Entrepreneurs embarking on the crowdfunding route find going tough

The first round of companies hoping to raise funds from Trinity College’s new crowdfunding platform ended their campaigns last week without hitting their funding targets.

An "exhausted" Gail Condon, whose children's e-book company Writing for Tiny was one of three early-stage businesses from TCD's LaunchBox start-up hub to take part in the pilot project, raised a third of the hoped for €10,000 in donations.

“To be fair, it’s not to be sniffed at,” she says. “Often [companies] fail the first time and it works out the second time.”

Condon is indeed taking a second chance on crowdfunding, though next time it’s going to be with the US-based behemoth of the industry, Kickstarter.

The other two companies who took part in the pilot were digital art tool creators, Artomatix, and food waste platform, FoodCloud, whose co-founder Iseult Ward says it was "very difficult to dedicate the resources" needed to be successful with crowdfunding.

“Ideally, we would have had someone who was quite dedicated to it, who could give three hours a day,” says Ward, though with only two people involved in FoodCloud that wasn’t an option as “other opportunities arose” both before and during the process.

Without those resources, she says the company ended up “with a fraction of what our original goal was”.

Attracting pledges
Trinity's David S Byrne set up the crowdfunding platform as "an alternative means of finance for various university activities".

“I suppose one of the lessons learned was that you really need companies who are fully focused on crowdfunding, who are entirely dependent on the funding they’re receiving,” he says.

Andrew Hetherington, project director with probably the country's most recognised crowdfunding platform FundIt, says that in a "relatively small country" such as Ireland, creating "smaller, niche" crowdfunding sites will be difficult, adding that participating companies should see the process as a "full-time job".

Hetherington says though that FundIt, alongside other crowdfunding models in Ireland such as the equity-focused SeedUps and lending-based Linked Finance, also “have difficulties” in continually “attracting projects and pledges” to their sites.

Seeing the first round of Trinity’s crowdfunding contenders as a “test case” for what’s to come, Byrne says he received “excellent high-level support” from the university and there was the hope that the institution’s alumni would be able to contribute funding.

However, Condon confirms all of the fund she raised were “from my network” with “no one” from the university’s alumni pledging money. She puts this down to crowdfunding still being an “alien” concept to many Irish people.

Kickstarter’s prominence in the market also causes issues for small competitors, she says. “A lot of universities have mini-platforms on bigger platforms like Kickstarter. Trinity decided it wanted its own platform. I don’t know if that was the best idea in hindsight.”

“Kickstarter is a verb,” says Hetherington, one which people instantly associate with the sector. “But they have about a 40 per cent success rate, so lots of projects that go up on the site don’t get funded – that’s the reality of a publicly-funded campaign no matter who you are.”

Lumafit, a Dublin-based wearable technology company, is currently taking part in a Kickstarter campaign and at the time of writing, more than 500 backers have brought it to within a few thousand dollars of its $60,000 target with over two weeks left of its funding drive.

Government supports
The company's chief executive Darran Hughes says that Ireland perhaps has a different fundraising culture to that of the US and other nations where crowdfunding is an exceptionally popular way to raise much-needed cash.

When starting the company more than two years ago, he says "the enterprise boards here were fantastic, Enterprise Ireland were fantastic", and the company soon found itself part of the NDRC's LaunchPad programme.

“If you’re in Silicon Valley there isn’t those government supports,” he says. “Your first 20, 30 or 40 grand are through friends and family until you can build infrastructure around the idea.”

For Irish companies wishing to go down the crowdfunding route – no matter the programme they choose – Hughes advises them to “get your early funding from enterprise boards and Enterprise Ireland, then make prototype, be customer-led in what you’re building and then go to community when it’s the last stage”.

Byrne notes that the Trinity model is one of the first of its kind, with similar UK projects only beginning in recent months, while in Australia, Melbourne-based Deakin University has also gone down the path of providing a university umbrella for crowdfunding.

Back at Trinity, Byrne says a “review” of the pilot project is due to take place, though one possible avenue he may explore is the idea of running a competition to take part in the platform among budding entrepreneurs and innovators throughout the Trinity campus.

“I think it would be almost ideal to have it in almost as a competition within the university that teams would compete to be placed on the platform and that would prove they have the determination and resources in place to launch the campaign,” he says.