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(Francisco Kjolseth | The Salt Lake Tribune) Kenny Olsen of West Haven Utah has been a network security IT guy for some time before turning to family farming. With the help of Kickstarter he has raised money for a new tiller and for six new beehives in hopes of expanding on the family side business.
Entrepreneurs, dreamers turning to crowdfunding in droves

Investors beware » Read the fine print, don’t expect big returns, consumer advocate warns.

First Published Mar 08 2013 09:34 am • Last Updated Mar 10 2013 12:32 am

Fitness lovers with a competitive streak, picture this: a wearable electronic device that does the trash-talking for you.

Dave Scott did. He’s 27, big into cardio and cross fit and wanted to brag about his personal bests. So did his buddy Abe Carter, 24. They thought a device that collected data on repetitions, duration and speed would be cool, but they also wanted that information in real time so it could be shared and used to compete virtually with friends.

At a glance

Before you crowdfund

Do your homework » The more information available about the pitch, the more legitimate the campaign is likely to be.

Check out initial funds » Friends and family typically provide the first 20 percent of funding to a campaign, so be careful with campaigns that have raised less than that in the first few days.

Look for active links » Official websites, social media presence and press coverage can be used to help validate campaigns.

Keep an eye out for updates » Has the campaign owner provided updated information about the campaign? If you see updates every one to five days, the campaign is more likely to be legitimate.

Source » Indiegogo

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"We’re just two guys with a crazy idea," Scott said.

They teamed up with Max Mann and Nahom Workie from MIT and got some initial funding through a Dubai venture-capital firm. But eventually they turned to the crowd, launching a crowdfunding campaign on Kickstarter with a goal of raising $90,000 to get the product through the manufacturing phase. So far, they’ve raised more than $470,000 on Indiegogo for their Amiigo Fitness Bracelet.

"We hit our goal on day two of the campaign," Scott said. "We’re stoked with the response we’ve gotten so far."

Crowdfunding defined

Crowdfunding is quickly joining the ranks of banks and angel investors as a funding source, redefining how entrepreneurs get seed money, how small businesses finance expansion and how anyone with an idea or cause can turn a dream into a reality.

At its core, crowdfunding is an online pitch. You post a bit about your project and how much you need on a crowdfunding website and appeal to the Internet "crowd." Then, if they’re convinced, funders can click to pay a certain amount. In return for an investment, many campaigns offer public radio-type goodies, such as a mug; others offer an actual product hot off the manufacturing line or a feel-good reward such as a handwritten thank you note. And later this year, new federal rules will allow ventures to offer equity stakes in crowdfunding campaigns.

It’s a relatively new fundraising tool, with the world’s first crowdfunding platform launching in 2008 right here in Utah at the Sundance Film Festival. Indiegogo was founded to raise money for independent film projects, but the site has since generalized and emerged as one of the big-three crowdfunding platforms, along with Kickstarter and RocketHub.

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The growth in crowdfunding and crowdfunding platforms has caught the eye of market watchers and analysts. According to a 2012 survey conducted by Crowdsourcing.org, more than a million campaigns raised nearly $1.5 billion through crowdfunding in 2011, with the average campaign taking about 10 weeks from launch to completion.

The trend certainly captivates Bill Cherry, an entrepreneur who formed the Utah Crowdfunding Association a couple of months ago. He was introduced to the crowdfunding concept at a seminar in Kaysville last year and was "blown away."

"There’s so little access to capital [through banks] and a high percentage of all business loans are denied," he said. "With crowdfunding, it is ‘the’ new way to finance a business."

Cherry estimates there are roughly 200 crowdfunding campaigns run by Utahns on the three major platforms at any one time.

"People are so excited about it when they learn about it," said Cherry. "A light goes on and they see that maybe they can get their business going after all. It’s kind of fun to see people get excited."

But hype aside, crowdfunding raises red flags for consumer advocate Preston Cochrane, president of AAA Fair Credit Foundation.

"In Utah, where we’ve had so many scams, I hate the next wave of fraud to be crowdfunding."

Success stories

Currently ranked second in the nation for creating start-ups, the University of Utah has clearly been working hard to take new inventions and research coming out of its labs to market. Part of that equation is, of course, funding, and in mid-December, the university’s Technology Commercialization Office entered the crowdfunding universe. They partnered with RocketHub to create the University Tech Vault crowdfunding platform, said Taylor Bench, TCO’s director of economic development.

Bench said they started with four campaigns, one of which is to raise funds for something called the Active Desk, sort of computer-desk-meets-recumbent exercise bike. So far, the Active Desk campaign has raised more than $10,000.

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