Minutes before it’s set to close, Joey Batts and Rudy’s Kickstarter campaign to scrape together the money to shoot a short documentary about Nova Scotia is sitting pretty.
The two teachers from Connecticut were hoping to raise U.S.$1,500 for their documentary, ROY G. BV II – The Mysterious Beauty of Nova Scotia.
They ended up getting $3,528.
“A big chunk of that will be spent on post-production for video and audio,” says Betts. “We’ll also be able to reimburse ourselves for the bed-and-breakfasts.”
In the world of fundraising for pet projects, including film production, book publishing, aid to victims of all kinds, environmental initiatives and, well, just about everything else, crowdfunding is increasingly being used as great tool.
Crowdfunding is the practice of raising money online for a project by getting a lot of people to chip in relatively small amounts. It is sometimes used to fund almost all of a project’s cost. Other times, though, organizers like to use crowdfunding to raise a relatively small amount of a project's costs and create a lot of buzz.
When Summerside 20-something Jordan Cameron set his heart on building an eco-friendly Earthship home on Prince Edward Island a few years ago, he launched a Kickstarter campaign with a goal of raising $5,000 to feed and house volunteers for the project.
By the time that campaign closed, it had raised $5,181 towards the construction of the Earthship, a project which cost another $60,000 to build and was completed only last year.
In many ways, crowdfunding is faster and easier than the many traditional ways of fundraising for pet projects, including putting on a show, holding a car wash or bottle drive or running a benefit concert.
Crowdfunding, though, does come with some pitfalls including the cost. Of the various platforms, each charges fees to use the service and to handle the donations.
But those who dream of launching their pet projects often pick their crowdfunding platform as much for its ability to reach their target audience or market the project as anything else.
Zachary J. Adam, a Fredericton author, produced his first full-length novel last year with a small group of local illustrators and graphic designers. It’s called Sanity Line and it first came out as an e-book, an online version that had no printed version, and was sold on Amazon.ca.
Adam wanted more.
With only 12 backers, the self-published author was able to raise the $400 on Kickstarter to get that first book of his Arcane Revolution Trilogy published.
“Kickstarter was a way to raise that capital really quickly,” he said. “It has more of an entrepreneurial perception publicly whereas GoFundMe is more frequently – in the circles I run in – for acts of charity and to help people pay for their hospital bills and that sort of thing. Kickstarter also has all these entrepreneurial tools.”
Small crowdfunding campaigns for projects which are essentially hobbies come with few worries beyond simply paying out any promised rewards or perks and accepting the platform’s fees.
There’s no income tax to pay on money from a crowdfunding campaign when it is provided as a gift to an individual, says Wayne Adams, the director of community relations for the Canadian Taxpayers Federation.
“If there’s no charitable receipt, then there’s no tax implications,” said Adams. “If you distribute it among the families of the Humboldt hockey players, for example, then there’s no tax implications.”
Accounting for crowdfunding monies and the tax implications change though when the funds being collected are going to a registered charity or a business. A company that uses a crowdfunding site to drum up sales or investment funds has to account for those funds using standard business practices, including paying any applicable taxes.
In the sometimes-wacky world of crowdfunding, however, the funds sought don’t always exactly match the money that’s finally raised. Many crowdfunding campaigns go nowhere. Others have modest success.
And every now and then a crowdfunding campaign catches the public’s imagination and goes viral, raising far, far more money than its organizers ever dreamed was possible.
When Karen Klein, who was then working as a school bus monitor, was bullied in the state of New York in 2012, a 25-year-old Toronto man was moved by a video he saw of the harassment. Max Sidorov started his Indiegogo crowdfunding campaign to raise $5,000 for the beleaguered bus monitor.
That gesture of support went viral. Tens of thousands of people chipped in from around the world. The final amount eventually handed over to Klein was almost $704,000.
Earlier this year, a similar thing happened south of the border. Charlotte and Dave Willner started a Facebook campaign, Reunite An Immigrant Parent With Their Child, to raise $1,500 for the Refugee and Immigrant Centre for Education and Legal Services in Texas because they were moved by the plight of children being separated from parents at the U.S.-Mexico border.
A dozen days into that campaign, it had already raised almost U.S.$20.4 million from more than 530,000 people.
It might seem like a strange and wonderful problem to have too much money for a project but crowdfunding donations have to go somewhere. The organizer of a crowdfunding campaign can’t just keep those funds for their personal use, as a tax-free gift, when the money far exceeds the need.
Even well-meaning organizers can run into this dilemma. Fortunately, there’s a way out.
Give the money to charity.
“You could always give it during the next United Way campaign,” Adams said. “There are ways to pass it on.”
Usually, it’s not an embarrassment of riches that’s the problem for those looking to fund pet projects but rather the challenge of getting would-be supporters to take that leap of faith.
In Connecticut, Batts and Rudy made an initial documentary-style short flick featuring their music and interviews before this current crowdfunding campaign. That first movie was called ROY G. BV, an acronym for most of the colours of the rainbow, and this helped further build up the duo’s credibility.
“Establish yourself as a product that is good … and then you can raise money,” said Batts.
It also helps to have been recognized – as Batts was this year by Connecticut Magazine - as one of the most influential 40 people under 40 in that region for his contributions to the music scene. The driving force behind the Hartford hip-hop group UZOO, Batts has also hosted four annual Hip Hop for the Homeless Festivals and put on shows in half a dozen American cities.
Those concerts raise money to provide food and other aid to the homeless.
Now, Batts wants to come to Nova Scotia with Rudy for his next film. The two will be leaving Connecticut on July 22 and driving up to the Halifax area, over to Peggy’s Cove, and down to Kejimkujik National Park.
Along the way, they plan to interview Bluenosers and later weave those stories about how Nova Scotians see their home province together with Rudy’s original music.
“Nova Scotia is a beautiful place that we’ve never explored and we wanted to go there,” said Batts. “I’ve been a city boy all my life and I really wanted to see the wilderness, the fishermen working on the boats and the stars at night.”
The cost to crowd fund
Crowdfunding through one of the many platforms seems like a simple endeavour but it does come with its costs.
Kickstarter, one of the best-known crowdfunding platforms, charges a fee of five per cent of all the funds donated for the campaign itself. Kickstarter then also charges what it calls payment processing fees that range from another three to five per cent.
The bottom line is that a Kickstarter crowdfunding campaign can leave the person fundraising with only 90 per cent of the donated monies.
Competitor Indiegogo charges the same five per cent for a campaign but adds three per cent plus 30 cents per transaction in third-party payment processing fees. That’s slightly more expensive than Kickstarter. Fundly, another crowdfunding platform, also has similar fees. It takes 4.9 per cent as a platform fee and 2.9 per cent plus 30 cents for transaction processing fees.
Among the big crowdfunding sites, GoFundMe is one of the few that does not charge a platform fee, charging only the 2.9 per cent and 30-cent per transaction payment processing fee.