Edition: U.S. / Global

Start-Ups Look to the Crowd

When Eric Migicovsky, an engineer, wanted to develop a line of wristwatches that could display information from an iPhone — like caller ID and text messages — he went the traditional route of asking venture capitalists to finance his company.

Pebble Technology

The Pebble, a line of wristwatches being developed with money raised through Kickstarter.

Multimedia
James Estrin/The New York Times

The founders of Kickstarter, from left, Charles Adler, Perry Chen and Yancey Strickler.

But he couldn’t even get a foot in the door, let alone secure any money for what he called the Pebble watch.

So he turned to Kickstarter, a site where ordinary people back creative projects. Backers could pledge $99 and were promised a Pebble watch in return.

Less than two hours after the project went up on the site, Mr. Migicovsky and his partners hit their goal of $100,000.

“By that night, we were at $600,000,” said Mr. Migicovsky, who is 25 and a recent engineering graduate of the University of Waterloo. “We went out for a beer to celebrate, went home and slept, and when we woke up, we were at a million dollars.”

As of Friday afternoon, nearly 50,000 people had pledged close to $7 million — and there is still two weeks left before the fund-raising window closes. (As of Sunday afternoon, the total had passed $7 million.)

Pebble is the latest — and by far the largest — example of how Kickstarter, a scrappy start-up sprouted in the New York living room of its founders three years ago, is transforming the way people build businesses.

Although the site first began as a way for people to raise money for quirky projects like pop-up wedding chapels, around-the-world boating trips and offbeat documentaries, it quickly expanded to include video game production, feature films and innovative new gadgets, like the Elevation dock, a sleek stand for the iPhone, or Brydge, which turns an iPad into a laptop resembling the MacBook Air.

The large amount of money that Pebble has raised — equivalent to what a young company would get in a second round of venture capital financing — also signifies a coming of age for Kickstarter.

“This year marks the year that we’ve seen Kickstarter enter the real world in a number of ways,” said Perry Chen, one of its founders. “At Tribeca Film Fest, there are a dozen different Kickstarter-backed films, there’s an installation at the Whitney Biennial that was a Kickstarter project and we just had our birthday party at a Kickstarter-funded restaurant.”

Much as the introduction of cheap Web services lowered the barrier to entry for people seeking to create a start-up, and as offshore manufacturing gave entrepreneurs a chance to make products without having to build a factory, Kickstarter offers budding entrepreneurs a way to float ideas and see if there’s a market for them before they trade ownership of their company for money from venture capitalists.

Mr. Migicovsky and his partners did not have to give up any portion of their company to the venture capitalists. They still own 100 percent of it.

“Kickstarter is already proving to be a viable alternative to starting a company the traditional way,” said David H. Hsu, an associate professor at the Wharton School at the University of Pennsylvania who studies entrepreneurship and innovation.

“You’re activating a user base that you know will be interested in your project,” he said. “Which, historically, has always been the biggest trouble for crowdfunding sites, getting traction and critical mass.” As Kickstarter prospers, other sites for financing through a crowd have appeared. There’s Crowdtilt, a service that lets friends contribute money for outings like a beach vacation; Zokos, a start-up that gives guests a way to pitch in for a dinner party; and Gambitious, a financing site devoted to indie game developers, to name a few.

But Kickstarter is the biggest. To date, it has raised more than $200 million for 20,000 projects, or about 44 percent of those that sought financing on the site. Only projects that meet their stated financing goals receive money.

Patrons who back Kickstarter campaigns are often rewarded with insider access to the projects they finance, and in most cases, a tangible reward for their money. In Pebble’s case, the reward is an actual watch, making it a more appealing project than, say, a movie, where the payoff is a little harder to show off to friends.

Kickstarter does not charge anything to set up a campaign. But if it is successful, Kickstarter takes 5 percent of the final amount. Amazon, which processes the payments, takes 3 to 5 percent.

Mr. Migicovsky says he suspected that the Pebble project might be a runaway success. “The plan,” he said, “was always to go big.”

Before introducing the project on Kickstarter, Mr. Migicovsky says he sought advice from previous successful project founders on Kickstarter, including the creators behind Twine, colorful blocks outfitted with sensors and Internet connectivity, that blew past its original goal of $35,000 to raise more than $500,000 — an anomaly considering that the average Kickstarter project size hovers around $5,000.

“They all told us not to focus on the hacker market because they are already going to love you,” he said. “But how can you tell people who have no idea what this is why they should back it?”

A carefully made video helped to earn the trust of their backers. Mr. Migicovsky also played up his four years of experience building smartwatches — previously for BlackBerry products — and his time polishing his ideas in Y Combinator, a technology incubator in Palo Alto, Calif. Mr. Migicovsky also worked to broaden the appeal of the watch beyond a tech-focused audience by working with a company called RunKeeper that helps people track their jogs on their smartphones.