Crowdfunding: A New Opportunity for Science and Innovation

BY JOHN R. PLATT

A secure mobile payment device. A gesture-based mouse that connects your television with your computer. A mobile telemedicine app for screening skin cancer. A satellite-linked webcam to monitor penguins in the Antarctic. These are just a few of the recent science and technology projects seeking financial support through the new technique known as crowdfunding.

Crowdfunding, as embodied by industry leader Kickstarter, allows anyone to contribute a few dollars toward the budget of a project that lacks other funding. Although crowdfunding has only been around a few years, it is becoming increasingly popular and entrenched in today’s world. According to a just-released report from the industry website crowdsourcing.org, there were at least 450 crowdfunding platforms online at the end of 2011 which raised a combined $1.47 billion last year. That amount is projected to increase to $2.8 billion in 2012.

Most projects on Kickstarter are arts-related: music, film, comic books and so on. There’s not much room on that particular platform for science and technology projects, which is why other crowdfunding platforms such as FundaGeekTechMoola,RocketHub and the #SciFund Challenge have sprung up to help scientists and inventors take advantage of this new financing opportunity.

How Crowdfunding Works

All crowdfunding sites operate on a similar model. People seeking funding submit their projects to a crowdfunding platform, which usually has a screening process to weed out inappropriate requests. Once approved, the individual or team behind the project creates a webpage on the platform about what they are doing and why they need funding. Each crowdfunding project has a financial goal — typically a few thousand dollars — and a deadline — usually around 30 days. They then hit the social media and try to generate interest in their projects.

Supporters who decide they like the project can then make a contribution, anywhere from $1 on up. These supporters earn incentives based on the dollar value of their pledges, similar to the way PBS offers tote bags and other goodies as rewards for donating. The average supporter pledge is under $25 but can be as high as several thousand dollars.

With all crowdfunding platforms, the pledged funds are only collected from supporters if the initial fundraising goal is met by the set deadline. At that point, the crowdfunding platform takes a small percentage and the project gets the money to move forward. (If the goal is not met, the supporters are not charged and the project owners are often welcome to try again.)

The Need for Crowdfunding in Science & Technology

Crowdfunding for science and technology is currently a very small percentage of the total number of crowdfunded projects, but the need for finding alternative methods of funding is growing as R&D budgets tighten.

Like many of the other players in the science and technology crowdfunding scene, Daniel Gutierrez, co-founder and CEO of FundaGeek, says his site is a reaction to the lack of available money for research projects. “Almost every issue of Science and Naturetalks about the funding situation in terms of doom and gloom.”

Jai Ranganathan, a biologist and co-founder of the #SciFund Challenge, agrees. “I’ve been seeing the funding situation getting worse for people around me,” he says. “If you look at funding rates, they’re not great and they’re getting worse every year.” The #SciFund Challenge, unlike other platforms, runs its fundraising requests all at once in batches with a common deadline. It ran its second batch, with 75 new projects, in May.

Solomon Nabatiyan, co-founder and COO of TechMoola, says crowdfunding is a better option than the traditional venture capital (VC) route, which has become riskier for inventors. “Investors are increasingly burdensome and short-term oriented,” he says. He blames the American business culture which says “if you don’t make your money fast, you’re not going to make it at all.” Nabatiyan feels that crowdfunding offers a way to enable long-term innovation outside of that quick-buck, venture capital mentality. “This will put us back on the cutting edge of the global innovation curve,” he says.

Not Just Funding: Communicating

Ranganathan says that teaching scientists to communicate with the public is actually the main goal of the #SciFund Challenge. “We live in a world that’s dominated by science and engineering,” he says. “Our lives are transformed in ways unimaginable, and yet we live in a time when the society is functionally science and engineering illiterate. The consequences are enormous.”

Instead of scientists just talking to the heads of their departments and policy makers, Ranganathan says they should also learn how to take their messages to the public. “There are scientists who do a great job reaching out,” he says, “but they are the exception.”

With that in mind, Ranganathan says creating the #SciFund Challenge was less about raising cash and more about “trying to change the incentives to create social connections between science and engineering and society.” He says academia especially opposes people reaching out directly to the public. He encourages turning that around by rewarding people for how often and how well they connect with the general populace. He describes the #SciFund Challenge as “a crash course in modern communication methods packaged as a money-raising system.”

“A lot of times a technologist isn’t necessarily the best marketing person,” Gutierrez says. To help them compensate, FundaGeek walks its participants through the process of learning to communicate with their audiences and helps them to make sure that they have a project that is presented in a compelling manner. “We give them all sorts of tips and suggestions about how to make their projects more compelling to the crowd.” The company also provides a series of emails covering how to create a Twitter feed and how to use it, when to create a Facebook page, and related topics.

Since the #SciFund Challenge takes place all at once, their participants get a lot of similar information as a group rather than one at a time. “We spend a month with the SciFunders training them on the things they need to know about their science message,” Ranganathan says. “How do you actually translate your science message into a way that’s both understandable and appealing to a general audience? How do you find a general audience? How do you get your message out there? How do you put out a press pitch? How do you do a short video about your project?”

Learning how to do this — and pulling all of the pieces together — can take time. Nabatiyan says TechMoola has only made about 8 projects public so far and has another 15 in the pipeline while the project owners prepare. “A lot of these guys are bootstrapping,” he says. “They have day jobs. It takes some time to put it all together.”

The effort can pay off. “We thought at first that this would be like a field of dreams: if you build it they will come,” says Ranganathan. “That is not the case. The people who made any effort to get the word out, they got traction, even if their projects didn’t get fully funded. Those who just put up a project and forgot about it went nowhere.”

Moving Forward

So far the amount of money crowdfunding can generate for science and technology is relatively small — what Ranganathan calls “graduate student money” —  but that is in part because most scientists don’t have the same number of fans as rock stars like Amanda Palmer, who recently raised more than $1 million to fund her new album, book and tour. Twenty thousand fans contributed to her project. “Today, most scientists have very small audiences, so the amount of money they raise is small,” Ranganathan says. He encourages scientists to turn this around by blogging about their work, creating online videos, attending conferences, and giving public talks in their communities. “By reaching out with your science message in a regular and consistent way, you build that audience over time, so raising more and more money becomes possible.”

Meanwhile, another new opportunity waits around the corner. President Obama recently signed the Jumpstart Our Business Startups (JOBS) Act, which could make it easier for technologists to raise $1 million instead of $1,000. The Securities and Exchange Commission is still writing the rules related to how the Act will be implemented, but after they are in place early next year projects will be able to offer equity in their companies during crowdfunding projects instead of just incentives like tote bags. “That’s huge,” says Gutierrez. “It’s going to revolutionize our industry.”

No matter which way the economy goes in the next few years, Nabatiyan predicts that crowdfunding is going to be “a disruptive tool to traditional funding mechanisms. It will create tremendous opportunities,” he says.

Crowdfunding: A New Opportunity for Science and Innovation.

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About CoffeeWithKath

Passionate about Technology in Education and how it can make a difference in the lives of students with Dyslexia. Founder of @ForDyslexia. Mom of twins. Juggling entrepreneurship and kids.

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