Posted: Nov. 16, 2012, 3:00 p.m. EDT
By Clay Jackson
Deputy News Editor, Pet Product News International
Crowdfunding, the growing practice of issuing a global plea for money to support an endeavor or cause, usually through the Internet, has been successfully used for everything from launching independent films to assisting animals in need to getting Billy Idol to perform at a Seattle man’s birthday party.
The idea hasn’t been lost on pet industry entrepreneurs, who are increasingly turning to crowdfunding to generate quick cash to introduce products, create marketing campaigns or drive expansion.
“Crowdfunding allows investors to follow the wisdom of the crowd,” said Sherwood Neiss, a principal with Miami-based Crowdfund Capital Advisors. “Because pet products are consumer-related products, they tend to be the hardest ones to fund and yet they are the ones we see breakout successes in all the time.”
Creating a Monster
Jessica and Haley Pryor, owners of Green Monster, a manufacturer of functional dog apparel, chose to follow the crowd.
Jessica and Haley Pryor sell Green Monster dog apparel from their booth at SuperZoo. Green Monster’s presence at the show was the culmination of a campaign the women waged on the crown-funding site Kickstarter. Clay Jackson/BowTie Inc.
The women started their company in January 2012 out of their Atlanta home, where they design, sew and market colorful, reversible jackets for small dogs.
“On the advice of several business mentors, we decided that debuting our fall collections to the wholesale market at SuperZoo was the route we wanted to take,” Jessica said.
By the time the Pryors realized they were onto something big, the deadline to register as an exhibitor at the 2012 trade show in Las Vegas was upon them.
“We knew that our product could gain popular support and succeed with crowdfunding,” Jessica noted.
They quickly posted a “Sending Green Monster to Vegas” video pitch on Kickstarter.com, one of the first crowdfunding websites, and asked for $15,000 to make their SuperZoo dream a reality.
“We pitched our unique styles and approach and were enthusiastically embraced,” Jessica said. “We raised $15,279 in 30 days.”
The money paid for Green Monster’s booth fee, display fixtures, initial inventory and marketing materials. The company’s appearance at SuperZoo in September was deemed a success as the Pryors found new customers in Canada, the United Kingdom and on both coasts of the United States as well as one new distributor.
What did Green Monster’s investors get in return? A dog jacket.
“If people aren’t getting anything [of great value], why would they have invested $1.5 billion last year in crowdfunding platforms?” Neiss pondered. “They want to help someone, they understand times are tough, they want to be part of a community. These are all reasons that are bigger than financial returns.”
Bigger Crowd in 2013
Crowdfunding platforms such as Kickstarter.com cannot offer a return on investment to potential backers, but that’s about to change in 2013.
The Jumpstart Our Business Startups Act, or Jobs Act, was signed into law this year by President Obama, opening up crowdfunding to investors looking for more than a free product or two.
Sherwood Neiss and Jason Best, partners in Miami-based Crowdfund Capital Advisors, helped write the legislative framework that eventually became the Jobs Act.
“We needed to update the laws, which don’t permit the ‘99 percent’ to invest in private shares,” Neiss said.
While perk-based crowdfunding websites will remain unregulated, any sites that offer a return on investment will be overseen by the government starting in 2013, Neiss pointed out.
Rules will be in place to keep people from making ruinous investments, he added.
“Under the new rules, if you make less than $40,000 a year, the maximum crowdfunding investment you can make is $2,000,” he said.
Start-ups and small businesses historically have a 50 percent failure rate,” Neiss cautioned.
“At the end of the day, people should only invest in people they know and trust, products and services they believe in, and where they feel it is worth the investment risk,” he said. –CJ
Crowdfunding backers in the United States are legally limited to receiving nominal perks such as books, T-shirts and the like. But Neiss expects all that to change in 2013, when the federal Jumpstart Our Business Startups Act goes into effect.
Guerrilla Marketers in the Room
Orabrush Inc. hoped crowdfunding would do for Orapup, a new tongue brush for dogs, what a quirky YouTube video did for the company’s namesake human tongue brush in 2009.
“Soon after we launched Orabrush, many of our customers began asking when a version would be available for their dogs,” said Jeff Davis, CEO of the Provo, Utah-based company.
“As we watched crowdfunding become more popular, we recognized how successful it could be to engage the large and growing Orabrush community to bring the Orapup to dog owners everywhere as quickly as possible,” he added.
Orabrush spokesman Austin Craig called crowdfunding “a whole new field, wide open, where anybody can get in, figure it out and win.”
“Without crowdfunding, we wouldn’t be able to bring Orapup to market as quickly as we would like,” Craig added.
Possessing only a prototype and a sales guarantee from a national pet store chain, the Orapup team decided to make a pitch for $40,000 on Indiegogo.com, a San Francisco-based crowdfunding site. The campaign surpassed expectations, raising more than $60,000 in 60 days.
“We thought we’d engage our community, especially owners of dogs with bad breath, to help us bring this product to fruition,” Craig said. “Crowdfunding can really drive innovation forward.”
Raising money through the Internet paid off in another way, he said.
“We have been contacted by several potential partners and distributors who first heard about Orapup through our crowdfunding campaign,” Craig said.
By the Book
After his publishing project was rejected by one crowdfunding website, Dr. Jason Nichols, a Portland, Ore., veterinarian, took his pet safety books—one for cats, one for dogs—to Indiegogo. Dr. Nichols needed $15,000 to edit, design, illustrate and print the books. He raised $15,021.
“My campaign on Indiegogo not only allowed me to raise the funds to offset the production costs of the books, but it also helped me create some wonderful awareness for these books and my website, as well as to network and meet others who are doing great things for pets and their people,” he said.
Indiegogo kept 4 percent of Nichols’ fundraising total—a common practice in the crowdfunding industry—and he had to contend with credit card processing fees.
“But these were a small price to pay for the ability to reach a large network of backers and raise the funds I needed to move my books along,” he said.
“I think crowdfunding provides people with an opportunity to support, in whatever way and amount, people and projects that will help them protect and enhance their life with their pets,” Nichols added.<HOME>
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