Innovators Learn the Benefits, Challenges of Crowdfunding

By Lisa Adkins, Director of the BioScienceCenter

By Lisa Adkins, Director of the BioScience Center

“Crowdfunding” is a way that startups can raise money to get a project or enterprise off the ground without company founders having to surrender ownership, secure a loan or approach foundations for elusive grants.

Earlier incarnations of the practice didn’t have the advantage of instant access to a global fan base that can grow exponentially through social media. The Internet created that access, and crowdfunding sites like Kickstarter.com and IndieGoGo.com created platforms where people could pitch their projects.

Aqua Research, a resident company in the BioScienceCenter incubator in Albuquerque, is using IndieGoGo to raise $50,000 by May 10 to finance production of its H2gO water purifier, which can turn up to five gallons of unsafe water at a time into potable water using a solar-powered rechargeable cell-phone battery.

QueLab, an Albuquerque nonprofit raised twice as much money as it needed on Kickstarter to secure the materials to build a three-dimensional printer for its “maker-space,” a creative workspace where people collaborate on innovations “at the intersections of science, culture, art and technology.”

Thirst for invention

The h2gO Purifier’s inventor, Rodney Herrington, also invented its predecessor, the MSR MIOX Purifier, used for years by the U.S. military. Private funding underwrote research and development of this next-generation device, but now the company wants to begin production, obtain certifications and conduct field-testing.

The purifier uses electrolytes to convert salt into a powerful disinfectant that’s added to impure water, making safe drinking water in about 30 minutes. The device is recharged via its integrated solar panel.

As of mid-March, 82 funders had contributed $9,942 toward Aqua Research’s goal. Unlike Kickstarter, IndieGoGo isn’t an all-or-nothing proposition. Project sponsors can keep whatever they raise, but the fee paid to the crowdfunding site is higher (9 percent verses 4 percent) when projects fall short of their target.

Those contribution at least $55 to Aqua Research will receive one of the purifiers when they’re produced. For details, see http://www.indiegogo.com/projects/h2go-quest-to-create-the-best-personal-water-purifier.

Power of abundance

QueLab raised $2,200 — twice its $900 goal — in 30 days earlier this year to buy a 3-D printer, a computer dedicated to the printer and printing filament. The nonprofit’s members and visitors can use the printer, once it’s built, to fabricate things for fun or profit.

Because the money raised from crowdfunding isn’t a loan, it doesn’t have to be repaid. But getting a project funded requires coordination, good financial planning and an appealing message, QueLab board member Ray Finch emphasized. It isn’t “free.”

“You have to set it up so people want to give you money,” he said. “And you have to be prepared — you have to have your perks [rewards to donors] ready, and your goal has to be reasonable and attainable.”

Finch said he was surprised how quickly the group raised — and exceeded — its goal. The extra money will finance a second, more experimental printer. The organization hopes to use the platform again for other projects — once it finds a larger space for its growing venture.

QueLab thanked its backers with T-shirts, public mentions and — best of all — access to the “maker-space” and all its creative tools. To view QueLab’s pitch, visit http://www.indiegogo.com/quelabprinter.

The BioScience Center, located in Uptown Albuquerque, is the only incubator/accelerator in New Mexico focused on nurturing bioscience and life-science startups. It has more than 40 offices and eight wet (chemistry and microbiology) laboratories totaling 2,500 square feet and shared facilities that include reception, IT infrastructure, group purchasing and conference space. Founded and managed by entrepreneurs who have considerable experience creating, nurturing and exiting successful businesses, The BioScience Center is the place for fledgling bio companies.

Download 288_Innovators Learn the Benefits Challenges of Crowdfunding PDF

This entry was posted in Uncategorized by HEakes. Bookmark the permalink.

One thought on “Innovators Learn the Benefits, Challenges of Crowdfunding

  1. Mary Schmidt

    Comment from Mary Schmidt: Crowdsourcing could be much preferable to the old-style VC and angel model for many. (A very small % of startups are actually funded by VCs and/or angels in any case. And, Google started with credit cards.) However, should note that the IRS considers this taxable income so start-ups should plan accordingly. n short, money raised from Kickstarter and other crowdfunding platforms is considered to be taxable income. “Amazon Payments, which handles the credit card transactions for Kickstarter, disburses the funds to the project creator and sends them a 1099-K, a tax form that reports “Merchant Card and Third Party Network Payments” to the IRS.” from http://www.salon.com/2013/04/10/kickstarter_just_might_get_you_audited_partner/