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Crowdfunding a creative form of fundraising for San Diego startups

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Perhaps only in the world of crowdfunding would a $1,000 pledge to the makings of a Point Loma brewery result in a black-velvet painting of your likeness.

Yet that was just one of the incentives offered by startup Modern Times Beer as part of its uniquely successful Kickstarter campaign.

Founder Jacob McKean raised $65,471 with 645 backers, eight of whom pledged at least a grand to be “league founding members” commemorated with a black-velvet portrait to be hung in the brewery’s tasting room. Modern Times’ campaign, which ran March 28th through May 1st, made it the most funded brewery on Kickstarter, ever.

“I was shocked by how many orange beanies people donated for, not to mention the higher-end rewards,” McKean said. You can offer these extremely random rewards, that wouldn’t make sense in any other setting, allowing for a certain kind of creativity.”

Crowdfunding is a relatively new concept made possible by donation websites like Kickstarter, DonorsChoose and Fundable that encourage people to pool their money to fund projects they find worthwhile. Among the perks of this kind of fundraising: Donors become emotionally invested in the projects and so become priceless advocates.

By giving $15 to Modern Times' Kickstarter campaign, donors could be among the first to own a custom knit koozie from Freaker USA. Photo courtesy of Modern Times Beer

McKean spent 16 months planning and kindling attention for his Kickstarter campaign before it launched, as just one of many means of raising funds for the brewery’s equipment, barrels and tasting room. He also sought private investors and bank loans.

“For me, it wasn’t an either/or deal. Kickstarter was another component of this,” McKean said of his traditional and non-traditional fundraising. “Building a brewery is very capital intensive. You can’t have too much cash. We’re a medium-sized brewery hashing together funds, so we’re not excluding any viable options.”

McKean was encouraged by the success of the San Diego Public Market’s Kickstarter campaign, which in August of last year raised $146,121 from 1,379 backers to build an expansive public market in Barrio Logan. McKean even kicked in $10.

San Diego Public Market cofounder Catt White said she and partner Dale Steele likewise pursued a number of funding options to get the 92,000-square-foot property up and running, but found their Kickstarter campaign to be a great opportunity to galvanize the community.

“You’re not just collecting money, but hearts and minds,” White said. “Even if they just donated a dollar, they still feel attached to the project.”

Still, the $146,121 raised was a “drop in the bucket” compared to the several million dollars the San Diego Public Market project will require to become what White and Steele have envisioned, according to White.

Equity investments are still being sought, she said, and a number of fundraising events have been held to support the effort.

If she were to use crowdfunding again, White said she would make the rewards offered to backers less complicated.

“Some of the rewards included events at the market, and we’ve hosted a few weddings now. Which is great, it’s just that we’ve become victims of our own success. We’re planning events to fulfill our rewards instead of concentrating on building the market.”

They considered other crowdfunding websites, but settled on Kickstarter because it seemed to have the greatest reach, she said. Kickstarter doesn’t allow fundraising by nonprofits, though, so if the market someday fundraises for a nonprofit component White said she might use a platform like Indiegogo.

San Diego-based LED lightbulb designer NanoLeaf set a relatively modest Kickstarter goal of $20,000, a three-month campaign intended to give the startup enough capital to reach its manufacturer’s minimum order requirements. The concept of a super energy-efficient lightbulb appealed to the online community: 5,746 backers pledged $273,278.

“Before we launched our Kickstarter campaign, nobody had heard of us,” said Gimmy Chu, one of three company founders who is working as NanoLeaf’s product development manager. Chu and cofounders Tom Rodinger and Christian Yan met at the University of Toronto.

“Kickstarter has been an amazing platform to get our name out there.”

NanoLeaf -- which ran its crowdfunding campaign as “NanoLight” before discovering the name was already trademarked by a flashlight maker -- has since been contacted by hundreds of potential distributors and investors alike.

“There have been a lot of people interested in investing in our company, but right now, from the Kickstarter campaign, we’re pretty self-sustained,” said Chu, noting future expansion plans will likely require more capital.

The bulbs, fashioned from printed circuit board, range in wattage from 10W to 12W and in price from $30 to $100. They’re designed to use less electricity, and last at long as 30 years.

“I think we’re helping people transition into energy-efficient lighting. If people choose to stop using traditional bulbs, it’s something that will save money and conserve energy,” Chu said.

NanoLeaf is working to fulfill orders for LED lightbulbs made through the Kickstarter campaign, and taking preorders through its website for shipments later this year. NanoLeaf’s founders had hoped the Kickstarter campaign would help them build 1,000 lightbulbs; instead, their crowdfunding success has enabled them to order the mass-production of some 6,000 bulbs.

-McEntee is a San Diego-based freelance writer.

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