“People want to buy local and be more connected to the businesses around them,” said Slava Rubin, the co-founder of Indiegogo, where small businesses have been crowdfunding since 2008. “It’s emotion and commerce coming together.”
Indiegogo is organized around the belief that anyone should be able to raise money for anything, as long as they’re upfront about where the money’s going and what they’re offering in exchange for contributions. Its many successful campaigns prove that people will “fund” or “contribute to”—both Indiegogo and Smallknot insist on using the language of investment and gently but firmly corrected The Observer when we referred to such monies as donations—every endeavor imaginable.
From opening a vegan donut shop (Brooklyn’s Dun-Well Doughnuts) to paying for a couple’s in-vitro fertilization (the first crowdfunded baby was born just recently), people can be surprisingly generous. Sure, some are motivated by the perks or in-kind goods and services that most businesses offer in exchange for cash (Video Free is giving away everything from free rentals to a private screening with comedian David Cross), but others seem moved by little more than the spirit of generosity. Dun-Well, for example, offered a coupon for a free doughnut in exchange for a $25 contribution. It was claimed by 58 people.
In Mr. Rubin’s view, crowdfunding allows for a shift from a basic transaction to a relationship, which is essentially the same thing as branding. “Now small businesses get to create campaigns, gauge interest in new concepts and create lasting relationships with their customers,” he said.
Sarah and Allon Azulai, a husband and wife team who operate Park Slope coffee shop Kos Kaffe, agree that crowdfunding had been an surprisingly fun way to connect with customers. The couple recently ran a Smallknot campaign that raised $4,500 for an awning to block the direct sunlight that routinely cleared out their coffee shop for several hours every afternoon.
“I don’t know if it will change the game for small business, but many small businesses, you’re just making a living,” said Mr. Azuli. “No one is putting away hundreds of thousands of dollars in reserve, so when you need an awning or a new delivery van, you almost always have to go outside to get the money.”
Kos Kaffe offered perks—like cards for free drinks in exchange for $10 investments or a coffee of the month club for $75—which made the whole thing more akin to selling goods ahead of time, Mr. Azuli said.
Indeed, Smallknot is quite insistent that perks be more than mere tokens. “It’s really important that they’re not out there shaking the cup,” Smallknot co-founder Ben Rossen said. “With patronage of the arts or a creative project, it’s easy to give for the sake of giving, but it’s really not the same when you’re giving to an existing business. I think among a lot of business owners, there’s sort of a perception out there that crowdfunding is kind of magical, this idea that people will give me money just because I’m there.”
And while crowdfunding is an excellent way to test whether a new concept will be popular, it does risk triggering resentment from customers who feel that patronizing a business should be enough. Mr. Hillis said that one customer came into the store recently and asked, “Are you the guy begging for money?”
“And while it is the digital equivalent of a handout, I wouldn’t have done it if our linoleum was crappy and we just wanted to replace it,” Mr. Hillis said, adding that he thought it was important that crowdfunding be limited to one-time projects rather than run-of-the mill replacements.
“If you’re a coffee shop and your boiler’s busted and you need a new one, well, you’re a business, you make money, why can’t you get that with your revenue?” Mr. Hillis asked. No one wants to seem like a charity case.
Yassir Raouli, who operates Bistro Truck with his wife, Elsa Leon, said that he was hesitant when Mr. Rossen, a fan of their food truck, first contacted the couple about using Smallknot to help fund Rustic L.E.S., the brick-and-mortar restaurant they’re opening.
“I wasn’t too excited, to be honest. It sounded like we were going to beg for money and I didn’t think it would be good for the brand,” Mr. Raouli said. But he was eventually won over by the platform’s focus on in-kind exchange (and his wife’s enthusiasm). The couple raised $8,000 to buy kitchen equipment, money that came through at a time when things were taking longer than expected and the couple was short on cash.
Jonathan Hack, one of the customers who contributed to Mr. Raouli’s campaign, said that he was moved to participate by his love of Bistro Truck’s food.
“The food is also definitely higher quality than a normal lunch I would get during a workweek and costs a whole lot less,” he wrote us in an email. “With Rustic, it is my understanding that they would bring this simple but creative cooking style to a restaurant setting. This is the sort of restaurant that I like to frequent.”