Crowdfunding Overview - 101
Crowdfunding has evolved over the past several years from a place that had a perception, at least in some circles, that it was a place for s
A Crowdfunding Look Back
Crowdfunding has evolved over the past several years from a place that had a perception, at least in some circles, that it was a place for starving artists to find people to donate money to help them with their artsy projects. To learn more check out FREE resources at www.startsolid.com.
Everything from independent music, movies, photography, books and any other type of art imaginable found ways to reach new audiences. At that time crowdfunding rewards or perks were less about tangible items and more about “paying it forward” and supporting someone in return for their thanks. Many of the rewards were things like thank you emails or postcards or even the principle of the campaign would offer to host a dinner for fans. Each of these perks would be priced according to the effort and it gave people a quid pro quo feeling when they would contribute.
What’s Crowdfunding Like Now?
Today, by contrast, crowdfunding is a well respected platform for businesses and companies of all types to engage the most sophisticated early adopter audiences on the planet. Movie studios have harnessed this new medium to engage their prior audience and find new fans at the same time. The Veronica Mars Movie project raised over 5.7 million dollars with over 91,000 participating backers.
Rewards for this project included everything from a bumper sticker to an invitation to the red carpet premiere event and even the chance to name a character in the movie.
Even independent movie producers have crowd funded their projects and in a number of cases raised millions of dollars from their fans.
One of the creative perks here offered to include a live bear in the movie if the fans can hit a certain fund raising target.
Game makers use crowdfunding to get their product launched and in a recent case basically just pressed different versions of the game with the option to have the game creator draw you a custom card if your backing level was high enough.
The explodingkittens.com campaign raised over 8.7 million dollars and put together over 215,000 individual backers. That is a stunning achievement.
One of the most famous crowdfunding campaigns is the coolest cooler. This campaign was originally launched and tried to raise $125,000.
It fell short by only getting around $102,000 worth of backers. Instead of taking this failure as a signal that the idea was stupid and by extension they are stupid and should quit the founders listened to their audience and reworked the campaign.
How many people would be that resilient? Ironically when they relaunched for the second time after tweaking the campaign they lowered their goal to $50,000 since kickstarter.com operates on an all or nothing method of fundraising.
It seems clear they had no intention of falling just short of their goal this time. However, the this second time around they raised over $13 million dollars leaving that fifty thousand dollar goal and the first failure far in the rearview mirror!
Why are people using crowdfunding instead of just launching?
Today the idea of using crowdfunding is taking hold in many companies as a proving ground for new ideas. After all, if you can’t get these sophisticated early adopters to engage with your project then what chance to do you have in the market overall?
The idea of getting 500, 1000, or more preorders of product is also a great way to make your minimum viable product come to life. In the past years there were many cases of t-shirt makers launching their designs on kickstarter.com and if they could not pre-sell 1,000 units they didn’t go forward with that design.
That concept of testing became so popular teespring.com was born and became the de-facto standard crowdfunding platform for t-shirts. Imagine that, a specialized platform just for t-shirts. Yes - there is a crowdfunding platform just for t-shirts. And it is awesome.
Recently a crowdfunding pioneer came back and launched another campaign for their second generation of their product. Pebble had already become a very well known brand and used their original crowdfunding campaign as a massive brand awareness and capital generation tool. This most recent campaign was able to re-harness that prior momentum and it ultimately became the most lucrative crowdfunding campaign to date. Over 20 million dollars was raised in just 30 days with participation from over 78,000 backers on kickstarter.com. Of course we know now that Apple ultimately was the killer of pebble, but it doesn't diminish their accomplishments.
What does this mean to you?
If you have a unique project, product or idea that you believe has merit you should challenge yourself to see if crowdfunding is a good idea for you. Putting these campaigns together takes at least 3-5 months prior to your launch and they are a ton of work. Furthermore think about reality when considering your target amount to raise since most campaigns do not rake in millions of dollars. It is common to see most campaigns in the ten to thirty thousand range (10,000-30,000USD) and less than half are successful. So being realistic about your goal is a good thing if you are considering crowdfunding. Running a crowdfunding campaign is NOT as simply as posting the information. There is a lot of work to get down before hand and a lot of work during to engage your audience.
Another thing to consider is that on some platforms there is a lot of clutter. Sites like gofundme.com and others are places that offer the freedom for anyone to place a project online. That can literally translate into people posting that they lost their iPhone and hope that people will donate to help them get a new one or even to buy them a new car or help them make their rent payments. Those types of platforms are not viable for businesses to test new ideas. They are a different type of crowdfunding which is more donation based vs. a quid pro quo exchange of money for something mostly tangible with the business oriented platforms.
Where should I start my project?
At this time, in my opinion, there are only two choices for any serious artist, business or someone who is truly looking to make a real offer for something cool and unique in exchange for someone committing financially earn on.
Those two platforms are: indiegogo.com and kickstarter.com. Each of those have their own strengths and weaknesses, but that is an entirely new discussion.
To learn more about the differences between the platforms join other entrepreneurs at startsolid.com and opt into our VIP Entrepreneur list. Additional information about platform differences as well as the 7 secrets to running a successful crowdfunding campaign will be shared free in the upcoming weeks. We believe the world needs more Entrepreneurs!
Additional Facts and Findings:
Since I received a comment that my statements are "unsubstantiated" and that there dozens of other alternatives to the two that I think are the leaders, I am adding some additional comments here:
My statements are very qualified and are directed towards entrepreneurs who are seeking a quid pro quo type of crowdfunding(aka rewards funding). Context is very important.
I am NOT interested in a personal fund raising idea like www.gofundme.com which is absolutely credible, but absolutely not oriented towards businesses.
I am NOT interested in debt fund raising which is an entire category of it's own. Http://Moolahoop.com or http://zip.kiva.org are both credible choices.
I am NOT talking about an equity fundraise which is a whole different category. http://Crowdrise.com is also credible, but is directed at charities and causes and therefore not applicable to my subject matter.
http://www.crowdfunding.com shows rankings that support my contention as well. The numbers support my opinion.
Other sites that may exist may or may not be credible. I don’t have time to find out every single one and most entrepreneurs don't have time either. Our job is to make informed decisions quickly.
As an example the site www.fundanything.com originally started with a close association to Donald Trump as a credibility signal. That relationship appears to be over - so the question is does that change the site’s credibility or not? I honestly don't know. I am not a huge fan of Trump to begin with so it didn't make me gravitate towards the site in the first place.
This site: http://www.crowdsourcing.org/directory lists 2,926 sites that are somehow crowdfunding related. I certainly haven't vetted each one. One thing I do know is that they are not all credible even if they are relevant to the rewards funding model.
Inc Magazine did a create a great Infographic Chart a couple years ago that talked about some of the niches and helped people navigate the plethora of choices. It is VERY comprehensive, but it is 2 years old which has to be considered. It is fun to take different ideas through the infographic.
Finally this article talks about the top 26 crowdfunding sites by niche. You'll note that my selections are validated once again in the relevant niche that I am talking about:
I still believe that my conclusion is accurate for the context I am speaking about, but I am happy to agree to disagree on this issue. Send me a link to your article so I can get schooled. :)
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