How to Reach your Crowdfunding Tipping Point

Avoiding the “Ghost Town” Effect


Imagine stumbling upon a crowdfunding campaign…

with an awesome idea, hi-res photos, a great biography of the founders, and the coolest prototype ever. You are ready to pledge! Now imagine seeing that it’s been active for 2 weeks, has 2 weeks to go, and has only 11% of its goal raised. Next.

A low “percent funded” is not just a bad result. It’s the cause.

This may seem like circular logic (well, it is) but it’s true. People don’t like pledging towards a campaign that looks like it will fail, even if a pledge to a failed campaigned doesn’t cost anything. People like winners, even on a site that’s ostensibly for promoting the underdogs.

Snow-ball fights are fun, but can hurt. But then again, so can a failed Crowdfunding campaign. Ouch.

With 15%, you’re halfway there

Yancey Strickler, CEO of Kickstarter, points out that Kickstarter campaigns that reach the 20% mark have an 82% success rate. If you reach 30%, you have a 98% chance of reaching your goal. Think about that: with less than a third of your goal funded, you have a 98% chance of success. These inherently lopsided results require a lopsided approach: you should be putting the vast majority of your efforts on the early or even very-early portion of your campaign.

Family & friends support is key factor in crowdfunding success

The same week that Indiegogo celebrated $1 billion in pledges, one of their senior business managers explained to a group of Founder’s Institute students his interpretation of this crowdfunding truth. He suggests that before your startup even considers a crowdfunding campaign, you need to be reasonably certain that you can gather 25-30% of your goal in verbal commitments before your campaign even goes live. These verbal commitments should come from your existing personal network: friends, family, and close business partners. Then, spend the first three quarters of your campaign getting those commitments to actually go to the site and pledge.

The implication here is don’t promote a campaign with 10% or 12% funding to strangers. This also includes Facebook fans, blog readers, or existing user base. This sounds counter-intuitive, but even a die-hard fan can be off-put by poor crowdfunding performance. It’s one thing to mention your new campaign, with 1 or 2 small posts, but don’t waste these high-quality leads early-on. Save them for when they’ll help the most: maybe before 50%, but definitely after you’ve reached a respectable 20-25%.

Whoever made this piece of clip art doesn’t understand basic physics.

What if you can’t raise 20-25% from your personal network?

Then don’t start a crowdfunding campaign. This isn’t because crowdfunding isn’t awesome; it’s because you’re not ready for it, and that’s ok. If you have a great personal network and you still can’t raise enough pre-pledges, that means 1 of 3 things:

  1. Your goal amount is too high
  2. Your friends and family don’t believe enough in your product
  3. Your friends and family believe in you, but want to be paid back

Paying it forward. Or backward.

If not reaching your crowdfunding goal means you won’t be able to continue working on your idea, you might want to restructure your funding. For absolutely essential funding, it can be easier to borrow the money (ie loans, debt) than asking for donations via crowdfunding.

If you raise this essential funding from friends and family, such as on TrustLeaf, then they have an additional reason to do a small donation on your crowdfunding campaign, or even recruit more donors. After all, if you already owe them money, the more successful your crowdfunding campaign is the more likely they’ll be paid back on the loaned portion. A great idea and a great prototype can be motivating for sure, but nothing motivates people like money, especially money that they feel they’re owed.

TrustLeaf.com helps startups and small businesses raise money from friends and family using personal loans.

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