I've spoken on panels about crowdfunding, written op-eds and generally thought of myself as an expert running a crowdfunding campaign. So when my campaign to raise $100,000 in 30 days failed, I was forced to ask myself some very tough questions. In speaking with others, I've found that these are questions few people think about before embarking upon a crowdfunding campaign.
1. Do you have the time to focus on the campaign?
With the plethora of crowdfunding platforms out there, literally anyone can start a campaign. The challenge isn't in starting the campaign; it's in running it. I put in the time to prepare a nice video, design campaign materials and create a compelling-looking campaign. What I didn't do was block off my schedule for the following 30 days so that I had time to focus on campaigning. Instead I was traveling almost every week to various conferences and accelerator programs, making it difficult for me to focus on getting the word out. I'd recommend blocking off 2-3 hours each day, particularly in the first two weeks, just to focus on outreach.
2. To what extent have you already hit up your networks?
Most crowdfunding campaigns receive 20-50% of their funding from friends and family. These are the first people to put in capital and the people most likely to share the campaign with others. My first Indiegogo campaign launched my social enterprise, Kuli Kuli, into the world. For most people in my network, this was the first time they had ever heard from me with a request for a donation. Additionally, there was a note of excitement to the request as I was proposing to quit my day job and focus full-time on turning my dream into reality. During the two years since launching that campaign, I've asked my network to support Kuli Kuli in a multitude of other ways, including voting for us in competitions and posting about us on social media. This meant that when I reached out to my network for our 2nd Indiegogo campaign, my network responded at less than half the rate than they had for the first campaign. Ideally you want a fresh network with a few large donors lined up to contribute on day one.
3. Have you done the math?
According to both Kickstarter and Indiegogo, the most common contribution to a crowdfunding campaign is $25 while the average campaign page conversion is between 3-5%. Assuming a 3% conversion rate, Kuli Kuli would have needed over 130,000 people to visit our crowdfunding campaign in order to raise $100,000. Instead, we only managed to draw 15,000 people to our campaign page and convince about 400 of them to contribute. We did manage to get a few larger donors, which bumped our average contribution up to $174, but we still fell far short of the numbers we would have needed to hit our goal. If we had done the math ahead of time we would have likely set our goal to a more reasonable number.
4. Are your perks priced reasonably?
Increasingly, crowdfunding campaigns are being used to pre-sell product and provide the campaign owner with capital to do a manufacturing run. This has been the premise for both the first and the second campaign that I've run. However, for the second campaign we partnered with a nonprofit and had the joint goal of both raising funding for the manufacturing run of our Moringa Energy Shots and also raising funding for the nonprofit to plant more moringa trees in Haiti. This meant that we built in a premium into all the perks. While many of our friends and family were happy to pay the premium to support a good cause, we found that strangers coming to our campaign were confused. They either wanted a good deal on a cool new product or they wanted a tax credit for their donation. Since we had taken a mixed approach, we couldn't provide either.
5. Are you relying too much on celebrities or press?
The last mistake we made was in expecting that a combination of celebrities and press would make our campaign go viral. We had tweets from a handful of noteworthy celebrities, including Ed Norton, Philippe Cousteau, Rainn Wilson and Chef Jose Andres. All of their tweets were re-tweeted and favorite multiple times but unfortunately drove very little traffic to the campaign. Apparently the public has become disillusioned with celebrity endorsements via Twitter and so they don't drive the same traffic that they used to. We also expected that the combination of a feel-good story to reforest Haiti and the launch of a unique new superfood product would drive a lot of press. Despite all of our press releases we only had one good article about our campaign.
Despite all of our mistakes, we did do one thing right: we choose Indiegogo as the platform to use for our campaign. Unlike Kickstarter where you don't receive any funding if you don't hit your goal, Indiegogo allows you to still receive the funds and, better yet, they have a policy that allows you to extend your campaign by up to 30 days. Different crowdfunding platforms have different pros and cons so I'd recommend looking at a couple before you launch.
Crowdfunding is a great way to launch a new business or project but it's not as easy as throwing up a campaign page. Through careful planning and by asking yourself these tough questions I have no doubt that you'll be able to succeed. Send me a note via twitter and let me know if I can help.