How Danae Ringelmann Came Up With Indiegogo

The San Francisco native says she was inspired by her small-business-owner parents to create the crowdfunding platform.

Colleen DeBaise By Colleen DeBaise

Indiegogo is having a good year. In January, the crowdfunding platform raised $40 million in venture capital. This summer, it released its first mobile app. And most recently, it saw one of its clients, Hour of Code, which is trying to make computer science widely available in schools, raise more than $4 million in a campaign that is still running. The donors include Mark Zuckerberg.

The success is particularly sweet for Danae Ringelmann, 36, who says she got the idea to “democratize funding” after witnessing her small-business-owner parents struggle for years to find capital. “They never could actually get a loan,” she says. They “never got a break, never complained, were always loyal to their employees and never cut corners in running their business.” Ringelmann became even more frustrated when she worked on Wall Street after college and realized how difficult it was for “little guys” like independent artists to find money.

She came up with the basic concept for Indiegogo — an offline platform where anyone can raise money for an idea or a project — and fine-tuned it at business school at University of California, Berkeley, where she met her co-founders, Eric Schell and Slava Rubin. They convinced her that using the Internet would be a better approach, and they introduced Indiegogo in January 2008, the same year Ringelmann graduated.

On the site, anyone — an entrepreneur looking to raise money to create a new product, for example — can create a campaign, share it through word-of-mouth or social media. In return for the money raised, entrepreneurs and businesses can reward supporters with products and “perks,” such as t-shirts or coffee mugs. What they cannot do yet is take equity investments; the long-delayed rules for equity crowdfunding are still awaiting final approval.

Indiegogo takes a 9 percent cut of the money raised. If a stated goal is met by a fixed deadline, the fee drops to 4 percent — a policy, the company says, that encourages campaign owners to set reasonable goals and promote aggressively. (The company declined to disclose its annual revenue.)

These days, Indiegogo has hosted more than 250,000 campaigns in 224 countries and territories. And its name — along with that of rival Kickstarter, which launched in 2009 — has become synonymous with the crowdfunding movement.

In the beginning, Ringelmann’s challenge was explaining the crowdfunding concept — in fact, the term did not yet exist. She says says she’s not sure who coined it: “I just woke up one day and someone started calling us that.” Early on, the only people who used the site were friends, family and Berkeley classmates. “Outside of that world, it was undiscovered territory,” she says. “If I had to define success as people giving us positive feedback, I would have given up.”

But the financial crisis that began in 2007 was something of a lucky break for Indiegogo: It created more of a need for alternative forms of financing. At the same time, people were getting more comfortable with established online payment systems like PayPal and social-media platforms like Facebook.

To get the word out, the co-founders introduced the site at the Sundance Film Festival, and Ringelmann spent the first few years speaking at film, music and other events. “We worked our butts off to get our first customer success, and then second customer success and third customer success,” she says. “Every time we had a success, we’d take that story and tell it to inspire other people.”

Those case studies, she says, were the most effective marketing tool the company had in terms of convincing skeptics that it was possible to raise money on the Internet. The next challenge, somewhat ironically, was raising money from investors. Ringelmann says she had saved up enough money to live without a salary for a year, as she and her co-founders anticipated they’d be able to secure funding by the fall of 2008. “That was the beginning of what I like to call ‘the dark period,’” she says. The Indiegogo team was rejected by 90 investors.

Ringelmann says she wore the same pair of jeans for three years to save on costs. She was joking, but she did give up her social life — “I wasn’t going out to bars every weekend and going out to Napa on winery tours” — and she moved back home and borrowed money from her mother. One co-founder, Schell, took on freelance work. The other, Rubin, who handled most meetings with investors, stopped telling them how many times they had been rejected.

It wasn’t until March 2011 that Indiegogo won its first $1.5 million round of financing. It did not attempt to raise money on its own platform. “As the first open crowdfunding platform,” Ms. Ringelmann said “we were still trying to prove that using Indiegogo and the Internet was a great way for artists, entrepreneurs and causes to raise money.”

Ringelmann suffered a loss when her father passed away in October 2008. Losing his insight made it difficult for her to continue for a while — he had been a believer. “He was very upset about how a few people on Wall Street were driving the economy down,” she says. “It gave me motivation to fix finance.”

Ringelmann says she knew Indiegogo was going to make it when a successful campaign in 2011 helped an African humanitarian named Pastor Marion, known as the Schindler of the Congo, raise enough money for a kidney transplant. It was one of the first campaigns where the founders didn’t know the person trying to raise money. “It really touched me personally,” she says. “I hadn’t thought about saving someone’s life. It showed it was really working.”

Other well-known Indiegogo campaigns included money raised for a bus driver who had been bullied; a couple who needed expensive IVF treatments to have a child; and Ubuntu Edge, a smartphone that raised $12 million but missed its goal of $32 million.

In 2015, Ringelmann anticipates the challenge of adjusting to the rules of equity crowdfunding, which she expects the Securities and Exchange Commission to issue in the new year. The rules would permit crowdfunding start-ups to lure supporters with equity stakes, not just perks. It will add a layer of complexity, but Ringelmann is happy to see it happen.

Before crowdfunding, she says,“we always had to rely on other people making decisions of what things get made. Now we can all participate in that decision-making.”

 

Posted: October 10, 2014

Colleen DeBaiseHow Danae Ringelmann Came Up With Indiegogo