Crowdfunding: what’s it all about?
Crowdfunding is a simple but effective way to raise money for… well, pretty much anything!
Also known as crowdsourcing, a number of websites now specialise in this simple but effective way of raising start-up capital, funding a creative project or raising funds for a non-profit organisation.
The concept is to raise (or exceed) an advertised target from a large number of small contributions:
- A project creator creates a new campaign. This is done on a web platform like Kickstarter, Pozible, Indiegogo, or a number of other emerging sites.
- In the campaign, the project creator outlines their project: what it is, the timeframe, a financial plan or business case, rewards for supporters, and importantly, how much the creator needs to raise to make their project a reality.
- Supporters or backers pledge financial support in exchange for rewards, commensurate with the amount pledged.
- Once the financial target is reached, backers have their credit cards deducted with their pledge amount (or their PayPal account or nominated financial institution).
Rather than backers actually donating money, crowdfunding relies on the project developers giving something back to supporters if the campaign reaches its target: this is entirely up to the project creator and includes all manner of merchandise, social media shoutouts, credits in video content, tickets to promotional events, even the finished product itself.
Typically, if the target is not reached within the specified timeframe, the campaign is said to have been unsuccessful and the project creator gets nothing.
Platforms like Kickstarter and Pozible undertake all the credit card and PayPal processing once a campaign is complete, and take a small commission from successful campaigns. The remainder is deposited into the project creator’s bank account. It’s then up to the creator to honour the reward structure and keep backers up-to-date with the project’s progress.
Each crowdfunding platform differs slightly, and targets different geographical and ideological markets.
Shack West has been involved in a number of successful crowdfunding campaigns. We’ve got a good feel for how they run, which platform to select, the best way to integrate social media into the campaign and how to set realistic targets and campaign rewards.
Contact us for help with your first crowdfunding campaign!