After just one day of fundraising, eCozy, a Ukrainian energy-saving hardware producer, raised almost half of its $30,000 goal on Indiegogo, a popular global crowdfunding platform.
The news spread fast through the Ukrainian tech community.
In 2013, another crowdfunding platform, Kickstarter, helped Ukraine’s hardware product iblazr, a flash that works with a smartphone, raise over $150,000. Petcube, a solution to keep an eye on one’s dog while at work, got $250,000 in funding.
In August, LaMetric, producer of a metrics device that tracks any of your data – whether this is day schedule or your Facebook likes, received $370,000. Next month, Looksery, a mobile app designed by Odesa natives that does real-time facial tracking, followed suit raising more than $46,000 on Kickstarter.
Indiegogo and Kickstarter help the startups to raise money that doesn’t have to be paid back, which makes them different from venture funds, which expect monetary return for a long-term investment. Anybody who feels a special concern over tech sector development may donate money to a startup he or she likes.
Kickstarter
Kickstarter is based on an “all-or-nothing” concept. Failure to raise the projected amount of money means whatever was pledged is lost. It is free to register and run the campaign. Whenever the project raises the goal, Kickstarter takes five percent commission on it. No fee is applied if the goal has not been raised and the pledged money goes back to the donors.
The platform has seven million donors worldwide and has already helped 74,000 projects around the globe, with many tech startups among them, raise as much as $1 billion. However, only citizens or companies registered in the U.S., Canada, Australia, New Zealand and some Western European countries qualify.
Registration also requires a bank account in an American bank, company’s registration documents if you register as a legal entity, the national ID if you register as an individual, and an account on Amazon Payments.
Having legally registered in the U.S., Ukraine’s Petcube and Looksery had no difficulties. The iblazr team did not have foreign registration, so they found another way around.
Iblazr signed a risky deal with an American lawyer who helps foreign startups to register on Kickstarter using his documents. “At the end of the campaign he transferred the raised money to us, while we paid him for coordinating registration and fundraising,” Oleh Malenkov, chief operating officer at iblazr, explains.
Kickstarter is also known for being stricter on product requirements. Precise description, lots of graphics and videos have to be included on a product page to be approved by Kickstarter. “Our campaign was approved in one day, which is surprising, as it usually takes up to two weeks,” says Julia Krasnienko, director of business development at Looksery.
Petcube’s experience shows that it’s also a good move to go through Kickstarter fundraising with a massive public relations campaign. “A well-planned product launch means you get in contact with media a month before you register on Kickstarter,” Yaroslav Azhnyuk, chief executive officer at Petcube, says. Petcube went even further. Successful communication with the media led to articles published about the startup in Wired, Mashable, CNet, websites popular among the global readership.
People from Looksery were featured on CNN, CNN Spain and local American television channels. “We chose Kickstarter as it was more popular at that time and seemed to promise bigger money raise,” Looksery’s Krasnienko explains.
Indiegogo
Indiegogo sets much looser requirements and offers flexible funding to the campaigners. The team can keep whatever is raised, even if the goal isn’t reached. Five percent commission is applied to successful campaigns and nine percent are charged for unsuccessful ones.
There is also no tie to the specific range of countries, banks or payment systems. The team of hardware product eCozy was considering Kickstarter, but chose Indiegogo in the end. Now they have $22,937 pledged out of a $30,000 goal with about two weeks left before the deadline.
“Investors are there for sure but act as regular people also as there is no equity to be shared,” Konrad Lauten, Indiegogo marketing and community manager in Europe, says.
eCozy was placed on Indiegogo due to the team’s interest in the promise of German-speaking areas of the European Union. According to Kyrylo Zlobenko, chief operating officer at eCozy, the product has a bigger target audience there rather than in the U.S., where Kickstarter is more popular.
Another barrier was opening a bank account in the U.S., UK or any other Kickstarter country. “That would postpone the campaign launch for the time we couldn’t waste,” Zlobenko says.
While startups use crowdfunding to get money for further development, the platforms can also attract real investors. According to Lauten of Indiegogo, after noticing startups on the crowdfunding platforms, investors usually contact them directly.
Kyiv Post staff writer Bozhena Sheremeta can be reached at [email protected]. The Kyiv Post’s IT coverage is sponsored by AVenturesCapital, Ciklum, FISON and SoftServe.
Editor’s Note: The story has been updated on Dec. 6 to state the accurate figure on amount of funding raised by various creative projects through the Kickstarter.
