How to fund your project with online tools in 2011

It's a new year, and you've decided to throw yourself headlong into a fresh project. Perhaps there's a little cottage-industry venture you want to start up. Maybe it's time to put some money into releasing your musical masterwork, or launching that artsy-craftsy endeavor you've been scheming. Then again, maybe you're feeling magnanimous, and would like to help raise money for your favorite charity.

Charities, struggling artists, and nascent businesses have always relied on the kindness of donors or investors. Unfortunately, our moribund economy has hit those well-deserving of seed money as much as anybody. These days, banks aren't eager to make risky loans, venture capital has dried up, and grant providers in all sectors have had to tighten their purse strings. Simultaneously, the Internet is opening up new avenues for borrowers and lenders alike. So if you're serious about starting something new this year, online is where you might want to go to get it underwritten.

For individuals and charities looking to hit the jackpot, there's the Pepsi Refresh Project. Hopeful funding recipients post their proposals online in four amount categories ranging from $5,000 to $250,000. Website viewers vote for their favorite propositions, and at the end of the month, the top 10 vote-getters are endowed with cash courtesy of Pepsi (only two quarter-million grants go out). Most of the winning recipients seem to involve children in need or animal rescue programs, underscoring the eternal popularity of critters and kids.

Occasionally, there's a more whimsical proposal: One local resident proposed using $250,000 to provide San Francisco with a citywide Free Pizza Party. Unfortunately for the rest of us, his pitch came in 159th. That illustrates the crapshoot aspect of the Pepsi Refresh Project — no matter how worthwhile your idea is, if you're lucky enough to get your submission through, you're still up against thousands of others, so your odds of landing the cash are slim to none.

Case in point: B.O.K. Ranch in Woodside provides therapeutic horseback riding to adults and children with special needs, and it's asking for $5,000 to build a feed shed. With the double whammy of kids in need and animals, you'd think this would be a surefire winner with the Refresh crowd. But sadly, no: With just days left in the December round, its proposal was ranked No. 88 out of 149.

Paying the piper
For a much better likelihood of successful fundraising, consider a site like Kickstarter. There, hopeful beneficiaries post descriptions of their endeavors for potential subsidizers. As additional incentive, money-seekers usually post bonus rewards for donors at various levels. A minimum cumulative donation level is set, and pledges aren't collected unless that minimum is met by a deadline date.

A quick search of Kickstarter for “San Francisco” reveals a bevy of Bay Area subsidy seekers. There are theater groups, arts festivals and technology conferences, a comic book artist, an intriguing food gathering called BaconCamp, and scads more, all vying for money. And there is never a shortage of musicians looking to bankroll upcoming albums and tours.

One of those is Potrero Hill resident Jim Fairchild, longtime member of Modesto band Grandaddy and current touring guitarist for indie stalwarts Modest Mouse. He decided to try using Kickstarter to raise $3,000 to help pay for the mixing and mastering of the new album by his band All Smiles. With friends and supporters pitching in, he surpassed his total with 13 days of fundraising still to go.

Spurred to Kickstarter in part because he didn't want to go into debt like he did making the last All Smiles record, Fairchild is, well, all smiles. “The record would have been made either way,” he says. “It just would have taken a hell of a lot longer.”

He adds, “The fan-funded model is a really cool way to do it. People are voting with their dollars, and it feels more collaborative. I like the notion of cultivating a sense of community, a cooperative nature. It makes me extra ambitious about making a good record: These people are paying for it.”

Another local musician who decided to go the Kickstarter route is composer and clarinetist Beth Custer. Her group, the Beth Custer Ensemble, had been invited to December's Tbilisi International Film Festival in the Republic of Georgia to perform its soundtrack for the 1929 Georgian silent film, My Grandmother. The surreal antibureaucratic slapstick comedy had been banned by the Soviets upon its initial release. Custer asked for — and received — $3,500 to pay her musicians.

Why Kickstarter? “I had exhausted all my grant possibilities,” she says. “So I started poking around, and noticed other people having successes with Kickstarter, so I just tried it.” While she did manage to raise the necessary funds, she explains that success came in part because everyone in the band persistently asked relatives, fans, and friends for donations. “It was probably getting kind of annoying at the end,” she adds with a chuckle.

Entrepreneurs and do-gooders wanted
Another possible online source of financial assistance is Kiva, a microlending site akin to peer-to-peer loan conduits like Lending Club and Prosper, albeit more charitable and less profit-oriented. Kiva tends to focus on do-gooder loans to those in need around the globe, but opened up to domestic entrepreneurs last year.

Specializing in assistance for struggling startups is the San Jose–based Opportunity Fund, which also has a part-time office in San Francisco. The nonprofit has facilitated loans of more than $12 million to small businesses throughout the Bay Area, reportedly helping to create or save more than 1,200 jobs. It provides small loans from $1,000 to $100,000 to promising applicants, at a fixed interest rate of 8 percent.

Finally, journalists working in any media looking to fund socially beneficial projects should try Spot.Us. Through this site, you can make tax-deductible donations to fund “community powered reporting.” It's a great way to finance that in-depth research piece you've been meaning to unleash upon the world. Recently funded articles include one about how San Francisco small businesses have benefited from microlending sites like Opportunity Fund, and a series titled “San Francisco's Muni: Why can't it run on time?”

Now there's some investigative journalism we can support.

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