Attendees at our Virtual Crowd Summit on Crowdfunding (27 August 2020) heard an array of advice and tips from some leading global experts. Here is a round-up of some of those valuable insights in to successful Rewards Crowdfunding, from modest cause-related projects to its use by global corporations.
Caleb Maru of StartSomeGood, an Australian platform for cause-driven crowdfunding, explained that fewer than one-third of campaigns on the platform reach their target funding level. Although it’s called ‘crowdfunding,’ in reality, he said, it’s not much good to simply blast a message out to all and sundry and hope it works. To him, it’s not so much crowds as communities.
Project owners should identify existing communities that seem to already be of a similar mindset, and reach out to engage with them. They should also build their own community around their aims and among people who share their values. Many projects that begin with a financial target find they create or expand a community of followers that becomes more valuable over time than the money raised.
Evolving best practices
Nathan Rose is a crowdfunding strategist and author, and across several years he has been able to track changes to what used to be, and what are now, the key factors for rewards crowdfunding success. Crowd-building and effective communication strategies have definitely changed over the years. For example, these days, many more successful projects have used paid-for social media advertising.
Though project owners should not rely on purely virtual contact – get out to events and meet influential people in person, he recommends. Though beware of trade shows where more people are likely to be like yourself rather than be potential backers.
PR efforts to crowdsource media coverage remain a valid activity, though not for the reasons you might expect. A published article is unlikely to generate much traffic to a crowdfunding project, though a collection of media logos is a strong endorsement of the viability of a project once site visitors see them.
In closing, Nathan warned of a classic error. He still comes across project owners who calculate the production cost of the rewards they will supply, and set a donation value without checking the fulfilment costs to deliver the items. Seemingly successful projects can then sometimes incur a loss for the project owner, or are simply abandoned leaving many disappointed backers.
Stepping stones to success
Khierstyn Ross is a self-proclaimed Crowdfunding Queen of Canada, who has steered a number of clients to six-figure raises. Though with Kickstarter’s current success rate standing at just 36%, there is plenty of room for things to go wrong.
For Khierstyn, the strongest benefit of Kickstarter or any other platform that operates on an “All or Nothing” basis is the ability to de-risk a product launch. Generating pre-orders through a crowdfunding platform means that production costs can be paid for with other people’s money.
Calculating the point at which a production volume delivers a certain level of profit sets the “All or Nothing” target. Hit the target – go ahead with production: miss the target – don’t proceed, backers will not be billed, and have a re-think. Was it the product or was it the marketing campaign that wasn’t up to scratch?
A key factor for success on the marketing side is for a crowdfunding project to start with strong support to build momentum. Khierstyn believes 30% of a financial target should be achieved on Day One. This usually entails the project owner and their team doing personal pre-selling to secure this level of guaranteed support. Or putting it another way, get it ready but don’t make your crowdfunding project live until you’ve reached pre-sell guarantees that match 30% of the target.
Doing it this way will get a platform’s algorithms on your side, identifying your project as one to trend among its database. A strong start also provides positive content for a project owner to amplify through their own social media and emailing list.
“Industrialised” reward crowdfunding
At virtually the opposite end of the spectrum to StartSomeGood, Narek Vardanyan is Co-founder and CEO of The Crowdfunding Formula. TCF’s aim is to work with clients that aim to raise a minimum $1 million through rewards crowdfunding. Such projects account for 0.1% of the total, and TCF has worked with thirteen that have reached this amount in the past three years.
At this sort of financial target it’s not a case of a Project Leader going out and doing some personal pre-selling. A team of over a hundred people advise and provide support to their clients. The process begins with extensive research to see what can be learned from previous similar projects. They collect subscribers to a mailing list through landing pages and other techniques, and collate a PR database of relevant journalists, editors and bloggers to amplify their messages, complete with extensive image and video content.
Multiple landing pages, automated mailings to the PR database, pixels inserted in links for re-contact, challenges to motivate participants, introduce-a-friend schemes and a variety of reward pricing structures are all part of a fairly industrialised process to deliver the big numbers.
Though before any of this takes place, Narek’s team checks that clients have the ‘right values’ to be able to cope with the stresses of generating $1m. There will be times when the pressure tests any relationship, and he needs to know their clients have the right values to stick with it and not to fold.
Corporate use of rewards crowdfunding
Esben Bistrup Halvorsen, Co-founder and CEO of Danish platform Lendino, took us through some examples of major corporations using reward crowdfunding. Here are two of them
Sony has a co-creation and crowdfunding platform called First Flight, which operates within Japan only. It encourages entrepreneurial “Challengers” to propose ideas and suggestions for new products and services and allows them to canvass for input and support among a community of Sony fans and early adopters. Fleshed-out ideas that have withstood this crowd’s scrutiny can then go on to a reward crowdfunding stage to check for demand to actually acquire the product or use the service. Where response from Sony’s First Flight crowd is strong enough to warrant investment, Sony makes the products and services available. Who knows, someone may come up with the best idea since the Sony Walkman!
Coop is a leading supermarket chain in Denmark. It runs as a cooperative with approximately 1.8 million members who are co-owners. Coop Crowdfunding aims to bring together food producers who often lack funding to develop their ideas to fruition, with Coop Danmark’s members who increasingly want to get involved in ideas and local initiatives. Customers can pre-order items, which empowers them to help decide what’s going to make it on to the shelves in their favoured supermarket. For Coop, it de-risks stocking new and innovative products, and is a good research tool, based on actions rather than intentions, to keep up to date with its customers’ changing preferences.
A follow-up article will cover the event’s speakers equity crowdfunding.