Among many filmmakers, public film funding has a bad reputation. With seemingly incomprehensible funding decisions and major formal barriers, as well as laborious, time-consuming paperwork and mountains of bureaucracy when managing and processing a funded project − all of which make crowdfunding an attractive alternative financing option in the eyes of many filmmakers. Crowdfunding promises what the public funding does not appear to be: Simple to manage and process, freely available for everyone, grassroots democracy and transparent. And the stories of success speak for themselves. It proved possible to generate six-digit amounts within just a few days or weeks for films such as “Stromberg”, “Iron Sky” and “Hotel Desire” to the same extent as was the case with the last film from the grand master of cinema, Jan Svankmajer. And the principle behind it could not be simpler. Instead of aiming to attract just a few major sources of money (such as funding bodies or TV stations) as is usual in classic film financing, with crowdfunding many investors contributing small amounts to finance the planned film.
Although it is not the only option, as a rule the money is amassed using a crowdfunding portal on the internet. And while there are quite a few of them there by now, the only ones that have gained a greater role in Germany are the American platforms Kickstarter and Indiegogo, as well as their German counterpart Startnext. All three operate in a similar way. The person starting the project publishes their project idea there and provides details of the amount of money they would like to raise as their financing target, as well as the intended timeframe for the campaign. In this regard, Kickstarter and Startnext pursue an “all or nothing” strategy. Which means that the money collected is only paid out once the complete financing target has been reached or even exceeded ideally speaking. And if this is not the case, the providers of the money get it back. By way of an alternative, Indiegogo also accepts having a flexible target amount. When this option is selected, all of the money collected is paid out, regardless of whether the financing target has been reached or not. Both options have their positive and negative aspects. The “all or nothing” strategy utilises the gambling instincts and the momentum of the community. With each euro collected, the people who submitted the project come that bit closer to their aim. At the same time, the project becomes increasingly attractive for new funders. Moreover, with the “all or nothing” principle, the funders can be certain that they will only have to pay once the project is completely financed. Which is a security that Indiegogo’s flexible financing strategy is not able to provide. And which is also the reason why Indiegogo itself recommends the “all or nothing” strategy for those projects with pre-defined production costs.
The actual money transactions between the funders and the filmmakers are also organised by the internet platforms. And as nothing comes without a price tag, in addition to their management fee (5 percent at Kickstarter and Indiegogo, 1 percent plus a voluntary commission at Startnext), with successful projects they demand a premium of 3 to 5 percent, depending on the amount of funding.
However such a crowdfunding project is first complete and rounded off by the “thank-yous” or perks that the funders receive as a reward for their contributions. Since all three platforms forbid the funders from participating in any proceeds earned by the projects (as this would then be crowdinvesting), these presents are mostly small as a rule. Such as starting with the funder’s name being mentioned in the film’s opening and closing credits, through to receiving DVDs or film posters or being given a role as an extra in the planned film.
So which platform is the best one? Wrong question. What counts is what and who you intend to reach. With more than 11 million registered supporters, Kickstarter is probably the portal with the greatest extent and range. It is followed by Indiegogo, which is visited by 15 million people each month, according to their own information. With almost 700,000 users, Startnext is clearly behind the other two. But Startnext’s concentration on the German-language territories is not necessarily a disadvantage. Thanks to the low number of competing film projects it has (accounting for 20 projects on 25 August 2016), the probability that a filmmaker’s project will be funded there is far greater than with the competitors. With the other two platforms, several hundred films are vying at any one time for the money from the crowd. And this is also reflected in their success rates. While 62 percent of the projects at Startnext in 2014 reached their financing target, the statistics from Kickstarter only reported a 37 percent success rate. A further argument for Startnext is the low minimum fee and the promise to provide individual advice to project starters where needed. However, if international funders also have to be broached to finance a project, then there is no option at present other than to use either Indiegogo or Kickstarter.
“The project has to be in tune with the spirit of the times and be presented in the right light. It has to stand out from the crowd and at the same time convey the impression that it is financeable,” was how Jan Bütow put it succinctly in response to the question of what is the “right” crowd funding project in his Bachelor dissertation on the crowdfunding financing of short films which he submitted to the DEKRA Medienhochschule media academy. Take Startnext for instance. In the first half of 2016, campaigns for about 80 short film projects were conducted there, with the main group of them being university or third-level films. The one striking aspect of this is that is seems crowdfunding is being used especially by students who are taking media studies beyond the major film schools and universities. A second identifiable group here are (media) education projects in the broadest sense, in which the filmmaker themselves or their subject matter are the main focus, and not the actual filmic result. The large amount of projects remaining have such differing structures and positions, that is not possible to allocate them to groups with typical features and elements. While at Kickstarter, films from the fantasy and animation areas especially seem to be the most promising, at Startnext quite a large amount of documentaries can be found. Both genres have one common aspect: They make it easy for the filmmaker, relatively speaking, to appeal to their target groups via their affinity for the specific genre or the subject of the film. Yet for that, classic short film dramas and comedies have a much harder time in this respect. Startnext itself says that documentaries with content to do with the subject of sports are especially successful on its platform. For instance, a documentary about the German national hockey team’s route to the 2016 Olympic Games managed to amass approximately €325,000 there. However this was intended as a feature length film. By contrast, the amount of the financing targets with short documentaries, fiction and animation films is far, far lower. In the projects surveyed, it ranged from €300 to €12,000, with €3,700 being defined as the average target. Similar figures can be found on all three platforms for successfully financed short films. By way of comparison: The average funding amount that a short film received from state film funding in 2013 was in the €15,000 range, or more than four times greater.
So this would indicate that crowdfunding is used especially for short films in the low or, at most, the mid budget area. Short films with higher financing targets can barely be found on the platforms, as is also the case with films from well-known or established filmmakers. One can only speculate as to why this is so. One the one hand, it is certainly true that when it comes to financing a film, crowdfunding is frequently only regarded as the last option left after the others have been exhausted. And this is certainly not surprising in light of the typical crowdfunding contributions. €3,000 or €4,000 are not enough for a professional short film production. On the other hand, crowdfunding does provide opportunities for new filmmakers especially or those entering this area from different prior careers to produce their projects independently to the greatest extent possible – provided they find enough supporters.
“With each new project the users decide anew whether they will make a financial commitment or not,” Jan Bütow wrote in his Bachelor thesis. For which reason, there is always the “fisher of men” aspect to crowdfunding as well. With powers of persuasion required when it comes to handling critical questions about one’s own project: “Why should someone give me their money for me to be able to make my film?” Whoever does not have a coherent, comprehensible answer to this question is unlikely to achieve much success at all with their crowdfunding campaign.
Moreover, it is important not to underestimate how much work a crowdfunding campaign requires. Bütow estimates the time and effort needed to actually be greater than with classic film funding. With the main reason being the enormous effort the filmmakers have to exert at times in order to find a sufficient number of supporters. Startnext’s rule of thumb here is that one visitor is required on the campaign homepage for each euro of the financing target. Or in other words: If I intend to generate €10,000, then I have to “attract” 10,000 visitors to my campaign homepage. Which is quite a lot of work – and that both on the strategic planning level as well as in terms of the everyday managing of the project during the financing stage. “Who do we want to reach?” “What are the strengths of our project?” “What can we use to be convincing?” What is our financing target?” “When will we start the campaign and how long should it last?” and, last but not least, “How do we attract potential funders?” Anyone considering crowdfunding as an alternative means of financing needs to have their answers ready to these questions.
Several of the answers, if not all of them, are provided by the portal operators themselves. For instance, Kickstarter and the others emphasise the importance of having a good, convincing campaign film. The campaign film should not be a trailer, but rather self-portraits of the filmmakers that present them and their project to the potential funders in two to three minutes. Which is basically the exact same as a classic pitch.
The campaign length together with its momentum represent further success factors. In terms of the length, all three portals recommend a period from 30 to maximum 45 days. With shorter campaign lengths having better chances as a rule, because they are able to demonstrate greater momentum. However, when the campaign length is too short, there is no opportunity to generate the required momentum at all. In this regard, the first few days after the campaign starts are extremely important for its success. In its Campaigner Field Guide, Indiegogo notes that successful campaigns reach at least 30 percent of their financing targets within the first two weeks after the launch. For which reason, the platform operators also advise that a campaign should only be started when it is certain that a third of the financing can be provided by friends, acquaintances or relatives. The intention is to then use the major part of this funding to set the dynamics and momentum of the campaign in motion right from the beginning, and to hold back a small amount as a reserve in case the campaign has not yet reached its financing target just before it ends.
The amount of the financing target depends on the requirements and the quality of the project itself. Most of the funders have a keen sense of how much a film is “worth”. If the target is set too low, the project quickly becomes implausible. And if it is too high, the suspicion arises just as quickly that the money is going to be squandered. Thus the initiator of a project is well advised to ensure maximum transparency and to provide an honest calculation. It is important when preparing the calculation not to forget the costs for the campaign itself. Which in addition to the platform fees, will certainly also include the costs for the thank-yous and perks. And: The proceeds from the crowdfunding are, just like any other income, also subject to the laws on income tax, corporate tax and sales (VAT) tax (more here…). For this reason when preparing their calculation, private persons should always take into account a surcharge of at least 15 percent (5 to 9 percent for fees + 5 to 10 percent for perks) and business operators as much as 35 percent (additional 19 percent for sales (VAT) tax).
Attractive rewards and thank-yous represent a further success factor. The intention is for them to motivate funders to support the project beyond their own network. Usually the perks are scaled to the individual funding amounts being sought: The more money a funder gives, the more valuable (either monetary or non-material) and exclusive the thank-you is. The classic items, which have almost reached the point of being mundane by now, are DVDs or VoD access (typical funding amounts of €5 to €10), as well as being named in the closing credits (€10 to €100) or receiving a prop from the film (€50 to €4,500). Or to put it simply: The greater the attractiveness (and originality) of the thank-you, the greater the willingness to fund a project. Otherwise, the most popular financing contributions by funders are sums of €25 or $25. For which reason, Indiegogo recommends offering one or, even better, several different perks for this exact funding amount.
However the most wonderful and unusual perks are of little use when nobody becomes interested in a campaign or, as is far more often the case, nobody knows about the campaign. That a funder will come across a short film project by chance and it arouses their interest is highly improbable, at least with the US portals. For which reason developing one’s own community is all the more important, as it ensures that the project becomes well-known to the greatest possible extent. In this regard, all of the portals offer integrated functions to service such potential supporters. However by themselves, these tools are not enough. Facebook, Twitter, Instagram and the other social media are more suitable, at least for establishing the project and “feeding” the community. And that always in the hope that one’s own project will go viral in terms of its reach. For good preparation often represents the reason why a campaign succeeds or fails. Thus it is practically an obligation to have a project plan that defines who communicates what on which channel and when.
So does crowdfunding deliver what it promises? Yes and no. As an alternative to state funding, the crowdfunding idea is only feasible to a limited extent, as the amounts of financing that can be reached (at least for now) are far below the comparable sums awarded by the major film funding bodies and institutes. Yet for that, especially for filmmakers who intend to avail of state funding, crowdfunding can represent an important additional source of financing. However crowdfunding first reveals its true strengths in those projects which have no access to money from the state. For filmmakers without their (own) production company, as well as for students and newcomers, crowdfunding especially represents an attractive and quantifiable option for amassing money for the financing of their short films. However it should also be clear to them that crowdfunding is not some “sure thing” or guarantee of success.
1 Jan Bütow: Crowdfunding als Finanzierungsalternative für Kurzfilme in Deutschland (Crowdfunding as an alternative methode of financing for Short Films in Germany), DEKRA Medienhochschule