Despite what the advertising campaigns may tell you, banks have gotten very good at saying no in the last few years. Innovative projects, read risky and untested, are given particularly short shrift as an unknown quantity to financiers.
Entrepreneurs, innovators and inventors have been pushed into finding other sources of funding to get their ideas off the ground and in 2009 Brooklyn-based crowdfunding website, Kickstarter, stepped in to fill the void left by traditional lending platforms. The idea was simple. Advertise your project or idea and ask people to contribute towards the start-up costs in return for a product, discount, credit or exclusive opportunity but not financial return or equity.
On the day of its launch 40 individuals contributed £648 to seven projects. Things have grown since then, last month Kickstarter celebrated $1billion (£605million) of contributions towards projects.
While video game projects are the most popular at attracting funding on Kickstarter, the concept has funded an Oscar-winning film, works of art, albums and even projects that have launched objects into space.
However the most popular of all projects in the five year history of the Kickstarter, that attracted just shy of £6.2m in funding in 37 days, is the Pebble e-ink smartwatch.
Eric Migicovsky, CEO of Pebble Technology, had begun developing the first smartwatch in 2008 but exhausted traditional avenues of funding and had even been turned down by venture capitalists and private investors, who either didn’t like the hardware or didn’t believe a market existed for the product.
In March 2012 Migicovsky launched a Kickstarter project seeking $100,000 (£60,000) that would enable him to build 1,000 Pebble watches with backers who pledged $115 or more receiving one as a thank you. Within two hours Migicovsky had reached his financial goal and six days later the project became the most successful Kickstarter of all time.
In the end more than 85,000 people backed the product which itself went on to inspire the entirely new Smartwatch technology sector that shipped 900,000 units worldwide in 2013 and has spawned products from the likes of Samsung and Google.
Search for ‘watches’ on Kickstarter today and more than 670 individual projects, albeit of a more traditional variety than the Pebble, are seeking funding to turn their designs into a reality.
Despite the term only originating online in 2006, crowdfunding is not a new concept. One of the first true crowdfunding projects was launched by newspaper publisher Joseph Pulitzer in 1884 when the American Committee of the Statue of Liberty ran out of funds to build the iconic statue’s pedestal on Liberty Island. Pulitzer published stories in the New York World asking for donations to complete the project and raised over $100,000 in six months from 125,000 contributors.
More recently, but before the advent of social media-led web platforms, music fans had driven crowdfunding initiatives to back albums and, in the case of British rockers Marillion, an entire US tour in 1997.
But the business model that kick-started the Kickstarters was established much earlier, in 18th Century Germany, and is still going strong today. Praenumeration involves asking for part of the sale price upfront in order to fund production costs and was popularised by early publishers who offered books and magazines for sale at a discount before they had been printed.
Today that’s being viewed, particularly in Europe, as a method to launch new watch brands under the Pre-Registration banner.
Swiss complication module constructor Vincent Plomb was one of the watch-making pioneers of the model when, in 2010, he launched Pre-Registration for his VicenTerra GMT-3 haute horology design. The mechanical watch featured a GMT hand, day and night indicator, date and a globe rotating around its axis.
Computer renders of the design were unveiled with the understanding that production would only begin once 100 customers had agreed to pay 5,000CHF (£3,432) upfront for the watch, a massive discount considering the eventual retail price would be 15,000CHF (£10,296). More importantly the project offered these early adopters some share capital in building the new company.
All of the promised watches were delivered and Plomb, who exhibited in Basel this year, is now launching his second watch via Pre-Registration, the VicenTerra Luna. The new watch uses a Vaucher movement and features a rotating Lunar sphere alongside the spherical Earth. The stainless steel version is available as part of a limited edition run of 99 Pre-Registration examples for €13,500 (£11,297).
This year Plomb has been joined in his use of Pre-Registration by the French team behind Olivier Jonquet. The fledgling brand’s new vintage-inspired design, Elie, features a cushion-shaped case, white enamel dial, blued-steel Breguet-style hands, vintage ammo-case leather strap and an original 1950’s handwound France Ebauche movement. Unusually for a start-up brand, Olivier Jonquet has relegated its own name to an engraving on the caseback to preserve the clean look of the dial side. Only 50 pieces will be created for a Pre-Registration price of €1,890 (£1,582).
The most promising aspect of these new, or repurposed methods of financing, is that they are being used to fund creatively challenging, niche products that might not otherwise have seen the light of day. It’s extremely democratic and gives new meaning to giving the people what they want.