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Crowdfunding Projects Explode, Despite Zach Braff Pushback

<p>Braff raised a few eyebrows when turned to crowdfunding site Kickstarter to raise $3.1 million for his new film.</p>
PARK CITY, UT - JANUARY 18:  Filmmaker Zach Braff attends the The Variety Studio: Sundance Edition Presented By Dawn Levy on January 18, 2014 in Park City, Utah.  (Photo by Jonathan Leibson/Getty Images for Variety)
PARK CITY, UT - JANUARY 18: Filmmaker Zach Braff attends the The Variety Studio: Sundance Edition Presented By Dawn Levy on January 18, 2014 in Park City, Utah. (Photo by Jonathan Leibson/Getty Images for Variety)Jonathan Leibson / Getty Images

Zach Braff's directorial debut, "Garden State," earned $35.8 million after it was released in 2004. That might be why he raised a few eyebrows when turned to crowdfunding site Kickstarter to raise $3.1 million for his new film "Wish I Was Here."

He isn't the only big name asking for money. In a real-life "Cool Runnings" story, the Jamaican bobsled team raised more than $180,000 in donations, including $54,000 from Indiegogo, another crowdfunding site. (It also raised a significant sum in dogecoin, the virtual currency based on an Internet meme).

Braff is a famous actor. Jamaica funds some of the top Olympic athletes in the world — at least in track and field. Why, suddenly, are they looking to ordinary people for funds? Has crowdfunding finally jumped the shark from a platform for small independent passion projects to just another alternative to traditional investment?

Crowdfunding sites — just in case you haven't been hit up for funds by your friends on Facebook — give people a place to raise money for creative projects. In exchange, donors get rewards and a sense of self-satisfaction, while the sites usually take around a 5 percent cut.

Before Braff was in the headlines for "I Wish I Was Here," people were questioning why director Rob Thomas couldn't ask Hollywood for the $5.7 million fund his "Veronica Mars" movie and why Dresden Dolls singer Amanda Palmer could raise more than $1 million to fund an album and tour and then ask musicians to appear with her on-stage for free.

"It's not an investment. I'm supporting a creative endeavor"

If people are fed up, they certainly aren't showing it with their wallets.

"Crowdfunding is growing very rapidly," Ethan Mollick, an assistant professor of management at the Wharton School at the University of Pennsylvania, told NBC News. In 2012, the amount spent on crowdfunding projects exploded by 81 percent from the year before to $2.7 billion, according to research firm Massive Solutions. The total for 2013 is expected to be around $5.1 billion, with no end to the growth in sight.

New crowdfunding platforms are popping up all of the time. Kickstarter is by far the industry leader, followed by Indiegogo, but there are plenty of niche sites out there as well, such as appbackr for apps, crowdrise for charities and even offbeater for "adult" projects.

More often than not, projects don't reach their fundraising goals. Kickstarter currently lists 55,370 successfully funded projects, compared to 71,664 that didn't make it. Of course, if they fail, donors don't have to pay up.

It's when projects succeed and backers don't get their rewards that the grumbling begins. The problem is especially pronounced with gadgets, which have to deal with manufacturing and testing setbacks that arts projects don't have to. Overall, 75 percent of fundraisers are late delivering rewards, Mollick said, although the number that fail to deliver altogether is less than 1 percent, mostly because the crowd ends up policing projects that look fishy.

Some backers complained that Braff wasn't exactly rushing to send them their rewards. Others waited in line at Sundance for tickets to the premiere only to be denied. And if "Wish I Was Here" becomes a hit? Backers won't make a dime, as Kickstarter doesn't allow donors to share in the profits. (If they did, that would move them into the realm of equity crowdfunding, which has to deal with evolving regulations from the SEC.)

Many fans, however, seemed forgiving.

"It's not an investment. I'm supporting a creative endeavor," Michelle Jones, 37, a freelance writer from Louisville, Ky., told NBC News. "If you are a Kickstarter supporter, and you view it as an investment, then you are probably going to be disappointed."

Jones, who has backed more than a dozen projects, gave Braff least $100, enough to earn her a limited-edition version of the movie's soundtrack on vinyl. She hasn't received it, but said that she understands that it will take some time.

People who back projects aren't the only ones who should be careful when it comes to crowdfunding, Mollick, the professor, said.

"We tend to think of projects like Zach Braff's that raise way more money than they ask for, but that is really rare," he said. "Most projects only beat their goals by very small margins."

People raising money for a film or a gadget can underestimate their costs, he said, leaving them in the hole financially while angry backers complain. Not to mention that many projects change over time.

"Most start-ups and creative projects pivot as the creators learn more about their market and product, as as their creative ideas evolve," he said. Pre-selling an idea and then having to stick to it, he said, "can actually be stifling in its own way."

Still, crowdfunding should continue to grow in 2014, he said. Despite the risks, using platforms like Kickstarter gives people access to both capital and free publicity. For backers, it lets them combine their idealism with tangible, if not occasionally delayed, rewards.

"Kickstarter is a way for me to fund something that I want to see in the world," Jones said. "I loved 'Garden State,' so I was happy to see Zach Braff direct another movie."