local Brewing Co. "The biggest hurdle is getting people to the web after they've already seen and enjoyed the beer," Long said during their campaign. "Although people clearly like the beer, they aren't going from the bars to their computers to pledge as often as we had hoped. We're on Facebook and Twitter trying to promote through those channels and with email lists, but it's really about getting more people to know about the project and spreading through word of mouth."

Estrada says Three Babes Bakeshop's strategy relied almost exclusively on online tools to connect with pledgers. "We all did a really good job of marketing to our friends and various networks to try to raise money." She says the business connected its online campaign and potential pledgers by throwing a campaign party. Local Brewing Co. did this too — the practice has become an expected part of many crowd-funding business campaigns.

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