Do you have an idea, project or cause that needs money to get it off the ground?
Has your not-for-profit organisation had its funding reduced due to government cutbacks? Are you unsure of what options to pursue to 'keep the dream alive'? Crowdfunding may be your solution!
Crowdfunding has been around since the mid-2000s; it gained more traction with successful publicised campaigns launched on US-based Indiegogo and Kickstarter platforms and Australian-based Pozible and iPledg.
Today there are over 1000 crowdfunding platforms and the industry is set to raise $34.4 billion in 2015.
Basically, crowdfunding is attracting money from people that you know and don't know. Usually the initial funders (or 'backers') are friends and family, and then friends of friends and family. After you have exhausted that 'list', the rest of the funds come from people you don't know, commonly known as 'the crowd'.
The most common types of crowdfunding are equity-based and reward-based initiatives. Equity-based crowdfunding attracts accredited investors who give money and then receive a stake (i.e., equity) in the company; the Australian Small Scale Offerings Board is an example of such a platform. Reward-based crowdfunding is where backers receive a tangible item or service in return for their funds (e.g. platforms such as iPledg, Kickstarter, etc.).
Crowdfunding can be used for almost any project and cause though it cannot be used for general running costs (e.g., paying utility bills). Successful campaigns have highlighted start-ups, prototyping, publishing, recording, performing arts, charities, schools, community groups, and sporting clubs.
Despite the increasing popularity of crowdfunding, only 50% (or lower) of all projects listed are successfully funded. Campaigns that reach 30% of its funding within the first week have a higher rate of success. Once a campaign hits that mark, the success rate climbs to 90%. The main reason for failure is that people do know how to develop and launch a potentially successful campaign. They either don't have a list and ask for too much money, have a weak 'story', or offer inappropriate rewards.
There is no project too small or too large to crowdfund. The challenge is being able to attract the right people to your campaign and give you money so that it gets funded. There have been many campaigns that have targeted to raise a 'small' amount and by the end of their campaign had raised millions of dollars.
A recent example of this was FlowHive who initially aimed to raise $70,000; the 45-day campaign finished with approximately USD$12.5 million.
There are commonalities you will find with successful projects. Projects need to be carefully planned and prepared including formulating a budget. The budget includes the amount you need to raise as well as how much it will cost to develop and launch the campaign (e.g., producing the video, etc.) and servicing the rewards.
It is really important that you have an existing audience and especially one that will 'give' to your campaign. If you don't have a 'giving' list, the chance of meeting your goal diminishes.
Equally important, people must be attracted to the 'story'; do you have a compelling story and 'sellable vision' for the product, idea or cause? Your story needs to be supported by a strong presentation, ideally coupled with high production videos. For reward-based crowdfunding, it is important that there is an appealing reward structure for the project's potential backers.
Once you launch your campaign, you have to implement an effective social media, marketing and public relations strategy. Many times when a person launches a campaign, they just leave it there and hope people will come and look at it. There has to be an ongoing outreach to current and potential backers until the campaign finishes.
Crowdfunding can be an important strategy for any business, not-for-profit organisation, 'creative', or passionate person with a 'cause' who wants to see a dream come to fruition. The key to success is educating yourself in how to communicate your story to the crowd so that they want to contribute to your campaign to make something magnificent.
About Dr Dion Klein
Former Canberra resident, Dr Dion Klein is the CEO of iPledg.com, an Australian reward-based crowdfunding platform. He will be launching the inaugural Crowdfunding Boot Camp Weekend in Canberra, October 16th. For more information, go to www.crowdfundingbootcamps.com.au or www.ipledg.com.