Crowdfunding offers a way of raising funds for all sorts of projects. Backers can collectively and directly fund a commercial, artistic or charitable initiative that is close to their hearts. On paper, running a crowdfunding campaign looks like a doddle. In reality, it’s anything but. Read on for a short guide to successfully navigating the world of crowdfunding and avoiding common pitfalls.
The world’s first crowdfunding campaign dates back to 1875, when a call went out for donations to fund the construction of the Statue of Liberty. 160,000 backers from the United States and France took up the call and, in doing so, helped cement the bond of friendship between their two countries. Ten years later, Barcelona’s Sagrada Familia was similarly built using only funds raised from anonymous donors. Today, this form of fundraising has become much more widely accessible thanks to specialist websites that aim to connect projects with potential backers. Transactions are carried out online, without the need for an intermediary, creating a new form of financing that complements conventional solutions.
Crowdfunding is aimed at project creators – entrepreneurs, artists, charities and individuals – who need money to make their projects a reality. If needed, it can be used in addition to a more traditional financing solution. It is also an excellent means of communicating about a project and building a (vital) community of backers.
Most crowdfunding initiatives set funding goals that offer different returns on investment. Creators set an initial goal that must be reached for the project to go ahead. Once this amount has been raised, stretch goals allow them to raise additional funds and offer extras for each additional goal that is reached. For example, a creator wishing to self-publish a book might set an initial funding goal of €5,000 to write and publish their book. They might then choose to set a stretch goal of €5,500 for the book to have a hard cover and another of €6,000 to have a colour illustration on the cover. This system helps mobilise initial investors early on, as they have an interest in spreading the word about the project to ensure it achieves as many of its goals as possible.
In France, the amount raised through crowdfunding increased from €167 million in 2015 to €401.7 million in 2018 [source: Financement Participatif France]. Three platforms dominate France’s crowdfunding market: Kickstarter (a generalist platform set up in the United States in 2012), Ulule (focused on media and gaming) and Kisskissbankbank (for creative or unconventional projects). It is worth noting the recent launch of the “Portail du Crowdfunding” (“Crowdfunding Portal”) website, which aims to help project creators find the digital platform best suited to their needs – a very helpful resource when it comes to navigating the complex world of crowdfunding.
Start-ups and innovative businesses regularly turn to crowdfunding, often in addition to more conventional sources of financing (such as banks or business angels). Here, once again, crowdfunding campaigns are a good way to communicate and test potential customers’ take-up of an innovative product or service. Launching and running a crowdfunding campaign is a challenge that requires plenty of preparation.
The campaign itself will be a communications “marathon” from start to finish. You will need to come up with regular events to retain existing backers and attract new ones. These might take the form of updates, feedback from beta-testers, a stylish video about the project, mini-games based on sharing via social media, new goals, attending trade fairs in person, mailshots or Facebook ads. When drawing up an action plan for your campaign, it can be helpful to look at similar projects that have been successful and, of course, trust in marketing common sense.
Once the campaign has ended, it’s time to take stock, particularly if it achieved only modest success or was not successful at all. What went wrong? Was enough preparation done for the launch? Did investment tail off during the campaign? When it comes to crowdfunding – and indeed anything else, for that matter – taking time to reflect on the positives and negatives always offers plenty to learn from. If the campaign is successful, this doesn’t mean you should scale back your communication with backers. Thank them, then keep them updated as the project progresses. And why not offer to meet some of your major backers to demo the product created as a result of the campaign? The aim, once again, is to build loyalty and make backers want more through regular contact.
This sneaker start-up has launched four hugely successful crowdfunding campaigns since its foundation in 2015, raising a total of €390,000 to set up its “TwoShoesForSchool” initiative, which funds one day of school for disadvantaged Peruvian children for every pair of sneakers sold. The company decided to raise the money through crowdfunding to limit the amount it had to borrow from banks, test products before going into production and get a cash advance. The project proved a hit with backers: Perús’ first campaign hit its target of 200 sneaker pre-sales in a single day and a month later reached a pre-order of 2,000 pairs. Since this initial campaign, Perús has diversified and still uses crowdfunding to launch its new products, with every campaign proving a real success.
Crowdfunding – heir to the patronage of years gone by – is becoming increasingly popular. Its ability to create a direct connection between a project and its backers makes geographical location irrelevant and boosts take-up. Setting up and maintaining a strong community of backers is key to a successful campaign. So, when will you launch yours?
Sébastien Viozat, UX, editorial and IT project management consultant