CrowdFunding Beat News, By, Zack Miller, Head of Investor Community at OurCrowd,
Crowdfunding provides a very democratic way to rally a community of backers around an idea, a technology or a project. With all the news around successful crowdfunding projects that have raised millions of dollars like solar roadways and thePebble watch, the fact is most crowdfunding ends in failure.
If executed correctly — meaning, strategized, planned, and executed — crowdfunding has the potential to leverage the power of social media, affinity marketing, and the Internet. Unfortunately, it’s not always easy to recreate the crowdfunding successful formula.
Kickstarter is far and away the largest and most popular rewards-based crowdfunding site globally. Backers have committed $1.4 billion dollars towards over 73,000 projects. That’s impressive but the thing is 60% of the projects on Kickstarter failed.
Let me repeat that: only 40% of all projects successfully raise money on crowdfunding sites like Kickstarter.
And now, a site called Kickended has random links to all those Kickstarter projects that failed to reach their financial goals and didn’t tip, and didn’t raise the money they intended to. It’s actually worse than that — Kickended tracks all those Kickstarter campaigns that didn’t raise a single dollar.
Kickended is the place where campaigns with no backers live a second life. Free from the pressure of money raising, these retain the purity of abstract ideas.
When you look through these ghost towns of loser crowdfunding projects, you can see some shared characteristics that contributed to their failure.
Why crowdfunding campaigns fail
- Not getting the crowd excited about the project: Crowdfunding campaigns are more about emotion than about prudent allocation of capital. To rally the crowd, a campaign must play into the deeper emotions and encourage people to participate in backing ideas and causes that are important to them. Videos, good text, and a powerful reward structure can all help.
- Having a boring video: It almost pains me to write this but a video can do much of the heavy lifting for a crowdfunding project. It’s the connective glue that ties the whole project together and gets people pumped and sharing a crowdfunding campaign. While videos should be short and punchy, Neil Young’s successful crowdfunding campaign for the Pono music player had an 11 minute video. Crowdfunding needs to captivate.
- Slow to update: People just don’t contribute money to crowdfunding campaigns — they contribute time and attention. It’s important to encourage backers to check back and check back often. Post updates all along the way.
- Didn’t get feedback along the way: If you want your crowdfunding campaign to be successful, you’ll need to get people clicking and sharing. Do yourself a favor and test out your campaign page before you take it live. Test your video. See how people react before you go live with a campaign and not just after.
- Lack of compelling rewards: The core of crowdfunding backing is at the $1-$10 level. The next step is to up-sell your backers — those who believe in your ideals and project — to put more money behind their support. To do that, you’ll need anawesome crowdfunding rewards structure to encourage your backers to commit more money.
- Setting unrealistic financial goals: It’s important to hit your minimum funding threshold early on in your campaign. That momentum can get you in front of backers who want to back projects that have a high likelihood of receiving funding. Contrary to popular belief, people on Kickstarter do treat it like a store and shop for projects to throw their money behind. Set a too distant goal and you’re overreaching. Set a realistic goal — one you can reach quickly — and use stretch goals and frequent updates to parley momentum into larger and larger sums.
Crowdfunding campaigns require forethought and good marketing planning and execution to succeed. The Internet is littered with thousands of crowdfunding campaigns that failed to learn from the numerous public examples of campaigns that did succeed. Don’t make the same mistakes.
Zack Miller is the Head of Investor Community at OurCrowd, an online investment platform where people from around the world invest in the best Israeli and global startups.