The #1 Reason Why Crowdfunding Campaigns Fail
Crowdfunding is becoming ubiquitous and success stories like the Coolest Cooler, Pebble or An Hour of Code for Every Student impressively demonstrate how this new wave of funding for startups, creative ideas and causes via the crowd can be used to turn dreams into reality. Undoubtedly the most successful crowdfunding campaign of all times, Star Citizen has raised over $88 million dollars at the time of writing this post and shows no signs of slowing down.
Crowdfunding is democratizing the access to capital and with all the encouraging news stories, who wouldn’t want to launch a crowdfunding campaign today to fund the next big thing the world has been waiting for? How much easier does it get?
The flip side is that for every successful Kickstarter campaign, two fail and in the case of Indiegogo it gets worse: About 9 out of 10 Indiegogo campaigns fail to reach their goal.
The biggest difference between Kickstarter and Indiegogo is that Indiegogo will allow people to raise money for virtually anything, while Kickstarter is a much more restrictive platform when it comes to funding models offered and types of projects it accepts. Kickstarter’s single funding model is “All or nothing” which means campaigns that do not meet or exceed their goal get nothing. This approach seems to attract higher quality campaigns than Indiegogo’s “Keep whatever you raise for whatever you want” model.
What the media doesn’t cover is how much work actually goes into running a successful crowdfunding campaign and how crucial the pre-launch preparations are. Oftentimes, a false sense is created, suggesting that choosing a popular platform like Kickstarter or Indiegogo is all it takes. I’ve talked to many crowdfunders whose biggest worry seemed to be their choice of platform, whereas there are many more important decisions to be made.
On average 9 out of 10 contributions to your crowdfunding campaign will come from your own efforts. The rest is traffic from the platform to your campaign page which only makes up about 10%. This means that the remaining 90% need to come from a carefully planned and executed plan of action on your part, regardless which platform you decide to use.
Think of your project as a satellite and your crowdfunding campaign as the rocket that will take your satellite to where it needs to be so it can do its job. Now, before you press that launch button to ignite tons of liquid nitrogen to shoot your satellite into orbit, you will want to carefully plan and and test in advance, so that the trajectory of the rocket and all other intricate details are in place, allowing your satellite to be successfully transported into space. You only have one shot, if you burn the fuel and the rocket misses its target and your satellite isn’t deployed, you’ll have to start all over again.
The point (and #1 reason why campaigns fail) is that it is pretty much impossible to make improvements or compensate for lack of preparation once your campaign has launched. Success in crowdfunding is in preparation. Don’t let excitement get the better of you and don’t launch before you are ready or you’ll skip important steps to success.
Have the below things in place before launching your campaign and you’ll be in good shape:
- 30% of funding goal is guaranteed by friends, family and anyone else you can line up to make a financial contribution to your campaign on the day it launches. If you can raise 30% in the first couple of days of your campaign, you significantly increase your chances of reaching your goal.
- Build an email list; compile emails of all team members. The more emails you have the better. Services like Mailchimp allow you to send out emails and drive traffic to your campaign page when it launches and as you hit weekly milestones. As a rule of thumb you should have one email per $1 funding goal.
- Build a crowd on Social Media that is large enough so you can tap into not only for financial support but also to share your campaign with their followers. Twitter is the most active social network in the crowdfunding sphere. Depending on your funding goal and how many followers you currently have, this process can take several months. Tools like Twitter Marketing make it easy to identify and connect with supporters and build a targeted audience.
- Run a Press Release and get Press Release distribution and high impact media lists. To make your campaign look attractive to journalists, do not send your press release or contact media before you have reached the 30% funding milestone. Journalists don’t just write about campaigns so they become successful, they write about successful campaigns in the making.