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Pioneer Valley Business 2014: Entrepreneurs use crowdfunding to raise money, interest in their business



Wednesday, March 05, 2014
Though Small Oven has yet to open for business, co-owners Amanda Milazzo and Julie Copoulos already have an idea who more than 200 of their first customers will be.

They plan to open the new bakery and café at 36 Union St. in Easthampton in late March or early April. While they were still in the process of securing the space, 216 donors gave them a total of $17,617 toward startup costs through an online campaign they started on Kickstarter, a website that gives people a platform to ask for donations toward a creative project. This practice, sometimes called crowdfunding, is popular among artists, filmmakers and musicians, and has proven a useful tool for hopeful entrepreneurs to not only defray startup costs, but gauge interest in their business.

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Another crowdfunding website called IndieGogo has also been used by new Valley businesses, including The Quarters, a restaurant, bar and arcade in Hadley that opened in January, and Knack, a recycled arts and crafts supply store in Easthampton that opened in July 2013.

There is currently no bakery in Easthampton, Milazzo and Copoulos said. Copoulos, who lives in Easthampton, said she has noticed that residents tend to drive into Northampton for restaurants. She said she hopes Small Oven will help encourage people in Easthampton to walk to the center of their home city instead of taking their vehicles to surrounding communities.

“Our Kickstarter gave us confidence that people wanted to support that ‘keep it local’ movement, and that this is something they wanted in their town,” said Copoulos, 25. The menu at Small Oven will include baked goods such as breads, pastries and cakes, and sandwiches for breakfast and lunch, according to the pair’s Kickstarter campaign.

Copoulos and Milazzo had been independently running their own businesses at the time they decided to join forces. Milazzo, 35, of Northampton, runs Cakery Dauphin, through which she sells cakes and cupcakes for special occasions. She is also a manager at Bistro Les Gras in Northampton.

Copoulos runs Little Raven Kitchen and Gardens, through which she sells sourdough bread and homegrown organic greens at the Easthampton Farmers Market. She is also a baker and server at Jakes Restaurant in Northampton.

For their Kickstarter campaign, they asked for $15,000 to put toward startup costs such as furniture, pots and pans, ovens and renovating the space. By the time the 30-day campaign ended, they had exceeded their goal.

According to the Kickstarter website, the funds raised start off in the form of pledges by the donors. Project creators must reach their funding goal in order to receive any of the donations, otherwise the donors get to keep their money.

On IndieGogo, users can raise money for reasons other than creative ventures, including personal needs, and campaigners get to keep the donations received even if they do not reach their goals. Both Kickstarter and IndieGogo take a small percentage of all funds raised.

Both websites also require anyone who opens a campaign to establish a reward system — called “perks” on IndieGogo — for donors depending on the amounts they give.

Before Copoulos and Milazzo started their Kickstarter campaign last November, they spent about three months of planning and establishing their reward system, Milazzo said. They also created a four-minute video describing their goals over playful footage of them baking.

“It’s an option in this world right now to do crowdfunding” but “it takes planning to do it,” Milazzo said.

Throughout their campaign, they posted updates on their Facebook page, where they continue to describe their progress toward opening.

Their reward system ranged from a free cupcake for those who pledged $20 to a free loaf of bread every week for year for those who pledged $1,000 or more. Copoulos said they tried to find a balance where they built the price of the rewards into the donated amounts while still being able to raise money. “They understand when they’re doing it that they’re not getting something for $20,” Milazzo said. “What they’re getting is what they’re helping create.”

Quarters in Hadley

The Quarters, 8 Railroad St. in Hadley, houses several classic arcade games such as pinball and Pacman. Their reward structure started at $25 in game tokens for donations of $25 and ranged up to a six- to eight-hour rental of the space with free use of the games and as well as a T-shirt for donations of $500. All donations from $25 and up also merited an invitation to one of the venue’s private opening parties.

Chris Perry, an associate professor of media arts and sciences at Hampshire College, was among 123 donors who gave a total of $7,505 to the IndieGogo campaign for The Quarters. He said he donated in part because he would have bought game tokens at The Quarters anyway.

“I really wanted something like that to exist. I knew that I would get value out of having it around here,” said Perry, who lives in Northampton. “In my act of pre-buying I’m also expressing my support.”

Co-owners George Myers and Greg Stutsman set their funding goal for their campaign, which ran from October to November 2012, at $7,500 to go toward the costs of the arcade games. They have also kept an active Facebook presence since they began raising money.

Myers said they bought these games from a “hodgepodge” of places including collectors and Craigslist sellers. The games should be familiar to anyone who grew up from the 1970s through the ’90s, he said.

“We wanted it to represent a cross-section so people can be like, ‘That’s the thing I remember,’” said Myers, 33, of Northampton. He is also the general manager of Amherst Cinema and a member of the Northampton Arts Council. Stutsman, 32, of Amherst, is a Realtor with Sawicki Real Estate and serves on the Amherst Planning Board.

They also obtained startup funds from Common Capital, a non-profit organization in Holyoke that helps finance small businesses. Michael Abbate, chief operating officer of Common Capital, said that the donations Myers and Stutsman received while still in the process of starting up added to their credibility.

“It proved to us that they had a broad following on their social media platforms that people were willing to commit money,” said Abbate.

Knack co-owners Amber Ladley, 34, of South Hadley, and Macey Faiella, 46, of Southampton, raised $5,001 toward their goal of $8,000 to open in their permanent location at 116 Pleasant St., Suite 126, in Easthampton. Previously, they had sold local artwork at temporary locations and craft tables. Their startup costs included paint, tools, insurance and their first and last month’s rent and security deposit.

Faiella said she believes it is useful to have a funding platform where interested community members do not have to sign on as investors, but can instead just donate small amounts of money.

She said they did not start the campaign, which ran from April to June 2013, until they felt they built up enough of a following through their Facebook page as well as their temporary shops throughout the area. Once they began receiving donations, they began to feel confident they would have a customer base at a permanent location, Ladley said.

“People want us to succeed,” Faiella said. “We really want to do the best we can for them.”

As Milazzo and Copoulos prepare to open, they find themselves making a conscious effort to tailor their business to the community that helped fund them.

“We feel like the community is a part of who we are now,” Milazzo said. “When we open the doors, we’re indebted to them.”