Is crowdfunding really worth it?
When one hears stories like that of the Zano pocket drone, one wonders if the gamble that is crowdfunding, is really worth it.
In 2013, the Pirate3D Buccaneer 3D printer, raised nearly $1.5m on Kickstarter. But two years later, the firm behind it, Pirate 3D announced that it had only fulfilled 40% of its orders, ‘due to a lack of cash flow ‘!
Backers of the Sondors eBike, the “Tesla of e-bikes,” were happy to part with $500 for a bike that promised to cruise up to 50 miles on a single charge, cover all types of terrain with a top speed of 20 miles per hour. The campaign reached its funding goal and became Indiegogo’s second most-successful crowdfunding campaign.
However, the campaign was soon blighted with accusations of deception and even got weirder when the PR firm behind the campaign, sued the CEO for breach of contract. This left backers wondering if they’d ever get a bike.
The crowdfunding industry is plagued with everything from outright scams (Kobe beef) to incidents of mismanaged funds (The Doom That Came To Atlantic Cit Game).
Yet, despite these examples, the space is also filled with success stories like the Pebble and An Hour of Code for Every Student–projects that show how this type of funding can bring creative ideas to reality.
Crowdfunding platforms are also expanding quickly; on Kickstarter, it took five years to raise the first billion dollars. The next billion was raised in only 18 months; when the platform launched in Germany, it raised $2m in its first two weeks!
You see, it IS possible to successfully fund projects, it only requires a great deal of planning, so one doesn’t end up like the examples above
In creating this 9-point Crowdfunding Masterplan, we find that successful project creators evaluate their campaigns at three crucial stages:
- During the campaign
Pre-planning is the most important part of your campaign as it’s difficult to make improvements once your campaign has launched. It’s important that you don’t launch before you are ready lest you omit important steps to success.
First, make sure you choose your platform wisely:
- The success of your project depends on the supporters you can find on your chosen platform.
- Have similar projects been successfully funded on that platform?
- Do thorough research and find a platform that suits the needs of your project and your brand.
Know your numbers:
Get your key numbers dialed in before you launch any campaigns.
- How much money will you ask for? How many units will that amount produce?
- What is the fee structure on your platform of choice?
- Decide on the reward structure and figure out how much it will cost to fulfill those rewards?
- Everything from how much it costs to produce it, ship it, any service fees, taxes etc.
- There will always be unexpected costs, that will add up and you can find yourself out of pocket.
Pitching a physical product?
Then, you must have a working prototype to show prospects.
Yes, you will have to spend some money to produce one, but you’re not going to convince anyone by simply telling them about this wonderful idea you have.
You must be able to show them something tangible; Kickstarter recently made it compulsory for projects to show backers a prototype of, not a photo-realistic rendering.
2. During The Campaign
Use Your Network
Tap into your immediate network of friends, family and influencers to donate to your campaign on the day it launches.
Data shows that if your campaign raises up to 30% of its goal within the first couple of days of launch, you’ll increase your chances of reaching your goal.
It is vital that you only ask for the minimum amount you need
Always start with the lowest possible figure that will allow you get a MVP produced.
As long as it’s reasonably priced, this minimum amount will help reduce any price sensitivity that potential backers may have. This also leads to more backers getting on board and help your project reach its goal quicker.
One of the most important parts of any campaign is the video deck and pitch
Your video should tell them how your product solves a problem you were having and how you now want to make sure it solves their problems too.
A fair number of crowdfunding contributions are ‘impulse buys,’ so a genuine human story that the audience can relate to, will grab their attention and convince them to contribute.
The timing of your campaigns can be crucial to determining its success
Whatever you do, don’t run a crowdfunding campaign in December!
People have just finished buying presents, meaning potential supporters will probably be low on cash. This makes many potential backers more than a little budget-conscious.
With the campaign completed, and funds raised, it’s down to one final hurdle: crowdfunding order fulfillment.
From the onset, you should assume that even your best production estimates will be further delayed.
An estimated 84% of projects experience delivery delays, mostly because of oversight at some stage in the plan. By staying very conservative with your projected production and delivery timelines, you can mitigate any ‘surprise’ delays.
You can easily get blindsided by the the cost to ship your products thousands of miles away, effectively eating into any profits you made.
Many campaigns get around this by asking international backers for an extra $15-$20 to cover the increased shipping cost–yet, with new logistics services, in many cases, when you plan ahead it is very possible that international shipping can be just as affordable as domestic.
Because of this, you will sell more because international backers won’t suffer an increased cost when purchasing.
When British rock group Marillion, first showed how an engaged and loyal crowd can be used to finance a project, they probably never thought we’d one day donate to create plastic bacon; but I digress.
Crowdfunding success leaves clues; but studying only runaway success like the Coolest Cooler will make you underestimate how much work actually goes into running a successful crowdfunding campaign.
The European Director for Technology and Design for Indiegogo, Anastasia Emmanuel, said it best when she said:
“Most people don’t know how to bring an actual product to market…Many things can go wrong….certification, testing, components, shipping….it’s just crazy.”