Crowdfunding as Gamechanger
A comparison of Kickstarter, IndieGoGo and other platforms.
Crowdfunding is empowering creators to do their best, most independent and most courageous work. Crowdfunding is the new alchemy, turning social capital into gold. Crowdfunding is frustrating. Crowdfunding is humbling.
Take your pick: all those statements are true. When you crowdfund, you find out who likes your stuff faster than a dog might size you up by sniffing your crotch. When you crowdfund, you learn your worth on the World Wide Web, an assessment that can leave you exhilarated or curled on the couch in a fetal position, sobbing about your low Facebook friend count.
With some 400-plus crowdfunding platforms in play now, you’ll find places to raise money for art, for charities, for education, for local government projects, and even for funerals. What is the best one to use for your fundraising effort? Is there a step-by-step formula for success?
There is a formula for crowdfunding success and that formula is teachable. Some platforms will work better for you than others. Let’s look at some numbers first, sourced from Alexa.
Kickstarter is the best-known platform and gets the most web traffic. Music, film and video projects win big, according to stats published by Kickstarter. Kickstarter charges you based on a percentage of the money you raise. If you do not completely fund your project, you get no money, so it’s all-or-nothing. It’s competitive and hard to get attention because of the large number of projects on Kickstarter. There have been some superstar Kickstarters, though. The Veronica Mars movie project raised $5 million this summer. Zach Braff raised $3 million for his Wish I Was Here movie. Spike Lee is going for more than a million bucks to make a vampire movie. Should celebrities use Kickstarter at all, reserving crowdfunding for the little guy? Get back to you on that in a sec.
IndieGoGo is the second most popular crowdfunding site. Creative projects find a home here, but also personal projects, and charity projects. (You’re not allowed to fundraise for causes on Kickstarter, but it’s okay on IndieGoGo.) IndieGoGo has an all-or-nothing fundraising plan like Kickstarter’s, but also a keep-what-you-raise plan. IndieGoGo charges a little more for that plan.
GoFundMe is the third most-visited crowdfunding site on the web. It embraces artistic projects, charity projects and community projects. It has a broad array of funding categories, but luckily you can sort them to create order among the chaos, looking at projects in your area, projects your Facebook friends have funded, and the most popular projects.
When you’re crowdfunding, its easy to get pulled into the money game. We like to keep score and watch our contributions grow. Crowdfunding is not just about money, however. It’s also about social capital — the value your community and your supporters add to your project.
Keith McMillen has launched two successful Kickstarter campaigns for music tech products and has seen how the crowd helped him improve both the products and his connections.
“Beyond raising funds, crowdsourcing helps to raise awareness, and at a very basic level gets people sharing innovative ideas. When we launched the QuNeo Kickstarter, we learned a lot in the process. We heard from the people who were backing us. They would give us ideas, and in talking to them, we reflected and were able to apply key learnings to really hone our focus. I think the quickest way to a successful campaign is to engage with the community that’s supporting you—play to that audience. They really are cheering you on.” — Keith McMillen of Keith McMillen Instruments
Social capital is the secret sauce in all successful crowdfunding efforts, no matter what platform you choose. There were more than 91,000 backers for the Veronica Mars Kickstarter campaign, and probably many had never heard of Kickstarter before. They were devoted fans of Veronica Mars, though, so the community was pre-built. The social capital was there to be leveraged.
A site like Citizinvestor can successfully raise money for local government projects — even if contributors have never heard of the platform. The social capital is there. Citizinvestor co-founder Jordan Raynor let me know that a recent campaign on the site raised money in just three days for a bike rack project.
Education projects can find passionate, devoted audiences, even when using a competitive platform like Kickstarter. Jessy Irwin, community manager for an app called Couple, has been involved in two successful Kickstarters with a tech-education mix. An interactive comic about globalization, brainchild of Virginia Polytechnic Institute and State University professor John Boyer, raised more than $23,000 on Kickstarter, and an educational science app called Tornado Maker, aimed at middle school learners, raised more than $75,000.
Jessy emailed to say that even though Kickstarter has no official category for education it was a “no brainer to use because of its name recognition and because of the tech contributions of its community.”
I’ve seen that the success of a crowdfunding initiative has less to do with the technology platform and more to do with the community platform that a founding team brings into a project. The most powerful platforms we had were the communities in which we had been active participants, our friends, and our pre-existing networks of personal and professional connections that could help us get funding and press. — Jessy Irwin, Community Manager, Couple
That said, if you’re raising money for a tech project or product, Kickstarter is certainly tech-friendly. You’ve probably heard about the Pebble Watch, another Kickstarter tech superstar,which raised more than $10 million.
Before you start hyperventilating about that, consider some stats. Most successful Kickstarters have raised from $1,000 to less than $10,000; 700 have raised more than $100,000; 40 projects have raised a million dollars or more, and more than half in that big-ticket category raised money for games. So I guess if you want to raise big money for a game, you may begin hyperventilating at any time.
If you’re not raising money for a game, don’t begin hyperventilating just yet. Instead, take a breath before you launch. Think about how much money you can really command. Your ability to connect with people will affect the amount of money you can raise. Look at any successful campaign, no matter what the platform, no matter how good the video, no matter how cleverly written, and you’ll see that success turns on the ability to connect with a network.
Do you want to know which platform is best for you?
If you have a tech or gaming project, Kickstarter might give you a slight fundraising edge. You’ll have lots of company — and competition — but people are used to going to Kickstarter for tech. If you have an artsy project in music or film, Kickstarter is also a good bet, but IndieGoGo provides more flexibility in the ways you can raise money. (You can keep whatever you raise in IndieGoGo.) GoFundMe is best for personal fundraising projects, and charity. The platform also charges less than Kickstarter and IndieGoGo.
Crowdfunding has a high density of fast-money opportunists, but so does your local Starbucks. Everybody with WiFi and an idea seems to be considering crowdfunding. Get used to it. The ability to jump past banks and traditional investors is worth the perceived hype.
With $2.7 billion crowdfunded last year, and with micro-lending forms of crowdfunding like Kiva.org thriving with billions raised as well, you may well ask, where is this thing going?
The entrepreneurial business landscape will change a lot if the SEC can sort through the JOBS act, making it possible for the everyman and everywoman, not just high net worth individuals, to secure equity in projects via crowdfunding. Right now, you can back projects, making a contribution in exchange for an incentive (like a mention or a DVD or prototype). Next, you may be able to become an investor in a project, and people I spoke with were excited about this.
Patty Lennon, CEO of Mom Gets A Life, who recently ran a successful crowdfunding campaign to launch the Mom Gets A Business Conference, emailed to say, “We need to have solutions outside the traditional banking system for getting money into the hands of startups that aren’t poised to instantly generate millions in revenue. Crowdfunding holds the best solution.”
Business consulting firm president Kirsten Osolind also sees a positive future in crowdfunded equity investment, but a long road to widespread acceptance.
With the JOBS Act and pending new policy formulation, many are speculating that equity crowdfunding could be the real game changer. AngelList recently announced that they are rolling out AngelList Invest, their own equity crowdfunding service. — Kirsten Osolind, President, RE:INVENTION
Brad Damphouse, CEO of GoFundMe, wrote me to say he views equity crowdfunding from the standpoint of the project creator.
Do I really want to give away parts of my company to other people? Reward-based crowdfunding has proven that project creators can successfully fund their businesses without parting with any equity at all. That said, some businesses don’t have rewards to offer — they just need capital. In these cases, supporters should absolutely be allowed equity in return for their investment. — Brad Damphouse, CEO of GoFundMe.
If you can raise money for your project without giving anything away, why not maintain ownership? That makes sense, because the beauty of crowdfunding is in the community it builds and the dialogue it creates.
Famous people, like Spike Lee and Zach Braff, and even if fictional, like Veronica Mars, can leverage community better than the rest of us, because they have already built their communities using older, established platforms like theatrical film distribution and big television networks. Though they get to reap the advantages of all that, that’s no reason to resent their success or keep them out of crowdfunding. There is room for everyone in this.
(Many thanks to Brittany Kelly of SS|PR and Brad Damphouse for providing the web traffic stats for all fundraising sites.)