Trends in Fundraising: Crowdfunding 101
In the past 5-6 years, crowdfunding platforms such as Kickstarter, Indiegogo, and United States Artists Projects have become increasingly popular. According to a 2012 survey conducted by Massolution, the amount of funds raised through crowdfunding platforms has increased by approximately 63% over the last 3 years. As public and private funding for the arts remains strained, many artists and arts organizations are turning to crowdfunding as a source of financial support for idea, project, and product development. This blog is the first in a series that will give you the in’s and out’s of crowdfunding. So to begin, let’s start with the basics.
What is Crowdfunding?
Wikipedia describes crowdfunding as, “the collective effort of individuals who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations.” In other words, crowdfunding is a way for artists and arts organizations to ask many individuals to make small investments that collectively, fund a project. The most popular crowdfunding resources are found on platforms like Kickstarter and Indiegogo. These platforms give users a simple webpage on which to build campaigns and promote work to potential funders. Some platforms even provide assistance in finding funders by featuring campaigns on their website or offering fundraisers which assist in seeking funds. Building a campaign is free, however if a campaign is successful in reaching its stated financial goal the host website takes a percentage (4-9%) of the earned money before passing it onto the recipient. Processing fees also take out an additional 4-5%.
Before we wade into the waters of online crowdfunding, here are a few terms you need to know:
Campaign: The platform from which you propose your project and attract potential funders. Crowdfunding platforms give campaigners the option of building an individual webpage to promote their project.
Backers/Funders: Individuals who pledge to contribute to a campaign.
Pitch: The project description and argument for contributions. The pitch usually involves two parts: a written description and a video.
Rewards: Incentives the campaigner offers to backers for donating to the campaign. Campaigners can offer different rewards for different donation amounts. The quality of the reward typically increases as the donation amount increases.
All or Nothing: Funding service model in which campaigns must raise funds to reach a stated funding goal in order to receive any funds.
Keep it All: Funding service model in which campaigns can keep whatever money they raise, whether or not the stated funding goal is met.
All online funding platforms typically have two similar features; the pitch and the rewards.
The pitch is the first thing backers see when they come to your campaign page. It is your chance to make a good first impression – and first impressions matter. While a written description of your campaign is required, crowdfunding platforms also strongly suggest you make a pitch video. Most successful campaigns make use of a pitch video; people are more likely to want to watch a video than read a description, so not only is it important, but it needs to be done well. To learn more about making a successful pitch, check out Wired Magazine’s article, Fund Your Dream With the Perfect Kickstarter Pitch. This article focuses on Kickstarter, but the information easily transfers to other online funding platforms.
Along with the pitch, crowdfunding platforms require that you offer rewards to backers if and when your campaign is successful. Crowdfunding platforms do not predetermine donation amounts or the types of rewards you can offer, but most offer advice. For example, Kickstarter found that, on average, most backers pledge $25 toward a project, and they wrote an entire blog about the power of the $1 donation. Kickstarter also stresses that rewards are best when they directly correlate with your project. For example, if your project involves recording an album, offering a CD or digital copy of your album is a good reward. No matter how you structure your donation amounts or determine your rewards, just remember, if the campaign is successful, you are required to deliver upon the rewards you offered. Make sure you offer rewards you can deliver.
Now that you know a little bit more about crowdfunding, here are some crowdfunding benefits and things to consider before launching a campaign.
Benefits of Using Crowdfunding Platforms:
Crowdfunding offers a high degree of flexibility. Unlike grants, which are often restricted by timeline, crowdfunding allows artists and arts organizations the freedom to raise funds on their own schedule. Furthermore, crowdfunding sites have very loose constraints on what can and cannot be funded. Can’t find a grant to support your next great idea? Maybe crowdfunding is the way to go.
Crowdfunding is a great marketing tool. When people get excited about a campaign, they are also getting excited about your project. Creating a campaign can be a great way to increase your number of patrons, audience members, buyers, and general followers by giving them an inside look at what makes you or your organization unique and exciting. Successful campaigners often update their current and potential backers on the campaign’s progress. This sounds like a lot of work, but statistics show that these updates keep people invested and interested in funding your project, and it doubles as a form of marketing and promotion.
The pool of potential backers is as big as your (online) network. Since crowdfunding campaigns are online, potential backers are not limited to those within your geographic location. Anyone you can reach in person, over the phone, or most importantly online is now a potential backer. Statistics show that having a large, strong online social network is crucial to campaign success. Expand your online social networks through Facebook and Twitter and polish up your email list to best prepare your campaign for success.
Things to Consider Before Launching a Campaign:
No one said this was easy. Successful campaigners often give this piece of advice; the work doesn’t stop once you launch your campaign. Once you are up and running, you’ll need to get the word out. Send reminders and updates about the campaign’s progress to keep potential backers excited and informed. Release new videos and pictures on the campaign page to keep potential backers returning to your campaign site. Efforts may not only be online, but through phone calls, in person meetings, and even mailers (depending on your patron demographics). Informing people and keeping them engaged in your campaign is a lot of work,. Consider the amount of time you can commit to this kind of effort before you launch a campaign.
Do you really know your audience? The more you know about your potential backers, the easier it will be to get them excited about funding your project. Knowing your audience is crucial when creating your pitch and rewards. However, there is no one way to make a perfect pitch. Some people are successful by simply sitting in front of the camera and speaking. Other campaigners find success in slick, well crafted videos. It all depends on your audience and your message.
Make sure your incentives for funding are rewards that your funders actually want. Also, take into account that not everyone who may want to back you is in your geographic area. Tickets to your show, exhibit or event may not be the best reward, unless you know the majority of your backers will be local. Rewards that are accessible to all of your backers are best.
Be realistic with your rewards. Campaign success is great, but be certain that you can deliver the rewards you promise. Be realistic. Offering a free copy of your new album for a $1 donation is not a realistic reward. The printing and postage costs alone are more than $1, and you will likely receive many $1 donations that you are required to reward if you are successful. Imagine a successful $1000 campaign built completely out of $1 donations – yikes, that’s a lot of work. This takes us to the next point.
Be careful what you wish for. Even making good on realistic rewards can be difficult if your campaign is more successful than you anticipated. Just ask local Phoenix illustrator Safwat Saleem. Saleem built a Kickstarter campaign to fund the creation of handmade screen prints and t-shirts based on nine of his illustrations. He far surpassed his goal of $3000 and raised a total of $32,000. Saleem’s campaign was a HUGE success, but he now owed backers a total of 950 screen prints and 660 t-shirts. That is a lot of work. Be careful what you wish for.
To find more tips on crowdfunding, check out, Fractured Atlas’s blog post, Tips and Tools: Crowdfunding. http://www.fracturedatlas.org/site/blog/2012/09/26/tips-and-tools-crowdfunding/.
Look out for our next crowdfunding blog, Navigating Crowdfunding Platforms – Who Does What? We will outline the differences between some of the most popular crowdfunding platforms for the arts.