Why Crowdfunding sites won’t take off in Singapore
March 12, 2013 by Guest Contributor
When Melbourne-based crowdfunding site Pozible launched in 2010, they were already already chasing the tail of the largest crowdfunding site, Kickstarter, based in New York City, USA. Yet in Australia, founders Rick Chen and Alan Crabbe were the first to introduce the idea of having the masses pledge sums of money towards creative projects via their website.
Other than working around heavy regulations set by the Australian Securities and Investment (ASIC), Chen and Crabbe had to gain the trust of project creators and build confidence amongst the general public to increase pledge support.
Events like “Let’s Talk Crowdfunding”, hosted at HUB Melbourne, become one way of building trust. “Crowdfunding was still a very new concept back then to Australians. We felt it was necessary to fund these events in order to introduce the general public to projects that were successfully backed and allay any concerns by backers and project owners alike.”
As of February 2013, the platform has helped funnel a total of AUD$8 million (SGD$10.2 million) across 1,300 successful projects since it was established in May 2010. It’s widely considered one of Australia’s most popular crowdfunding platforms working in partnership with prominent festivals within the Australian arts industry such as the Melbourne and Sydney Fringe Festivals.
Kickstarter’s tipping point
“The internet loves to save things,” said Yancey Strickler, co-founder of Kickstarter, in a talk he gave at CreativeMornings / New York on a film project, Blue Like Jazz, who nearly didn’t make it to theatres when Hollywood producers pulled out on funding the film. But the project raised close to USD 346k (SGDD 431k) from nearly 4500 backers, almost three times the goal amount set by its creator Steve Taylor.
Crowdfunding itself has never been a lucrative business model by nature. Crowdfunding sites like Pozible and Kickstarter, take a 5 percent fee to the funds collected on top of the 3-5 percent charges from payment processors like PayPal and Amazon Payments.
In short, in order for a crowdfunding site to be sustainable, it requires projects to be funded collectively at USD 100k upwards on a monthly basis. Even then, a SGD 5k monthly revenue is hardly enough to support a team with employees. Not unless they can hit a million dollar worth of pledges consistently.
Author Malcolm Gladwell defines the tipping point as that “magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire.”
On 11 February 2011, Strickler wrote in their company’s blog, “After not having a single million dollar project in Kickstarter’s first two-plus years, there are suddenly two within four hours of each other.”
Elevation Dock, a fuss-free vertical charging dock for the iPhone, became the first project in crowdfunding history to see USD1 milion (~SGD 1.25M) in pledges. Shortly after, Double Fine Adventure, a video game project, passed the USD 1million mark. Both projects then went on to collectively raised more than SGD 5.8M.
Crossing that million dollar threshold was when project creators realized that crowdfunding has become a viable option of garnering pre-orders and funding ideas that were capital intensive in nature. That was when Kickstarter reached its tipping point. And it attracted serious project creators with strong track records to turn their ideas into reality. Projects like Project Eternity by Obsidian Entertainment, of Baldur’s Gate fame (an award-winning PC game), who raised close to USD 4M (SGD 5M).
From then on, Kickstarter was getting more than USD100M (SGD 125M) in project pledges each year and averaging more than USD 2M (~SGD 2.5M) in pledges each week. In a move to expand its reach, Kickstarter has recently open up its website to project creators in London.
A case for Singapore
For Singapore at least, the crowdfunding scene seems to still be in its very early stage of development.
Despite notable media reports about crowdfunding through The Straits Times, crowdfunding sites like Togather.asia and Crowdonomic has yet to gain critical mass adoption with project creators and backers.
Renyung Ho, co-organiser of CreativeMornings / Singapore and co-founder of Kennel, a co-working space, said, “There’s an increasing interest in the creative scene here seen from the growing number of attendees for our events. We’ve also recently started slotting in one 5 minutes project pitch for each of our CreativeMornings event for project owners who are making an impact in the creative industries but are just starting-up.”
Ho, who did her undergraduate studies in London, notes that the number of people who start creative projects are still relatively small as compared to design capitals like London or New York City.
Earlier this year, she made use of Pozible to raise funds for her Rickshaw Run across India. The campaign would benefit 4 charities based in the country. Ho ran a successful campaign raising more than SGD 20k in total, with support from friends.
But she lamented: “One problem we faced as project creators was that some of our pledge supporters were not comfortable with providing credit card details to an unknown site. Many were also not familiar with using PayPal. Instead, we got more supporters pledging money through bank transfers and cheque deposits.”
Running a successful crowdfunding website clearly requires a huge market with a sizable number of early adopters who are comfortable with supporting such campaigns through online transactions.
Take initiative and wait, or move elsewhere
Early movers like Togather.asia and Crowdonomic share the responsibility of educating the general public about the risk and rewards of crowdfunding. Until these companies can build trust and allay fears, there will not be a strong community of core project creators and pledge supporters to grow the crowdfunding scene here.
However, with the Singapore government determined to train a new breed of risk-takers in its Singapore University of Technology and Design (SUTD) undergraduate program, the future offers a glimmer of hope. The program teaches students to embrace failure and aims to eventually boost the number of patents currently awarded mostly to the nation’s premier research institution, Agency for Science, Technology and Research (A*STAR).
Perhaps it is not just creative projects that local crowdfunding websites should be looking. They might want to help capitalize existing intellectual property in general, especially those pertaining to the field of technology and engineering.
Here’s the problem though: project creators who are innovating in hardware and manufactured products have persistently encounter a bottleneck when getting their ideas out in the market since there are limited manufacturing facilities in Singapore willing to deal with orders in small quantities.
Crowdfunding sites may eventually realize the importance of serving project creators by connecting them to reliable manufacturers situated within the South-East Asian region.
With broadband internet penetration growing and venture capital easing in within the region, all eyes are on the first crowdfunding website which will be able to gain critical mass by overcoming regional restrictions (e.g. laws and language), building a viable supply chain and gaining trust amongst the savvy Millennials: people like Ho are believed to be more entrepreneurial and more likely to pledge for projects they believe in than previous generations.
As Malcom Gladwell writes in The Tipping Point, “There are exceptional people out there who are capable of starting epidemics. All you have to do is find them.”
Find out more about SGE’s research arm: SGE Insights, providing customized in-depth research reports to help you navigate the business of technology in Asia.
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