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Crowded Out: Will the competition for crowd-sourcing dollars shut out small projects the platform was originally designed to help? 

Cellhelmet CEO Mike Kane at his company's Oakland store

Photo by Renee Rosensteel

Cellhelmet CEO Mike Kane at his company's Oakland store

For the founders of Cellhelmet, launching a crowdfunding campaign two years ago was as much about creating brand awareness as it was about getting startup capital.

And Cellhelmet, a Pittsburgh-area cell-phone repair company, ended up getting some of each. The company received $19,000 on Kickstarter — almost double its $10,000 goal — and an offer to appeal to a group of big-name, high-dollar investors on ABC's television show Shark Tank. Although the company didn't get an investor on that show, the appearance provided its product, a protective cell-phone case, even more exposure.

"[Crowdfunding] helped us tremendously," says Cellhelmet CEO Mike Kane. "It's a way for someone with an idea and an invention to do something they wouldn't have been able to do otherwise."

Cellhelmet is just one of the success stories coming out of the more than 450 crowdfunding platforms available, including Kickstarter, Indiegogo and Fundrazr. Such websites helped companies and individuals worldwide raise $89 million in 2010, $1.47 billion in 2011 and $2.66 billion in 2012, according to Massolution, a research and advisory firm.

But the competition for those dollars is building too, with already-established celebrities and corporations going hat-in-hand. For example, last May, Hollywood actor and director Zach Braff used Kickstarter to raise more than $3 million for an upcoming movie; the next month, Warner Bros. raised more than $3.7 million to fund a movie based on the Veronica Mars television series.

Kane says the participation of established players is not a bad thing. "I think the larger companies are actually making it easier for the startups, as they're putting more eyes on crowdfunding as a whole," he says. Still, he admits, "They are overshadowing the smaller companies in the media, what the average consumer sees."

And some critics believe allowing major movie studios, celebrities and corporations to use crowdfunding sites sets a bad precedent. Crowdfunding, they say, was designed to benefit smaller, independent entrepreneurs who can't get capital through traditional means.

Rodrigo Davies, a civic technologist and researcher at the MIT Center for Civic Media, says smaller startups are starting to feel "slightly aggrieved" by established names using crowdfunding.

"Kickstarter came from this place of struggling artists that mainstream funding sources aren't supporting," Davies says. "So for those people, it doesn't really feel like a level playing field."

"I think this is a really big issue," Davies adds. "There are lots of large organizations looking into crowdfunding, and people are rightly asking the question, ‘Why do they need it?'"

Established local entities are getting in on the action, too. Last month, the Pittsburgh Symphony Orchestra launched a Kickstarter campaign to fund its upcoming concert at New York's Carnegie Hall.

The symphony has received donations from a number of foundations, corporations and individuals over the years. Among them are several corporate sponsors who each give more than $75,000, and one-time gifts of as much as $1 million.

Despite that support, "there's still more need," says Al Jacobsen, PSO senior manager of corporate and tour sponsorship. "The truth is with any orchestra in this country, ticket revenue only covers a portion of our expenses, and every year we have a need to fundraise. The perception that just the foundations and corporations provide all the funding we need is incorrect. We rely on individuals, and that need doesn't go away."

Giving isn't a one-way street in Kickstarter campaigns; those who contribute usually receive something in return. For PSO's campaign, backers who give $50 or more will be invited to attend the orchestra's final rehearsal before the Carnegie Hall show. But the premium isn't the only reason to donate, Jacobsen says: The symphony's Carnegie Hall appearance will also focus a spotlight on Pittsburgh. "This will provide a vehicle for us to showcase the Pittsburgh community and what we have here."

"Whether you're an established or a younger organization, it's all about ... is your project captivating to enough people," Jacobsen adds.

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