Neil Young's Kickstarter Harvest Nears $5 Million

NEW YORK (TheStreet) -- It's hasn't been two weeks since Neil Young unveiled his new company PonoMusic on a stage at SXSW in Austin and launched a Kickstarter campaign. Within hours, that campaign blew through its goal of $800,000. At last check, it had netted over $4.8 million with 21 days to go.

While most of those backers are from the U.S., a good number are from parts of Europe, Asia and other parts of the world.

"We're delighted with the response," CEO John Hamm said, in an interview Monday with TheStreet. "The 14,000 backers to me are every bit as important as the money."

In hindsight, crowdfunding seems like the perfect vehicle for Young's company, using the singer/songwriter's rock star status to best advantage simultaneously to raise cash and generate buzz for the company's release of its products. Even Hamm said he underestimated how powerful a tool a Kickstarter campaign could be, as the community of backers themselves generated more interest in the project through social forums. That sparked a movement that, in turn, attracted additional media attention.

"I chose Kickstarter mainly because of the intimacy of the direct connection with the customers," Hamm said. "What I underestimated was the community."

Young and Hamm initially approached venture capitalists but couldn't get a firm commitment. At SXSW, a somewhat frustrated Young laid the blame for that on the company's vision for restoring a more complete music experience through high-definition audio technology.

"I was deeply shocked by the fact that the venture capitalist world did not understand this opportunity," Young told the audience. "The fact that they couldn't own it -- that you couldn't do something to the sound that they would own."

But that may be only part of the issue. Young's technology is complex and has been under development for years, wrestling with major obstacles. Coding techniques and hardware designs were developed, scrapped and reworked. Enough pieces of the puzzle are still being hammered out that only five prototypes of the PonoPlayer exist.

Pono most resembles Apple's (AAPL) digital music arm in that it has two big components: a $399 iPod-like piece of hardware roughly the size of a handheld mobile device; and an online store, like iTunes, that will offer a central location to find a wide variety of high-quality digital audio files. While Pono offers the opportunity for the highest quality digital audio experience, it doesn't impose its own format. The format and degree of quality are choices left to the artists.

Although some press members were given a private screening of the high-quality Pono files, Hamm said, no company exhibit booth was set up at SXSW.

"We just didn't have the manpower to man it, and that's the truth," Hamm said. "We didn't go there to demo Pono per se. The reason we went was to launch the movement," including the Kickstarter campaign.

Hamm sees the "movement" part of Pono as Young's area of specialty.

"He's really about, do people get what we're trying to do here. He's very savvy as a businessman," Hamm said. But in public, Young tries to steer clear of painting himself as a businessman.

"Neil is not a commercial guy. He's a very authentic guy. You'll never see his picture on a box of Kleenex," Hamm said. "He does not want to mix up his passion for the movement with his concerns for the business. That's why I'm the CEO."

Nonetheless, Young is very actively engaged in all aspects of the business.

"I talk to him like clockwork five times a day," Hamm said. "The conversation always starts out, 'John? It's Neil. I've been thinking . . . ' And what comes next is something new for the Web site or some new idea for the player."

But it's the noncommercial side that comes across when Young speaks in public. At SXSW, Young emphasized that Pono is about opening the door for the acceptance of a new standard of quality. If another company comes in and steals the idea and trounces Pono, artists and music lovers will only benefit.

"It's a no lose situation," he said, to applause. "We win. Everybody wins."

That's a tough sell for venture capitalists.

Enter Kickstarter. The nearly $5 million pledged so far should give the company plenty of cash free and clear to pay off its development costs and existing debts and fund the company at least through the end of year "if not well into next year," Hamm said. "We're already a revenue company now."

The initial goal of $800,000 was modest, Hamm said, intended only to "finish" the hardware component, the PonoPlayer.

"Our expectations were we could exceed that target," he said, adding that he was "superdelighted" with the result.

The funds raised will become available for the company when the Kickstarter campaign closes in April. In the short term, the company is working to fulfill its initial deliveries for October and a second larger shipment of orders in December.

"I'd like to bring demand online in line with supply by December-January," Hamm said.

-- Written by Carlton Wilkinson in New York

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