Maker Movement Mania

Crowdfunding Concept is Springboarding Maker Concepts to Market

PSFK Labs iQ Content Partner
factory workers

An expanding lineup of cost-effective capital services are financing makers of all sizes to move their concepts from prototype to retail floor.

In the three years that Michelangelo labored to coax his David from the 20-foot-tall block of Carrara marble, he undoubtedly encountered a few obstacles. Broken chisels, impatient models and no doubt, the marble itself — resolute, hard and unyielding.

Fortunately, the entire project was commissioned in advance by the Florentine authorities, so paying the rent or for materials was not among Michelangelo’s concerns.

Most Makers are not so lucky.

Wood, fabric, solder, plastic — the materials required to realize a do-it-yourselfer’s dream are expenses sometimes shared by a bank or loved ones, but for many, it’s Visa or MasterCard that foots the bill. Would David even exist if Michelangelo had had to self-finance his masterpiece? Maybe not.

Just as the market associated with Makers grows (USA Today put it at 135 million adults generating $29 billion in economic activity), so too does the array of options for financing their projects. This week, we’re looking at a trend we’re calling ‘elastic finance’ — the expanding lineup of sources for flexible, cost-effective capital. Whether tapping into niche crowdfunding networks or creating an appealing micro loan, these services are helping ideas come to fruition, with the added benefit of garnering greater public attention prior to launch. Let’s take a look.

Dragon Innovation, an established hardware manufacturing consultancy, recently launched a crowdfunding platform for hardware innovators to finance the development of their projects and bring them to market. Dragon’s team draws from their existing suite of services related to high-tech manufacturing to vet, advise and guide new entrepreneurs. They offer a pre-campaign design review and certification process to ensure developers have their proverbial ducks in a row before launching their ask on Dragon’s platform.

They coach entrepreneurs through the promotional aspects of a crowdfunding campaign and even offer a $100,000 bonus to projects that break $1 million. So far, none of the developers on Dragon Innovation’s platform have tapped the extra $100k in seed funding, but several high-profile projects have decided to do their fundraising there, forgoing more established platforms in favor of the niche focus and full-spectrum of services offered by Dragon.

For Makers who are already in business, mobile payment processor Square has begun offering funds without having to go to the crowd. The service is called Square Capital, and it is available only to entrepreneurs who are already using Square’s suite of merchant services.

After analyzing a business’ financial data generated on the platform, Square offers cash advances in exchange for a flat fee — distinguishing these funds from a conventional loan which charges an interest rate. Then, Square takes 10 percent of every purchase processed by the merchant until the debt is paid. When business is good, the debt is paid down faster, and if things slow down, payback slows accordingly.

The 10 percent on each transaction is collected on top of the 2.75 percent Square already charges merchants to process credit cards, but with no deadline for payback, Square Capital offers Makers a quick infusion of cash on terms that flex with the ebb and flow of their creative enterprise.

Business loans are a much older, more established model of financing for entrepreneurs, but online lender Kabbage has put a new twist on the idea. Since its launch in 2011, Kabbage has quickly become a popular source of capital for small businesses with an approach that is especially appealing to online vendors — perfect for Maker-entrepreneurs who sell via platforms like Amazon or Etsy or through their own websites.

Their niche is a product of Kabbage’s unique approach to gauging credit-worthiness. Potential borrowers link their financial and sales-related systems like Quickbooks, Square, PayPal or Stripe to Kabbage which automatically analyzes the data and within minutes generates an offer.

This represents a faster and less onerous process when compared with conventional bank loans and fits nicely with the fact that many small entrepreneur’s already rely on cloud-based systems to handle the backend of their business. Kabbage issues lines of credit ranging from $500 to $100,000 but all are structured for repayment within 6 months with monthly fees ranging from 1-14 percent.

Makers today, like Michelangelo and fellow master craftsmen of the past, have no end of challenges to overcome in bringing their visions to life. And from the Renaissance to the modern era, access to capital has remained a serious stumbling block to the creative process. Money for materials, money for tools, money to put your masterpiece out into the world — for some, it took a Medici to get it done.

For modern creatives, the funds increasingly come from a range of flexible, innovative platforms that offer capital on terms specially suited to the Maker community. Whether their creations are hardware, software or knitwear, elastic finance is out there for the taking, to finance the making.

The “Maker’s Manual” spotlights the do-it-yourself Maker Movement and how new computing technologies are helping democratize the creation of things once limited to craftsmen and professionals. This 10-week series from PSFK and iQ by Intel will explore trends and feature interviews with artists, inventors and entrepreneurs who are turning their ideas and dreams into reality.

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