We have just emerged from the end of a deep global recession and because of this, people are being more careful with their money now than ever before. So it’s not the right time to ask people to pay for a part in something that doesn’t technically exist yet, is it? Or so you think. Crowd funding, however, has increased in recent years in ways not even its most optimistic proponents could have predicted.
What is Crowd Funding?
What it says on the tin basically. Multi-funded projects offer backers the opportunity to ‘pre-order’ a service or product. But the difference is that their funds will be directly used for the development and production of the product or service in question. The most common products funded through crowdsourcing are music 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 set up to act as a virtual ‘go-between’ between you and consumers and are critical in strengthening crowdfunding as a legitimate alternative to traditional funding (via business loans, business partners, etc.). On these sites, users offer an introduction to their campaign, outlining their intentions and the form the final product/service will take. A target ‘goal’ is also set and if the goal is not achieved within the set time limit (usually 30 days) then the project is canceled and all money is returned to all backers.
Why is Crowd Funding Popular?
While many may consider it a minor cultural ‘fad’, there are actually many benefits to crowdfunding. On the project manager side, middlemen are completely eliminated, which means that developers, inventors and entrepreneurs can bring their projects to completion without any third party interference. This creates a level of creative and artistic freedom that is not possible through conventional funding. There is also a level of ‘connection’ offered with crowdfunded projects where the consumer truly feels they are part of the process, and in a world that is becoming more and more detached from itself and its people day by day, this is a very powerful concept. attractive to many people.
Recent examples of highly successful crowd-funded projects include the Veronica Mars film, which raised over 5 million dollars over its 30-day pledge and the film Angry Video Game Nerd, which raised the less impressive (but still somewhat hefty) $325,000, more of 400% of the initial target. Outside of the world of entertainment, it would be even harder to get noticed. These campaigns are equally run by well-known ‘public figures’ who have enjoyed a certain amount of publicity. Getting a crowd-funded project without that kind of publicity is significantly more difficult, but it is is Possible.
Ouya is an open source game console with an architecture based on the ‘Android’ operating system. It was listed on Kickstarter in July 2012 with a goal of half a million dollars. However, thanks to the unprecedented work-of-mouth buzz generated from gaming websites and forums around the world, the goal was achieved in 8 hours and by the time Kickstarter funding closed a month later, nearly 9 million dollars had been raised, more than 900% of the initial goal! Although the Ouya went on to be a significant disappointment to its early backers (the console’s late shipment, subpar performance, and downright evil controller design were among its most common complaints), the campaign demonstrated just how strong crowd funding can be when the right circumstances show. self.
Incentive – Most crowdfunded projects will offer additional incentives that give supporters reasons to donate more money to the campaign. This can be anything from offering a special edition of the final product to recording a personal message for concerned backers, the options are truly endless.
Analysis – Before you even start thinking about your campaign, make a list of each of your potential costs and make sure that they can be FULLY covered by them.
Promotion – Use social media sites like Facebook and Twitter to spread the word about your campaign, but don’t be afraid to use conventional media either. Early support from friends and family is also important because it makes the campaign appear legitimate immediately with signatures from the start.
Prepare – Spend at least a month preparing your campaign before launch so you have something to show backers that might entice them to donate.
Know Your Audience – Perhaps most importantly, do your research. See other successful and unsuccessful campaigns similar to yours. Why did the successful succeed and why did the unsuccessful fail? The answer will be a tremendous advantage for your own campaign.
Crispin Jones write about business for International Name Badge – a global supplier of prestige name badges. Read more by Krispin’s here.