When Jenny Schwarz decided that she was ready to start a new restaurant in Oakland, she took to the Internet, rather than the banks.
“We had a personal loan and our savings. We had no investors and we didn’t want another loan,” she said. “We knew that another restaurant had done a Kickstarter campaign and so we started working on that instead.”
Schwarz’ restaurant, Hopscotch, opened in the uptown neighborhood last June and serves American food with a Japanese twist, along with a wide array of cocktails. Its Kickstarter predecessor was FuseBOX, a Korean-American restaurant located in West Oakland and which was opened last May by Sunhui Chang and Ellen Sebastian Chang. Last October, a third Oakland restaurant joined them in using a Kickstarter campaign to help with starting costs: Nido, a farm-to-table Mexican restaurant in Oakland’s Jack London district. It shares space with Pietisserie, a pie shop that specializes in unique pies with mostly local and organic ingredients.
Kickstarter, which was launched in 2009, is a website that allows people to help fund projects, mostly creative ones such as independent films, music albums, comic books or technology-based inventions. A person who wants to get funding for a project can make a Kickstarter page explaining the project and its purpose—often using a video as well as text—then set a fundraising goal and a deadline. Then they spread the page’s link around their social networks, urging friends and family to donate small amounts to their campaigns. But sometimes, projects go viral or are featured as Kickstarter “Staff Picks,” which result in many strangers donating.
If the goal is met or exceeded by the deadline, the project owner gets the funds through Amazon Payments, which acts as a third-party payments processor. Kickstarter and Amazon take a small percentage fee. But if the goal is not met by the deadline, the project owner gets nothing.
Some recently successful projects include the funding of The Veronica Mars Movie, whose Kickstarter page was started by Veronica Mars TV show creator Rob Thomas, and Lumio, a portable lamp that unfolds from a book. Kickstarter has also been used to fund Academy Award-nominated documentary shorts like “Sun Come Up” and “Incident In New Baghdad.” Last year, supporters used it to fund the Pebble, a customizable watch that connects to iPhone and Android devices. Pebble’s inventors aimed to raise $100,000 and ended up getting over $10 million.
Yet successful projects make up less than 50 percent of Kickstarter projects, and most successful projects make less than $10,000, according to the Kickstarter stats page.
Kickstarter donations work on a rewards system, and the project owners can decide what rewards to offer donors for each pledge. Hopscotch owners Schwarz and Kyle Itani decided, for example, that a pledge of $5 or more would get the person who donated a high five and a big “thank you,” while a pledge of $4,000 or more gets the person who donated a private party with 30 friends at the restaurant, which will feature a chef’s tasting menu, beer, wine and cocktail pairings.
Currently, in the United States there are at least 100 restaurants that are running or have run campaigns on Kickstarter. The Good Karma Prasad Café in Los Angeles, a vegetarian/vegan musical café, recently raised more than $1,000 above its goal. In Brooklyn, the DUB Pies Food Truck project exceeded its fundraising goal by over $5,000.
Yet despite the number of restaurant owners using the site to help start their shops, Kickstarter’s guidelines state that its site cannot be used to fund businesses. The Kickstarter website states that projects cannot be open-ended, as an ongoing business is. “A project has a clear goal, like making an album, a book, or a work of art,” according to the Kickstarter project guidelines. “A project will eventually be completed, and something will be produced by it.”
(Justin Kazmark, a member of Kickstarter’s communication team, declined on behalf of the company to be interviewed for this story.)
Some restaurant owners say that they’re not breaking the rules because they are using the money to fund specific projects within each restaurant, not the entire restaurant. Schwarz said Hopscotch’s Kickstarter money was used to build out the restaurant’s bar, and owner Cory McCollow said he used the money to bring Nido up to building codes by constructing a wheelchair ramp, among other things.
“It’s great for getting a little boost of funding if you have specific things you need to get done,” said Schwarz. “It’s definitely not enough to start a whole business, though.”
The first Oakland restaurant to get start up help from Kickstarter was FuseBOX, which was funded by November, 2011, and exceeded its goal of $15,000 by over $2,000. Today the restaurant serves Korean food as well as some non-Korean snacks to accompany after-work drinks, in the Japanese Izakaya tradition. (An Izakaya is a casual drinking place for working men.) Chef Sunhui Chang serves tofu and small dishes of beef, beans, cabbage or other fresh foods with rice.
Chang said that many of the restaurant’s regulars are people who donated to the Kickstarter campaign. “It’s an ingenious way of collecting funds and building hype,” she said. “A lot of people gave us suggestions and advice. It was easy to feel like part of the community.”
But Chang had some high-profile help—she’s a former theater director and her friend, Whoopi Goldberg, donated to and helped advertise FuseBOX’s Kickstarter campaign, and later used the site herself to help fund her directorial documentary debut, “I Got Somethin’ To Tell You.” Chang said Goldberg thought the concept was great. “She was obsessed with it for a while,” said Chang, who worked with the Academy Award-winning actress many years ago in New York.
The other two Oakland restaurant Kickstarter campaigns, Hopscotch and Nido, were successful even without celebrity support. Hopscotch raised almost $500 more than its goal in May, 2012, and Nido ended its campaign with over $1,000 more than its goal in October, 2012.
All of the owners said the process of fundraising was nerve-wracking because of the immense costs associated with opening a restaurant, including renting a location, building out the restaurant and bringing facilities up to code. Schwarz said it took approximately $150,000 to open Hopscotch. “We had a personal loan and our savings, but we quickly realized that wasn’t going to be enough,” she said.
Nido’s McCollow also said that the Kickstarter money was used in addition to loans and savings. “The Kickstarter money was just a fraction of what it actually took to get the place open,” said McCollow, who liquidated a retirement account to fund the restaurant. “But using Kickstarter helped with advertising, marketing and community involvement, which you can’t really get using investors or another loan.”
Chang said that she went to Kickstarter because Oakland’s city redevelopment funds had dried up. She had already taken out a loan and spent her savings on the place. “Young artists, the working class, people who don’t have investors—they need this extra push to be able to make it happen,” she said.
For the restaurants, however, donations from friends, family and community members, obtained through social media marketing, were the ticket to success. “We were able to create a community base and a lot of enthusiasm before even opening,” Chang said. “This is what small towns are about.”
Correction: While the article previously stated that Jenny Schwarz is a co-founder of Yoshi’s, she is not. She was an employee of Yoshi’s in 2007.