We’re just about emerging from the deep end of a global recession and as such, people are being more careful with their money now than they ever have been before. So not a great time to be asking people to pay for a share in something which technically doesn’t exist yet right? Or so you’d think. Crowd funding however, has taken off in the last few years in a manner that even its most optimistic proponents couldn’t possibly have predicted.
What is Crowd Funding?
What it says on the tin essentially. A crowd funded project offers backers the chance to ‘pre-order’ a service or product. The different however is that their funds will go directly into the development and production of the product or service in question. The most common products funded via crowd sourcing are musical releases, games, films and general ‘artistic’ projects, but everything from gadgets to cookbooks and clothing collections have been funded through websites such as ‘Kickstarter’ and ‘Indie GoGo’. These are sites specifically setup to act as a virtual ‘middle-man’ between you and the consumer and have been absolutely vital in cementing crowd funding as a legitimate alternative to traditional funding (through business loans, business partners etc.). On these sites, users offer an introduction to their campaign, outlining their intentions and what form the final product/service will take. A target ‘goal’ is also set and if the goal is not reached within a set time limit (usually 30 days) then the project is cancelled and all monies are returned to all backers.
Why is Crowd Funding Popular?
Whilst many might dismiss it as a minor cultural ‘fad’, there are actually numerous benefits to crowd sourced funding. On the side of the project managers, the middle man is cut out of the equation entirely, meaning that developers, inventors and entrepreneurs are able to take their projects through to completion without interference from any third parties. This creates a level of creative and artistic freedom that just wouldn’t be possible through conventional funding. There is also a level of ‘connection’ offered with a crowd funded project where the consumer really feels like they are a part of the process, and in a world that is becoming more and more detached from itself and its people by the day, this is an incredibly attractive concept for many people. Recent examples of supremely successful crowd funded projects include the Veronica Mars movie, which raised in excess of 5 million dollars during its 30 day pledge and the Angry Video Game Nerd movie, which raised a less impressive (but still rather grand) $325,000, more than 400% of the initial goal. Outside of the entertainment world though it can be harder to get noticed. These campaigns were both run by noted ‘public figures’ who had already enjoyed a certain amount of publicity. Getting a crowd funded project off the ground without that kind of publicity is significantly more difficult, but it is possible.
The Ouya was an open source games console with architecture based on the ‘Android’ operating system. It was listed on Kickstarter in July 2012 with a goal of half a million dollars. Thanks to unprecedented work-of-mouth-buzz generated from gaming websites and on forums across the world however, the goal was reached in 8 hours and by the time the kickstarter fund closed a month later, almost 9 million dollars had been raised, more than 900% of the original goal! Although the Ouya went on to be a significant let-down for its early backers (late console deliveries, sub-standard performance and a truly diabolical controller design were amongst the most common complaints) the campaign shows how powerful crowd funding can be when the right circumstances present themselves.
Incentives – The majority of crowd funded projects will offer added incentives that give backers a reason to donate more money towards the campaign. This could be anything from offering a special edition of the final product to recording a personal message for the backers in question, the options are truly limitless.
Analysis – Before you even start to think about your campaign, make a list of every single one of your potential costs and make sure that your costs can be COMPLETELY covered by it.
Promotion – Use social media sites such as Facebook and Twitter to get the word out about your campaign but also don’t be afraid to use conventional media. Initial support from friends and family is also vital as it’ll make the campaign seem immediately legitimate if there are signatures there from the get-go.
Prepare – Spend at least a month preparing your campaign before launch so that you have something to show backers that might entice them into donating.
Know Your Audience – Perhaps most importantly, do your research. Look at other campaigns similar to your own that have been successful and those that have been unsuccessful. Why did the successful ones work and why did the unsuccessful ones fail? The answers will be an unbelievable boon to your own campaign.