Sprint Phones: Making Easy Money

Affordability: Resources, Not Money

Probably the biggest thing that trips people up when thinking about countercyclical public policy is a misleading over-emphasis on accounting ledger books as the right measure of what can and can’t be afforded. Making sums add up is important, of course, but it’s more helpful to start by thinking about real resources. People’s time, capital goods, raw materials, etc.

Think about the mayor of a mid-sized city presiding over good economic times. Tax revenues are going up, and demands on social services are relatively low. Suddenly the budgetary picture looks very bright and it seems easy to “afford” longer library hours, more frequent bus service, and tax cuts. This, however, is close to backwards. You can’t manufacture librarians or bus drivers. It’s when times are good that it’s most costly to pull human beings out of whatever else they’re doing and have them drive buses. Similarly, it’s when people are flush that extra money in their pockets is going to go to enterprises with low marginal utility.

Then along comes the crash and suddenly the budget looks bleak. Now we “can’t afford” those extra social services and we need higher taxes. But with household budgets tight, the taxes are much more burdensome than they would have been in good times. And the real social cost of having someone work in a library rather than sit at home unemployed is probably below zero.

What you actually ought to be doing is setting the quantity of social services at some level that makes sense across the business cycle. Then during periods of economic growth, taxes should raise more money than you spend. That way thanks to your stockpile you never need to cut services in the face of a recession and in fact can shower your city with tax cuts during a downturn to families can get by. But of course almost no jurisdiction in America actually does engage in this sort of responsible budgeting, and the Reagan and W Bush administrations took the federal government on a wildly different course. This has bad economic consequences on its own terms, and I also think tends to distort the political dialogue. Since budget deficits are “bad,” it’s unintuitive to say that bigger deficits will help in a recession. By contrast I think it’d be easy for people to see why a surplus-accumulating government shouldn’t try to horde even more money at a time when people are struggling. The reality is that nothing magical happens at zero, and what we “can afford” is ultimately determined by how many resources are available not by accountants.

Thanks to the success of projects like Diaspora, Designing Obama and The Glif, more and more creatives are looking toward Kickstarter as a way to fund their projects.

The site makes it possible for individuals or groups to fund an album, finance a documentary film or publish a quarterly magazine by soliciting backers online. The brilliance of Kickstarter is in its all-or-nothing approach. This creates a huge incentive for project creators to really put a lot of thought into their project and to offer appropriate rewards for pledges.

We wanted to find out why so many entrepreneurs are turning to Kickstarter to fund their projects. Kickstarter projects come in all sizes and we spoke with three project creators about the how’s and why’s of crowdfunding.

The Still Funding

Christopher Salmon fell in love with Neil Gaiman’s short story, The Price. As a filmmaker, Salmon immediately saw the potential of bringing the story to life, using computer animation. He contacted Gaiman — and thanks to an incredibly detailed animatic — received permission to create the film. Gaiman even agreed to provide the voice narration for the project.

Things were starting to come together, until Salmon ran into a familiar problem for indie filmmakers: Money.

Getting funding for a short film — even for something like The Price that has a built-in fan base — isn’t easy. For Salmon, it was important to not only find a way to raise money, but to do so in a way that would let him retain control of his project. That’s when he turned to Kickstarter.

Salmon decided to use the service to raise the $150,000 he needs to turn his animatic into a full-fledged 3D animated short. As of publishing, the filmmaker is less than 32 hours away from his deadline and he needs roughly $20,000 to meet his goal.

When we spoke to Salmon last week and asked him about the project, he told us that it was the all-or-nothing approach of Kickstarter that really interested him. Ambition and belief in the story is what led Salmon to create the intricate animatic that won over Gaiman; that same ambition is what led him to trust that he will reach his goal.

Salmon spoke to us about the overwhelming feedback he has received from supporters. Interestingly, the film has generated a lot of support and interest from the overreaching film community since the funding push kicked off at the beginning of the month. Pledges have come from all parts of the world and that support — and trust — will guide him into making an even better film, according to Salmon. “I want to make it as good as it can be to show my thanks,” Salmon said.

The plan is for the film to hit the festival circuit as soon as it is complete.

Pledges of $25 or more will receive a digital download of the finished film. Those who choose to donate $50 or more will get a special edition DVD that includes an exclusive interview with Neil Gaiman. Additional pledge levels include other incentives like posters, a class='blippr-nobr'>Bluclass="blippr-nobr">Blu-ray edition and signed copies of the film.

The Just Funded

Tom Durham is another filmmaker who saw Kickstarter as a way to fund his project. Less than two weeks ago, Durham successfully reached the funding goal for his project, 95ers: ECHOES. Durham’s goal was to raise $12,000; he ended up raising just more than $17,000 for his project.

Kickstarter turned out to be a crucial part of making 95ers: ECHOES a reality. An ultra-indie sci-fi film about an FBI agent with the power to rewind time, Durham describes the project as “The Time Machine meets X-Files meets Heroes meets… A Christmas Carol.”

Durham has literally put his life into the film. The project has taken more than four years — though the idea goes back more than a decade — and most of the funding came from mortgaging his house. He does not recommend that approach.

After almost reaching the finish line, Durham hit a wall. Completely out of money, he was faced with having to wait another year to save up the funds to finish the project properly. Fortunately, a relative told Durham about Kickstarter and he decided to give it a shot.

Durham tells us, “Kickstarter understands the artist and understands today’s patron, and connects them.” After the initial round of backers trickled to a stop, the 95ers was featured on the Kickstarter home page. At this point, the project really started to take off. “Something about our own story, and something about the movie’s story, was connecting with people,” says Durham.

With his funding goal complete, the next step is to finish the film. The plan is to have it completed by the end of January so that it can go off to festivals and then TV and DVD. Durham hopes to have the film on SyFy in 2011.

Incidentally, this is only the first of five planned 95ers films. We imagine that Durham will skip the mortgage next time and go straight to Kickstarter.

The Big Success Story

About a week and a half ago, we covered a Kickstarter project called the TikTok+LunaTik. TikTok and LunaTik are high quality kits for turning the iPad nano into a multitouch wrist watch. When we first wrote about the project, it had raised nearly $200,000 — far more than its initial funding goal of $15,000.

Since then, the project has gone on to raise more than $450,000, making it the most successful project in Kickstarter’s history. Oh, and there are still more than two weeks to go before the project ends.

For Scott Wilson, the founder of MINIMAL, the Chicago-based design studio where TikTok and LunaTik were engineered, the success has been pretty overwhelming.

Wilson came into Kickstarter with more experience under his belt than the average project creator: his past client list includes a stint at Nike and he has an extensive client list.

So why choose Kickstarter? Well, as we mentioned in our earlier piece, Kickstarter is one of the more pure ways that an entrepreneur can fund his or her idea. Wilson didn’t want to deal with VCs. He didn’t want to compromise his design. He wanted to make his project on his own terms. That echoes what Salmon told us about his project.

Scott Thomas, who used Kickstarter to fund the Designing Obama book last year, is a friend of Wilson’s and encouraged him to give the service a shot. The results, needless to say, have been pretty spectacular.

It wasn’t until about 6:00 p.m. on the first day that the project started to gain attention. After seeing little activity for most of the day, Wilson was shocked to look at his phone and see the funding notices fly in. When we spoke to Wilson last week, the project had just crossed the $300,000 mark.

Aside from the ability to control his own project, Wilson acknowledges that the potential publicity was also an attractive element. Wilson believes that the story behind the project could be as compelling as the product itself.

At this point, Wilson’s priority is to just make sure he can get his kits manufactured. Within the first week, he already contacted his manufacturer and doubled-down on his tooling so that the process can get started as soon as possible. Kickstarter backers will be the first priority — with orders for retailers and others coming after those are fulfilled.

Wilson, like other Kickstarter project creators, updates the project on a regular basis. He has been using his project’s exposure level to help educate other would-be creators and to even promote some other Kickstarter projects. In the waning hours of the funding push for The Price, profiled above, Wilson sent out a plea via Kickstarter’s messaging system to those who back or watch TikTok+LunaTik and recommended that they also pledge to Salmon’s project.

The Future of Funding

Kickstarter is impressive because it can work on multiple scales. From smaller projects like 95ers: ECHOES to mid-sized projects like The Price to half-million-dollar juggernauts like TikTok+LunaTik, the model for creator-centric funding has tons of potential.

Of course, not every idea will meet its funding goals. As with anything else, luck — as well as effort and overall idea quality — will ultimately play a part in what makes it big and what doesn’t. Still, we think Kickstarter represents a new era for funding.

What do you think of Kickstarter? Would you consider using it or a similar service to fund your next endeavor? Let us know!

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Wednesday, December 1, 2010

Making Easy Money