Friday Question of the Day – What Do You Think About the Trend in Restaurants Fundraising Through Sites Like Kickstarter?

For this week’s Friday Question of the Day – I’m curious what you think about the trend in restaurants fundraising through sites like Kickstarter? Pleasant Pops was able to raise over $20,000. Mothership from the owner of the El Floridano Food Truck has raised over $11,000 with a goal of $30,000. A site similar to kickstarter called fundrise is trying to raise money for Maketto hoping to come to H Street, NE. Do you think this trend is here to stay? Do you think it’s a good way for restaurants/markets etc. to raise money? Have any of you invested in one of these ventures?

37 Comment

  • I hate to sound like the capitalist square here, but I don’t get it. You’re supposed to donate to a for profit business? If they can’t make a profit theyre going to go out of business and if they can seems like they shouldn’t have much trouble convincing a more traditional source of capital to invest in them. I’m all for supporting local business, but I’m not going to donate to one. I’ll donate to people not trying to make money for themselves and doing more good than making popsicles (no offense to Pleasant Pops, I like them and wish them well.)

    Am I missing something here?

    • Totally agree! I just don’t get it.

    • Totally agree – it’s bogus. There is a separate start-up in the area focused on allowing microinvestments in retail stores. While I think that may have some functional/legal issues, in theory that makes much more sense to me, where you kick in some money but get some level of ownership (albeit, likely minimal).

    • There seems to be some confusion: Fundrise is only similar to Kickstarter in that they both use the internet to publicize their offerings. Fundrise is NOT a donation, it’s an investment. Kickstarter, on the other hand, is a donation. Through Fundrise, you DO get ownership–not just in a small business, but in real estate. Yes, the developers could get more traditional sources of capital (and much more easily, I would add), but are doing something more difficult in order to change the game–to give neighbors ownership and some pretty stellar returns for their investment. It’s up to the individual to decide whether they like the terms of a particular Fundrise offering or something on Kickstarter, but you should know that they’re completely different.

  • I can understand a nonprofit group using a site like Kickstarter to fundraise… but I don’t really understand the phenomenon of for-profit businesses getting donations from people.

    I understand that it’s potentially hard to get a new business off the ground, and I try to support new businesses in my area so that they’ll thrive… but it’s hard for me to imagine making a donation to someone’s for-profit endeavor.

    It is a donation, right? Or do “investors” actually see some return, other than the project coming (with luck) to fruition?

    • Sometimes there’s a value (Mothership: $25, free entree), sometimes it’s a bonus (Mothership: $50, front of the line privileges for El Floridiano), sometime’s it’s ego boosting crap (Mothership: $100, dinner for 2 plus names branded on a barstool), and sometime’s it’s outlandish stuff for the higher budget (Mothership: $5,000, 10 course private dinner for 30 people).

      The bonuses need to be worth it for the successful ones, but I think that’s why the targets for the for-profit ones like this are so low; they don’t want to cannibalize their future profits, they just want a small loan effectively with free PR built in to it.

  • It boils down to: Business owner wants free money that he or she doesn’t have to pay back.

    Fundrise is a better model, if we’re going to do this micro-finance stuff — at least you’re buying a share of the future profits, not just tossing money at a for-profit enterprise out of the generosity of your heart.

  • Disingenuous, especial for very well financed operations like Durkl. They’re from a very wealthy upper NW family that could fund Maketto with their pocket change. Basically a PR stunt on their part.

  • Another possible reason – I own a house in Park View and would really love to see Georgia Ave cleaned up and thriving; I could see myself and similar homeowners donating to Mothership in hopes of improving the area. Think about the property values!

    • Because Kickstarter has rewards, I don’t really think of it as a donation as much as buying a product in advance. If the concept becomes a reality by meeting its goals, you pay for the product. EatsPlace is happening in Park View/Petworth, and they’re going to launch a kickstarter:

      • I don’t see it as a donation, I don’t quite see it as an investment.

        The $100 I pledged to Mothership don’t feel like a donation, because I’m getting 2 three-course meals out of it. It feels more like a Groupon but in which the extra value is not getting half off your meal, but it’s getting the place built in your neighborhood to get your meal, and the opportunity of more meals to come. And honestly, it’s an easier way to contribute to improvements to my neighborhood than attending neighborhood meetings.

  • A someone who is trying to get a business off the ground, I sometimes feel like a chump for not doing something like Kickstarter. I guess I am fairly “old school” and it is hard for me to wrap my head around the idea of people donating money for me to start a business. However, I hope that what I am doing would actually benefit the community at large. The costs to just deal with DCRA alone are more than what I am spending on practically the entire renovation/getting started.

    I would definitely donate money to a small business who wanted open up shop in my neighborhood because 1) it would help my business and 2) it would be good for the community.

    The deck is stacked against small businesses in DC from the get go and anything to lessen the financial burden I am all for… if it means more people would try to open up shop..

    • I think the donations also show that people in the neighborhood genuinely want the business. What people say they’d like to see and what they actually end up patronizing can differ. If the owners aren’t successful in raising enough money it should be taken as a sign that they should re-evaluate their business plan.

  • It is definitely not an investment. They are asking for money for their own profit business. And all you get out of it is your name on a wall or a free entree if you show up.

    Call me cold but if you can’t raise the money without relying on donations from random strangers than maybe you shouldn’t be opening a business where the average failure rate is over 80% for the first year of operation.

    • I tend to agree. But that’s where the business has the advantage of the “gimmick.” Despite some saying here it isn’t a gimmick, it certainly will have the gimmick-like effect of those who donated money being more emotionally invested and thus continue to patronize the place so that their “money wasn’t wasted.”

  • Different kickstarter projects use different models. Some of them really are seeking donations (i.e., offering rewards worth far less than the pledge) because there are people (like me) who are willing to donate to support their artistic vision or community project or whatever. I donate to a lot of these, usually musicians or artists that I want to help keep going. Others are definitely more of a cheap way for the business owner to get a loan, and they offer products/rewards that are basically worth the pledge, just delayed a bit. some of these actually offer their product or reward at a significant discount to those who pay ahead of time. It seems like most for-profit businesses should fall into the second camp. Pleasant Pops’s campaign seemed somewhere in between, which I wouldn’t have guessed was a good idea. But goddamn those popsicles are their own awesome artform, and I like the folks who make them.

  • If it works, it’s good. People know what they’re getting themselves into with it. It’s good for cultivating small businesses without people having to take out overly large/burdensome bank loans (I know, I’m a banker and we suck).

  • Without getting into too many details, I have a hobby that could become a business and am in the “Your ‘blank’ is so good. You really need to sell it” camp.

    But flattery buys nothing. Flattery doesn’t rent space, or invest in capital equipment, or licenses, or employees. Flattery doesn’t pay any of the bills while the business is in planning and doesn’t make any money. Flattery can’t get you off the ground.

    We’re living in an age where the only people with access to money are people who already have money. Try walking into a bank as a guy off the street and getting a loan. Kickstarter is a way to show people you’re serious and other people take you seriously. Many of these projects are in their infancy with would-be entrepreneurs who need this show of faith from friends and family and people in their community like the folks who live in the neighborhood like Roe who want to see success come into their neighborhoods, since, after all, success breeds success.

    I think it’s a little ridiculous and hurts the credibility of micro-lending models like Kickstarter when people of means use it as a gimmick. But for those of us who really need that first boost, it’s a great idea, at least.

  • I donated a small amount to the Pleasant Pops campaign. I did so because I’d like to see them come to the neighborhood, and that was worth a small amount to me. For similar reasons, I’m sometimes willing to pay higher prices at local small businesses because I like having them nearby.

    • Yeah, me too. I donated because I like the product, I like the guys, I hope they succeed, and I can afford it. The reward level is nice, too – yeah, I basically overpaid in advance for a bunch of stuff, but I’m OK with that.

  • I think fundraising has gotten completely out of control in recent years. Everywhere you turn there are people asking for money to start this and help with so-and-so. If you don’t have the money to start up a business then you shouldn’t do it at all.

  • The official theme song for Kickstarter should be “Gimme Some Money” by Spinal Tap.

  • greenroofgoddess

    I like the kickstarter idea and have made substantial buys-ins for two campaigns that were basically doing discounted pre-sales of their product and needed Kickstarter cash for their commerical grade casting forms. In the case of Pleasant Pops, it clued me into what they were doing and we were able to make an in-kind contribution rather than cash that helped everyone involved. Without Kickstarter, we wouldn’t have known about the new venture until they opened.

  • I read through some of the Fundrise offer documents and it’s not clear to me how this works. There appears to be a clause that allows the owners to buy back your “shares” whenever they want, as well as a provision for members to be asked/required to contribute further funds under certain circumstances. I’m no lawyer but it looks like a whole lot of CYA without much information about how profits would be realized, or how investors could choose the time and/or manner of cashing out.

    I’d love to hear a lawyer or investor opinion about this. I was pretty excited about this upfront but after reading through the documents I’m less so.

    • I’ve read many many investment documents like these before, and am an investor in many similar business, but the documents are amateur. The line saying they can call additional capital is a bit nuts. If I was them, I would have structured this quite a bit differently to make it more palatable.

  • Giving money to a for-profit company … the world turns crazier every day.

  • I feel like Kickstarter is just another term for community investment. If you want small, local businesses in your community, then you need to invest. if you don’t like it, then you should not complain about the big corporations — like Walmart — who already have significant capital and can set up shop quickly. Me? I choose to invest in my community.

  • Personally, I would rather invest in a business than donate to one. I think it’s a great way to get communities to buy in to a new business. Don’t like the current retail or entertainment options in your ‘hood? Here’s an opportunity to put your money where your mouth is.
    The problem is that most business owners don’t want to have to answer to, or share profits with, a large ownership group. To paraphrase Diddy, “Mo money from mo people means mo problems.”
    Donations seem more appropriate for artistic endeavors.

  • My vanity demands eating a pan con lechon while sitting on a stool with my name branded on it.

  • It reminds me of a little story from business school…

    I can’t remember the exact context, but from what I recall, this was an activity in New Venture Financing class where some students from another class were doing a presentation on their start-up business to get feedback from the class and the professor before taking their idea to professional VCs, or something like that.

    Anyway, they had a pretty neat idea, and had invested something like $10K of their own money and were looking for another $30K to get things moving.

    The general consensus was that although the idea was good and the team was capable, no one wanted to give them any money because they didn’t have enough “skin in the game.”

    That’s pretty much how I feel about Kickstarter (and other means of raising small sums of start-up capital). I mean, there are a million businesses I’d be happy to start with *someone else’s* money. But if I’m not willing to risk my own financial well-being, I don’t see why someone else should take a gamble on me.

Comments are closed.