All or Nothing?
Once there is a project that needs funding, crowdfunders need to choose between using an existing crowdfunding service or follow a D.I.Y. (do it yourself) approach by using their own website, software and existing personal network of connections to successfully manage and conclude a campaign. Individually set up campaigns can either be implemented by using crowdfunding widgets and donation forms
such as IgnitionDeck or ChipIn, which can be embedded into a self-hosted blog or website. Another option is a white-label crowdfunding solution, offered by various CFPs, such as FirstGiving, InvestedIn or Mimoona, just to name a few.
According to The Crowdfunding Bible by Scott Steinberg, following the D.I.Y. approach “requires that you possess a user-friendly, accessible and stable solution for promoting and processing pledge efforts, as well as the capability to engage, motivate and retain the attention of a sizable fan base that believes in your brand,
your company or your project.”. He further continues, that “unless your project or team has a large existing built-in audience of fans, or the ability to self- motivate large crowds, for most people, using one of the crowdfunding services […] will likely prove more productive.”
In fact, it is the infrastructure of CFPs that make them useful for both individuals and organisations, as they include the following features:
- verified payment solutions
- supporter management tools
- clear structured project-pitching page
- social sharing tools
- projects success progress bar
- update/blog area
After choosing the right crowdfunding approach (equity-, lending-, donation-, reward-based) and the platform for a project, the crowdfunding campaign kicks off. Most projects target a certain amount that they seek to raise within a defined
timeframe. The majority of CFPs uses this all-or-nothing approach, whereby the funds are only disbursed to the project if the threshold is reached.
"Most projects target a certain amount that they seek to raise within a defined timeframe."
Nevertheless, some platforms are offering flexible or hybrid models, for example project owners on Indiegogo or Rockethub can choose between “fixed” and “flexible” campaigns, in which “flexible” means that the campaign will receive all of
the funds contributed within the set time frame.
When planning a crowdfunding campaign individuals as well as organisations should be aware that crowdfunding platforms earn income by charging commission on the money they raise. This commission is typically calculated as a percentage
from the total amount of funds raised, and/or based on achieving a “fully- funded”
goal.” Those platform fees vary between zero to ten percent of the set target amount. In addition, project owners should be aware of possible payment
transaction fees, e.g. such as fees charged by online payment providers like PayPal. There are also possible taxes payments, such as sales tax or value added tax, income tax or capital gains tax.
On their blog, equity-based crowdfunding platform Bloom venture catalyst provide an infographic that shows how to crowdfund in 3 easy steps, but in the figure’s subtext caution that crowdfunding is an arduous task:
“We’ve laid out the 3 all-important steps but remember, each step takes time and effort. You need to spend time planning your project before you post it, reaching out to your networks before you launch, and then repeat steps 2 and 3, keeping
in touch with everyone with regular updates, throughout the duration of your campaign.”
About the Authors
Wolfgang Gumpelmaier is an independent digital media consultant and one of the leading crowdfunding experts in Austria. He runs several blogs, e.g. on gumpelmaier.net he writes about Social Media in general.
Karsten Wenzlaff is co-founder and CEO of ikosom, the leading research institute on Crowdfunding and Crowdsourcing. He is also the co-author of the first
Crowdsourcing-Report in Germany.
Jörg Eisfeld-Reschke has conducted the first crowdfunding study in Germany in 2011 and written many articles since. He runs www.sozialmarketing.de – a blog about fundraising and digital communication for Non-Governmental-Organisations.