When I first heard about crowdfunding several years ago it caught my imagination. As someone with a background in marketing and social enterprise I love the idea of pitching an idea to individuals to grab their attention and get lots of them to ‘invest’ (yes – I do think crowd-giving is different from making a donation) relatively small amounts of their money to help turn the idea into action. With it being done mainly online, it requires real communication skills – very little time to make your case etc.
Using social media allows you to reach thousands of people at very low-cost – assuming you have online access to your own and other people’s networks – and this adds to the appeal of this one-to-one approach. Equally important for me is the potential to sustain a more personal relationship with your investors after the crowdfunding campaign is over.
Since first hearing about crowdfunding, I’ve invested in two projects – to publish a book on timebanking ( details via www.timebanking.org ) and support a short documentary film project (www.facebook.com/ZebrafishMedia are the filmmakers). Both reached their targets and I’m now hoping to emulate their success by crowdfunding an element of my social enterprise start-up – The Repair Shed (details elsewhere on this blog site – and watch this space for updates!)
I’ve now become an ‘overnight armchair expert’ in crowdfunding largely thanks to an excellent workshop by Anne Strachan at www.crowdfundUK.org [declared interest – I worked with Anne many years ago when I had hair and a beard]. I also have a nodding relationship (they nod off when I start talking to them…) with a couple of the people behind www.buzzbnk.org – one of many crowdfunding platforms to choose from. [Note: under the crowdfunding umbrella there’s crowd-investing, crowd-lending, and crowd-giving. I’m only talking about crowd-giving here.]
So what lessons have I learnt so far about achieving crowdfunding success?
It’s a lot of hard work! The crowdfunding platform provider will give you the benefit of their experience and expertise and the technology behind the process (for which they charge a commission of around 5%) but the success or otherwise of the campaign, as we experts call it, is down to you. Some crowdfunders have described it as a full time job and Anne Strachan estimates that when the campaign goes live (most are 30 – 90 days, but research suggests 30 – 45 days works best) you’ll need to spend 2 -4 hours a day to manage and refresh the promotional push.
Don’t do it all by yourself: Build your team. Think of those ‘friends, family and fools’ who traditionally fund small business start-ups and invite them to donate their time rather than money – particularly if they’ve got specific and relevant expertise and contacts eg in media promotion and video-making. It’s also important that team members are willing to use their social networks to spread the word.
Be realistic about success: All the real crowdfunding experts I’ve spoken to manage expectations around the likelihood of reaching target sums, quoting success rates of 40 -50%. However… of 407 projects accepted by big US crowdfunding platform Kickstarter when they launched in the UK in October 2012, only 30 reached their funding target – that’s little more than 7%! Maybe this is because Kickstarter is a big hitter and most projects are small fish in a big pond?
Set a realistic funding target: What’s realistic? Check out the many crowdfunding platforms to see what sorts of sums are being sought and achieved for proposals that are comparable with yours. More generally, learn from other crowdfunders – many are willing to share their experiences (good and bad).
Note – in most cases, like in Dragons Den, if you don’t raise the full amount in a specified time you don’t get anything (but nor, in most cases, do you have to pay any commission to the crowdfunding platform providers). Bear in mind you can ‘aim low’ while you cut your teeth on crowdfunding and then increase your targets as you learn the ropes, so becoming a ‘serial crowdfunder’.
So you need to have time to invest upfront with no guarantee of success – just like with conventional fundraising.
More specifically – assuming there are 3 elements in a crowdfunding campaign – the idea, the crowd, the promotion (including pitch and online campaign) this is what I’ve learnt so far about each element…
Your crowdfunding idea needs to have a beginning and end: People need to know what success will look like – which is why book publishing and film making is so suitable – they’re quite tangible. This means you wouldn’t pitch a social enterprise start-up in its entirety, but it could be a discrete, definable part of that start-up process.
It’s about love not money: Mark Kelly, keyboard player with the ‘original crowdfunders ’ – rock band Marillion – believes your project has to be something people believe in and get excited about. There’s a reward system associated with crowd-giving but unless you’re Marillion – see link to film clip below – the idea and other factors, such as a personal connections, are likely to be more important than the reward.
It’s all about networks and warm relationships: You need to warm up all your contacts before (for as long as two months in advance some suggest), during and after the campaign goes live. Importantly, you must maintain contact with those who have pledged their support – they are your advocates to bring in additional support through their networks. It may be you go back to existing supporters for a final push if you’re just short of your target as it gets to the deadline.
It’s about getting personal: Anne Strachan suggests you should expect to get 40% of your total from your personal social networks, after that it’s friend’s networks and, maybe, friends of friends. I’ve read a statistic that, on average, only 20% of your social media contacts will forward your posts to their networks.
Marillion crowdfund albums and concert tours from their fans – an extended family? Mark Kelly says they can only do this by building trust. This is a good reason to ‘under-promise and over-deliver’ in what you say you’ll do with the money (and the rewards on offer) – if you disappoint you’ll probably lose support forever.
Think why people will support your proposal. Your idea must appeal – a good story, captures the imagination etc – but the most likely reasons people will invest will be personal connections eg through family or local interest. Don’t forget what Mark Kelly said about trust.
The pitch is key: This is usually an (average) 2 minute film which, in reality, has to grab the viewer in the first 30 seconds. You are inviting people to literally buy-in to your story – so it needs to be well told and have credibility – that it’s an achievable and viable idea. [Tip – look on crowdfunding pitches for projects that have exceeded their target amounts]
People won’t go looking for your pitch: However good your filmed pitch (and notwithstanding an online celebrity endorsement or the film going viral) you will need to drive people to it. Except for crowd-investing, people don’t go trawling crowdfunding platforms looking for good ideas to support. Off line promotion to social networks is important alongside online use of social media.
Keep your campaign fresh: You’ll need a lot of pre-planning to identify different and relevant hooks on which to hang your publicity – to sustain interest and momentum through the 30 -45 day live period.
The rewards are relatively unimportant: With crowd-giving, you would plan to offer rewards as a ‘thank you’ for different levels of support but these will probably not make or break the success of your campaign; other factors are likely to be more important. The rewards should be relevant to the project proposal and their perceived value can be higher than the actual value eg exclusivity for big-givers. The story of how Marillion have crowdfunded so successfully is told in this film clip http://binged.it/17cuHDB – well worth watching and note the great rewards on offer!
Success in crowdfunding depends on: the strength of your idea; the quality of the pitch; the strength of your (online) social networks; your team – to help spread the load and sustain the promotional effort to more people. But remember, crowdfunding is only part of the picture…
“ If failing on Kickstarter is the end of your project, then really you should never have started it in the first place” Tudor Davies, raised only £4,000 of £12,000 target to fund a bike light that illuminates the rider as well as the road, but his business is now going from strength to strength.
Further information: See Anne Strachan’s blog on timing http://bit.ly/17gDep5, why people donate http://bit.ly/17opLAM, measuring success http://bit.ly/1iWuMjW, and an excellent A – Z of crowdfunding tips http://bit.ly/1bjnaqV