Crowdfunding: Green Start-Ups Crowdfund Their Way to Success
Companies seeking to expand or launch new projects have a tough time of it, particularly green-based companies. Sierra Club Green Home explores why more green entrepreneurs are turning to crowdfunding as a viable financial option to help them grow.
Crowdfunding is a financial vehicle that helps entrepreneurs, start-ups, small businesses, and even musicians and artists to raise much needed funds by pitching their ideas directly to the general public via the internet and asking for pledges. It lets them bypass the lengthy, often grueling process of seeking venture capitalists or “angels.” However, a crowdfunding campaign offers no guarantees. Success or failure rests on the efforts of the entrepreneur and the response from the public.
Many crowdfunding websites have gained prominence over the past few years. Perhaps the best known are Kickstarter and Indiegogo. Launched in 2009, Kickstarter has seen over $250 million pledged to more than 24,000 creative projects backed by two million people. Projects encompass a panorama of topics and industries, covering innovative products, books, movies, technology, and much more.
Kickstarter has helped to successfully fund green business campaigns including the WindowFarms Project—a vertical hydroponic “farm” that allows urban folks to grow fresh veggies year round in almost any window—and ANI (As Nature Intended) shoes—stylish, vegan, eco-friendly “Barefoot” shoes made with 100% organic canvas and recycled packaging. Examples of active green Kickstarter campaigns include the following projects:
- Lean, Mean & Green—an exciting documentary focused on what residents of urban areas are doing to turn urban blight into something extraordinary and useful to their communities. This campaign closes December 9th, 2012.
- Urban Air—a project to convert conventional advertising billboards in Los Angeles into above-ground living bamboo gardens. The campaign ends December 11th, 2012.
Project organizers run everything on Kickstarter campaigns. They build their web page; shoot and upload pictures and video clips; set their minimum funding goal timelines (the “by when” the project must be funded or end); and come up with tiered incentives to entice donor participation. From there, it’s all about promotion—casting as wide a net as possible to publicize their campaigns, create excitement, and elicit oodles of donations to turn the dream campaign into reality.
An added benefit is Kickstarter’s focus on building a community around its projects/campaigns. Running a campaign is a way to connect with potential customers, build word-of-mouth, and generate enthusiasm about a forthcoming project.
Yanna Sharifi, founder of ANI, was surprised at the number of people contacting ANI to sell the shoes in their stores after learning about ANI on Kickstarter. “I think being eco-friendly is a plus [with crowdfunding] and definitely helps,” said Sharifi.
Like Kickstarter, Indiegogo provides a platform where passionate people with creative projects can tell their story to the public and inspire others to get involved. While Kickstarter campaign fundraising is “all or nothing,” Indiegogo takes a different approach. It offers two funding options: Flexible Funding and Fixed Funding.
Both funding options charge four percent of monies raised when a campaign meets or surpasses its goal, but the entrepreneur can choose what happens should the campaign fall short: 1) Flexible Funding lets campaigns keep the money they’ve raised, but collects nine percent; or 2) Fixed Funding simply refunds the money back to the contributors, with no fees required.
Some of the exciting green projects currently listed on Indiegogo include the following:
- The GreenG Network—its first project will be to help eliminate invasive, allergy-causing forest species in Oklahoma and turn them into biobased chemicals and products. This campaign closes December 7th, 2012.
- Tenderloin Vertical Garden—a project to transform a blank wall in San Francisco’s Tenderloin district into a thriving produce-filled green wall. This campaign, if successful, will increase green produce availability in an area of San Francisco which currently has limited access. The campaign closes January 6, 2013.
Though not a crowdfunding platform, LivingSocial is a new venture launched in May 2012 that’s helping fund some green-related businesses. Mission Small BusinessSM, a partnership between Chase Bank and LivingSocial, funds individual grants of $250,000 each to twelve small businesses. To date, the grant program has awarded up to $3 million to small business owners nationwide.
This funding program was designed “to increase awareness of the important role small businesses play in local communities and to help small businesses grow.” Companies and entrepreneurs submit applications, along with a 500 word essay detailing why their business is unique, a plan for how they’ll utilize the grant to grow their business, and how the business is involved with its community.
In addition to receiving the grant, winners work with LivingSocial and its social media staff to design a LivingSocial promotion for their business. This opportunity allows recipients to expand and/or grow their small business by adding locations, equipment, products, or distribution.
The public votes for their favorite project via their Facebook, and winners must accrue at least 250 votes. Finalists in 2012’s inaugural competition were chosen by a distinguished panel of industry experts:
- Steve Case, Chairman/CEO of American Online (AOL)
- David Chavern, EVP & COO of U.S. Chamber of Commerce
- Jason Calacanis, Founder and CEO, Mahalo.com, a knowledge sharing web service
- Candace Nelson, Founder, Sprinkles Cupcakes (the first nationwide cupcake bakery)
- Tim O’Shaughnessy, CEO and Co-Founder, LivingSocial
- Richard Quigley, President, Business Card and Innovation, Chase
The winners of this funding competition were announced on August 21st, 2012. Among the 12 winners is EcoScraps, a Utah-based company that creates nutrient-enriched soil from recycled fruits and vegetables to grow healthy plants. Another green winner, PlanetReuse, is a consulting and brokering company that matches materials with designers, builders, and owners to serve LEED projects while cutting costs.
“What led us to participate in the Chase-Living Social competition,” said Nathan Benjamin, PlanetReuse’s Principal + Founder, “was the opportunity to make reused materials simple, top-of-mind, and easy to access.”
“If we could reuse 25 percent more construction and demolition materials that are currently headed for the landfill by the year 2020, and put those materials back to good use,” said Nathan, “it would be like salvaging sixty-eight Empire State Buildings each year!”
These exciting platforms provide opportunities for green entrepreneurs to not only source much needed funding, but to also gauge consumer interest, build a brand, and expand their reach to make a difference. Success or failure primarily rests on how resourceful and connected they are. It’s real twenty-first century American-style innovation, and we’re definitely going to see more of it.
For related article, see:
ECOnomics — Creating Environmental Capital
Sustainable Brands Save the Environment with Creativity
Environmentalism and Innovation at Sierra Nevada Competition
Eco-Entrepreneurs Inspire at Opportunity Green
© 2012 SCGH, LLC.