Indiegogo just made it easier to own a stake in what you crowdfund. But there’s a catch

The barrier of entry is high for indie filmmakers.
The barrier of entry is high for indie filmmakers.
Image: AiClassEland at English Wikibooks/Wikimedia Commons/CC-BY-SA 2.5.
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Indiegogo, a crowdfunding site that’s popular for movies, games, and other creative works, has paved the way for backers to own a stake in the creative projects they crowdfund. The platform announced a new service yesterday that allows entrepreneurs and creators to offer backers an equity stake in their companies.

This is thanks to a new security rule, which took effect in May, that allows average people to invest a few thousand dollars per year in private businesses. Before, only accredited investors who earned more than $200,000 a year, or had a net worth of at least $1 million, could do this.

There’s a high barrier to entry, though. Creators proposing projects will reportedly have to shell out an estimated $7,000 on compliance and regulatory costs before the equity campaigns on Indiegogo can go live. The site will then take an additional 7% cash fee on the funds raised, plus 2% in stock. Investors must also pay a $7 processing fee or 2% of their investment to Indiegogo, whichever is higher.

By contrast, it’s free to start a regular Indiegogo campaign. The site takes 5% of the funds raised. And backers usually get first dibs on the projects when they’re released—for films they may get a digital copy or tickets to see the movie in theaters—and other rewards for contributing.

Some of the creative projects funded on Indiegogo have decent-sized budgets, like comedy and filmmaking team Broken Lizard’s campaign for a Super Troopers sequel, which raised $4.5 million on the site last year. But films can also be risky bets. Backers pledged $5.7 million on another crowdfunding site, Kickstarter, to fund a movie version of the teen-spy TV drama Veronica Mars, which was distributed by Warner Bros. It was the second most-funded project in Kickstarter’s film category, but only grossed $3.5 million at the box office worldwide—so an equity stake wouldn’t have amounted too much, if it had been possible.

Kickstarter, for its part, told the New York Times (paywall) that it has no plans to sell stakes to its site’s backers. “The purpose of creativity is not to become an investment vehicle,” Justin Kazmark, a Kickstarter spokesman, told the paper. “When creative projects escape the need to generate profit, the result is a more vibrant and diverse culture.”

So far, no films or video projects are being advertised on the equity-investing hub of Indiegogo’s site, which currently features an interesting selection of four companies seeking your money:

  • Video-game developer ArtCraft Entertainment, which is raising money for an upcoming online role playing game Crowfall
  • Play Impossible, which created a connected athletic ball
  • Washington, DC-based distillery and cocktail bar Republic Restoratives
  • BeatStars, a music marketplace and distribution platform

Image by AiClassEland at English Wikibooks on Wikimedia Commons, licensed under CC-BY-SA 2.5.