Seeking big online support for small business ideas
Filipinos have a strong bayanihan spirit. In the aftermath of a natural disaster such as a destructive typhoon, people pitch in to help the victims. When a family member is hospitalized, friends and co-workers pass the hat to help pay for the bill. Both examples show the essence of what is now popularly known as crowdfunding.
Crowdfunding is putting an idea (a product, a service, art, music, film or even a request for cash) on the Internet, and asking netizens—many of them strangers—to pledge a certain amount of cash to you. But what would make you want to commit your hard-earned money to fund someone else’s idea? The ideas pitched are often innovative, and quite different from what the market offers. Rewards, like an item of the first-generation product or inclusion of your name in the credit, are typically offered in exchange for support on crowdfunding platforms.
One of the biggest crowdfunding success stories is the Pebble smartwatch. Launched on Kickstarter in 2012, the founders of Pebble famously raised more than $10 million in just 37 days. Similarly, the Veronica Mars movie was brought to life by the TV show’s fans, who contributed almost $6 million in 2013, nearly three times the target. In this case, rewards included T-shirts and PDF files of the script.
In the Local Scene
Crowdfunding first started in the Philippines in 2012 with the launch of the platform Artiste Connect. The Spark Project came a year later. The local scene is still in its infancy stage but there are now a number of players, including Cropital , Raise PH, and PhilCrowd.
Although crowdfunding has grown tremendously over the last few years and had a total estimated volume of $34 billion in 2015, it has very low penetration rates in developing countries, such as the Philippines.
This is ironic, as “it is in these countries where crowdfunding is most needed,” laments Patrick “Patch” Dulay, founder of The Spark Project.
Unlike popular foreign crowdfunding sites like Kickstarter, Indiegogo, or Gofundme, where campaign targets are in the thousands of US dollars, those on The Spark Project usually range between PhP80,000 and PhP120,000, which Patch believes is enough to get projects off the ground.
The most successful initial campaign of The Spark Project was for Gouache (pronounced as “gwash”), a brand of waxed canvas bags. The term refers to a watercolor painting technique. This seemed appropriate to founders Ann Enriquez and Louie Goco, as the fabric is painted over with wax, which not only makes the bags more durable and water-resistant but also gives them their unique look.
Louie developed the idea for the bag when he took an entrepreneurship class that required students to come up with a brand, a product, and a test. With the initial goal of building a better camera bag, the two interviewed photographers to find out what features they would really appreciate in a bag. With startup capital of just PhP3,000 for the prototype, this was a crowdfunding project in its purest form. According to Ann, the user-based design really paid off, as most of the buyers selected the reward level with bags (instead of just giving a contribution), proving that they found a real need in the market. In the end, the campaign, launched in 2013, raised PhP180,000.
Goauche then caught the eye of a retailer who wanted to carry their products. They were asked to create product designs for a broader market and came up with an expanded line, which includes, lunch bags and knapsacks. The products can be found on www.gouachebags.com.
A quick search on Kickstarter yields the story of Filipina Jena Krause and her German husband Julian Krause. The couple met while pursuing their masters’ degrees, specializing in social business. Choosing to settle in London, Jena was frustrated at not being able to find good representation of Filipino brands there so they decided to go for coffee.
“Specialty coffee is a booming industry in London,” says Jena and despite the city’s diverse population, “sadly there wasn’t one recognized Philippine coffee origin found among coffee roasters here.” That led the couple to open a coffee shop, specializing in beans from the Cordillera region. Motivated by the desire to showcase the best of Philippine coffee and raise the standards of producers, they work directly with farmers and throughout the supply chain to produce beans that meet international standards.
Crowdfunding enabled Jena and Julian to raise GBP15,000 (roughly PhP950,000) without the risk of going into debt. “It also offered us a great platform to communicate our brand not only to our close networks, but [it also] connected us to a worldwide audience who are avid supporters of Kickstarter projects,” Jena adds.
The couple opened Muni Coffee in Chelsea in June 2016. Since then, Muni Coffee Co has not only grown its customer base but has also sparked interest in other Filipino-inspired concepts such as purple ube cake and adobo power bowls.
Stepping into global arena
As crowdfunding grows in popularity, more Filipino and Philippine-based entrepreneurs are giving this method a try.
Last April 4, business partners Jiggy Santillan and Meg Keough launched a Kickstarter campaign for their shoe brand Hola Lili. The campaign, whose goal was to raise funds to produce and sell shoes made with traditional Filipino fabrics, achieved 100 percent of its funding target during the first day.
Both MBA graduates and lifelong shoe-lovers, Jiggy and Meg are enthralled by traditional Filipino woven fabrics. Last year, Meg took a backstrap weaving class, and was amazed when after 12 hours of work, she only ended up with a tiny piece of fabric. Realizing then how much hard work went into the fabric, she and Jiggy decided to come up with a business idea that would preserve traditional weaving and make it available to everyone across borders.
Wanting to showcase the fabric in such a way that it could be used every day instead of just being displayed in a museum, they decided to make shoes. But then they faced a hurdle.
“Building a sustainable business that allows us to pay fair prices for textiles and ensure quality production means pricing at a premium—at a level where most Filipinos are unlikely to afford,” says Meg.
That’s why Hola Lili mostly targets markets overseas, which takes more effort, time, and of course, money.
“We thought crowdfunding through Kickstarter would be a great way to access international markets without the expense of travel, trade fair registration, and so on,” says Jiggy.
Perhaps due to the growing value placed on artisanal products and Filipino creations, another live project in the Philippines is another female partnership supporting Filipino weavers.
Lifelong friends Kylie Misa and Yvette Gaston’s WVN campaign on The Spark Project to produce blankets and beach towels supporting traditional weavers in La Union was also launched in the same week as Hola Lili. Rewards for backing WVN (pronounced “woven”) included fun striped blankets and terrycloth beach towels in colorful wasig designs.
Kylie, who used to live in Spain, got the idea when she saw the popularity of Turkish towels. She thought, why not do something similar in the Philippines? WVN is a passion project for Kylie and Yvette, who’d spend weekends going up to La Union to meet the weavers. WVN now carries lines in traditional designs, but they are working with new ones, like the more modern patterns they use for their towels on The Spark.
“The lady who weaves it [the prototypes] for us was so excited to see it [the towels]; she hugged me so tight,” says Yvette, who recently discovered that her family has a historical connection to weaving. When she showed their designs to relatives, family members recalled the loom in their ancestral home in Negros
The WVN co-founders chose the crowdfunding route because they felt people needed to get to know about them. Hoping to achieve their funding targets, Kylie and Yvette are excited to produce a range of double-sided towels.
Direct and fast feedback
Getting immediate market feedback, without going through expensive or time-consuming surveys or focus groups, is one of the reasons to go the crowdfunding route. Indeed, Danae Ringelmann, co-founder of Indiegogo, claims that crowdfunding platforms enable you to get very direct feedback. The fact that you’re getting funded—or if you are not—confirms whether or not people think you have a good idea. If it doesn’t get any funding, maybe it’s not that great or it’s not meeting a real need, so that’s when, in her words, “you need to pivot or try something else.”
For Gouache, this was a test for Louie’s entrepreneurship class. Similarly at Hola Lili, Jiggy agrees, “We want to quickly test the theory that people will value the handwoven fabrics as much as we do.”
The other benefit of crowdfunding is that the pre-orders, based on the rewards chosen, reduce uncertainty. Going in blind, manufacturers have to produce based on estimates of styles, colors, and sizes. The campaign initially enables the company to respond exactly to what their clients want—the dream of any small business entrepreneur.
Ready for crowdfunding?
One of the main reasons crowdfunding is not as widespread here is the lack of internet access among Filipinos, so Patch advises crowdfunders to think beyond working online. Even The Spark Project straddles the line between working online and offline. Most international crowdfunding sites collect payments by credit card, but credit card penetration among Filipinos is low, so the local crowdfunding platform also offers direct bank deposit.
If you want to support
Hola Lili Shoes
Crowdfunding Page: www.kickstarter.com/projects/1364700113/hola-lili-premium-handmade-shoes-with-handwoven-te
The campaign runs until May 9, 2017
Crowdfunding Page: www.thesparkproject.com/project/wvn-summer-towels
The campaign runs until May 22, 2017
The Spark Project is having its first annual Spark Festival on June 24, 2017, which is also crowdfunded.
More Success stories
Risque Shoes [The Spark Project]
Founder Tal De Guzman’s campaign was one of the first major successes of The Spark Project in 2013. She used the funds to bring to life her line of avant-garde shoes made with Philippine woven fabrics and handcarved heels designed with tarsiers, crocodiles, and carabaos. Though her initial backers were friends and family, the crowdfunding campaign brought her first regular customers.
Baluncanag Children’s Library [Kickstarter]
When Australian Matt Boyd and his family lived in Hong Kong, they became close to their Filipina domestic helper. After visiting her family’s village north of Tuguegarao, they decided to help the community build a library, and chose to raise funds via crowdfunding. Matt thinks people were motivated to donate both because of the higher purpose (education) and due to his direct connection to the village. During the campaign, he constantly posted updates and promoted it on social media. After they raised the funds, the library was completed in mid-2016.