Has Crowdfunding Reached its Limit?

In May, the Inquirer published a commentary questioning if crowdfunding has reached an inevitable limit. It cited examples of blowback against a Kickstarter campaign to open a Philadelphia bar, as well as celebrities such as Spike Lee and Zach Braff, who were deemed by some as too wealthy to ask for money from the general public.

Although I’ve never owned a bar and am not a celebrity, I am a small business owner who knows how hard raising capital can be and how detrimental it is to be under-capitalized. My small business is a literary arts organization/publishing company. Every artist, whether it’s Spike Lee or a Head & The Hand Press author, is struggling to appeal to a public that is increasingly trained to not want to pay for content.

Just as the Inquirer article explained, one of the great benefits of crowdfunding is the opportunity to test a product with the general public to minimize risk for the producer while gauging how consumers will respond. I must admit that it is terrifying each time we run the numbers and settle on a quantity of books to print, hoping that people will want to buy that book and not leave us with a mound of debt and a pile of boxes in our stock room.

The article also brought up the point of crowdfunder fatigue, which we are painfully aware of at Head & Hand. Although we sell books as a for-profit, there is a certain level of making an appeal to readers to get them to buy our books that feels strangely reminiscent of life in the nonprofit sector. This realization led us to the conclusion that we needed to embrace crowdfunding if we were going to continue bankrolling the production of print books. This realization did nothing to alleviate the reality that asking people for money is often an uncomfortable task.

So it made us ask the question—What does crowdfunding mean to us? The answer we came up with was that rather than view it as charity, we view it as a marketplace where we should be able to present the concept of a novel or anthology to our audience in a controlled and efficient online platform to sell pre-orders of our books. This not only helps us raise the money needed for the initial production of our print run, but is also helps us spread the word about our books.

Thankfully, we work with the crowdfunding site Pubslush that is solely dedicated to crowdfunding for books and also shares our view of crowdfunding as a marketplace. People don’t go to the Pubslush site to give charity, they go there to discover and buy new books from independent publishers.

That’s not to say that organizations shouldn’t be able to use crowdfunding to raise money for causes. Those charitable ideals are what built the nonprofit sector and are ingrained into the moral fabric of our society. But what I’m advocating for is a shift in thinking where organizations that make and sell products feel comfortable utilizing the crowdfunding platform just as readily.

In keeping with books, I’ll end this essay with this real world example. This past week, Amazon made headlines when it removed from its book selling site many titles produced by the publishing conglomerate Hachette over an e-book pricing dispute.

By luring consumers with their one-stop shop of low prices, Amazon has gained enough power to be able to censor what makes it to the marketplace by picking and choosing what books they want to sell. Today it’s over money, but what if the dispute was ideological. When government censorship occurs, we can take to the streets. But when corporate censorship happens, what can we do other than shrug, and continue to buy books from a ubiquitous corporation that has destroyed its competition in the marketplace?

The only solution I see is to create other marketplaces that are efficient while at the same time decentralized — and that’s what I feel crowdfunding allows. Although I’m not naïve to discount the possibilities of sites like Kickstarter, Indiegogo, or even Pubslush gaining an unhealthy majority of the market share like Amazon has done, I do find hope in a system where consumers are being retrained to buy directly from the producer.

These sites just provide the platform, but it’s the organization that makes the appeal and converts that consumer into a supporter. Before starting The Head & The Hand, while I was predominantly working in urban agriculture, I was certain that sustainable systems were dependent on democracy. But as I continue in the world of small business, I now realize that democratizing the marketplace is just as important to spurring investment in sustainable innovations.

Crowdfunding is a mechanism for accomplishing this goal that is only beginning to realize its potential.

More on Crowdfunding

What Happened to Philly4Philly?: A Q&A with Founder Dan Morrison

The Changing Face of Crowd Investment: Fundrise and Manayunk’s First Coworking Space

New Federal Regulations Allow Social Enterprises to Crowdfund Investment

Photo credit: LendingMemo.com