Crowdfunding

Part
01
of three
Part
01

Crowdfunding - Pros & Cons

Kickstarter is the largest crowdfunding platform for creative projects while Indiegogo's platform can be used for campaigns of all types. Crowdfunder is best suitable for start-ups and growing businesses that seek to raise capital while GoFundMe charges zero percent platform fee.

Kickstarter

Pros

  • Kickstarter has a huge funder base compared to other crowdfunding platforms. According to report, Kickstarter has over 15 million project backers worldwide. The platform experiences about 22.05 million unique visitors monthly.
  • Kickstarter has a simplified payment process for project creators. It takes 14 days to process and transfer funds to creators.

Cons

  • The funding platform is only limited to creative projects which includes films, gadgets, arts, technology, music etc.
  • Campaign for funding on the platform must first undergo an approval process before it goes live.
  • Kickstarter only has the fixed funding goal option known as "All-or-nothing funding". Project creators do not receive the money raised if they don't achieve funding goals within the set time.


Indiegogo

Pros

  • Indiegogo crowdfunding platform can be used to raise fund for just anything including charity, small businesses, disaster relief, animal rights, music, etc.
  • Indiegogo gives creators the option to choose between the fixed funding or the flexible funding goal. The flexible funding option allows creators to receive funds raised despite not meeting their goals.
  • The Indiegogo InDemand enables creators to keep raising funds even after their original funding goals has been achieved to help support the production and delivery of their products.

Cons

  • A 9% fee is charged by Indiegog for funding campaigns that did not their goals.
  • Communication is limited between campaigners and backers.

GoFundMe

Pros

  • The platform allows quick withdrawal of funds to organizers and deposits are made within 2–5 days.
  • GoFundMe charges 0% platform fee for personal and charity campaigns.
  • No set deadline or time limit for campaigns and receiving donations.

Cons
  • GoFundMe's customer service cannot be contacted through the telephone or in-person. They can only be reached via an online contact form to initiate a query or raise an issue.
  • They have a low success rate for a fully-funded campaign. One in ten funding campaigns is successful.

Patreon 

Pros

Cons

CrowdFunder

Pros


Cons
  • Fundraisers pay a high monthly subscription fee of $299 to use the platform.
  • Crowdfunder does not allow funding campaigns for social causes, charities or personal causes. The platform is restricted to entrepreneurs "with high growth potentials".
Part
02
of three
Part
02

Successful Crowdfunding Video - Best Practices

Showing the human capital behind the project and adjusting the video to fit a perfect length and timing are some of the broader best practices for creating a crowdfunding video. Each best practice is a conglomerate of smaller practices. The following information presents the details of our findings.

Best Practice — The Human Side Behind the Project

  • Positiveness, storytelling and showing people are drivers to a successful video campaign, as reported by a study that scoured through Kickstarter data with a custom-build Python crawler and analyzed 20,188 campaigns, all including a project video.
  • The study discovered that the words and objects used in videos could help predict the success of the campaign. For instance, terms related to monetary depictions reduce the chances of success. Positive language, such as “beautiful” or “amazing”, is more effective, as social support is a higher motivator than monetary aspects.
  • Researchers also discovered that backers are more interest in seeing people. Showing animations, illustrations, cartoons, photomontages, special effects, or depictions in videos had negative consequences for the campaigns. Crowdfunders want to know the team, the founder and the people affected, as well as the product or demonstrations.
  • Content aiming to trigger excitement, social or technical inclusiveness is also more likely to succeed than firm-level determinants. Words like “backer”, “community”, “thank”, and “open source”, perform better than most.
  • Furthermore, employing enthusiastic language or showing the product in action may capture potential backer’s attention. Backers are only willing to evaluate textual material, narratives or schematics in more detail if the video induces a high attention state.
  • The founder's presence, even if it is just a cameo, has higher success rates than videos without any founder presence, as they lack authenticity. Videos that are narrated by the founder or the team also performed better, albeit, voice actors are a close second.
  • Charismatic founders are more successful in sourcing capital from the crowd than entrepreneurs without noticeable personality traits. There is also evidence that displaying social capital positively influences the trustworthiness and credibility of crowdfunders. Meanwhile, perceived cultural differences are associated with negative results.
  • Upbeat and friendly tones are more successful than serious or casual tones. The charismatic founder is also a way to communicate passion. They are perceived as passionate without the need to use an obvious passionate tone, which is considered a riskier tone.
  • Projects supported by teams including at least five members exhibited an increase in their chance to achieve their goal by 9%, as they attract a higher number of backers. Moreover, team-driven campaigns raise 38% more than solo campaigns, as people tend to be more confident about the accountability of the team.

Best Practice — The Perfect Length and Timing

  • The best length for videos, according to a study of 100 recent hardware crowdfunding campaigns, is 2:30 minutes. Videos between 3 to 4 minutes can have positive results as well, if they use the first minute to talk about the product and the last minutes to provide in-depth details, such as team, history and plan.
  • The first 30 seconds are vital to the campaign. The previously mentioned study identified that videos that revealed the solution between the 10s and the 20s mark achieved the highest success rate.
  • Ideally, the problem should be stated before the product, as videos that briefly showed the problem and then introduced a solution performed slightly better. Campaigns that waited 30 seconds to reveal the product performed somewhat worse, and the success rates dropped as the time increased.
  • Quality is also essential, as high-quality videos form positive impressions about the entrepreneur and the campaign. They also elevate the perception of other signals, such as textual descriptions. Location is another factor, as videos in attractive locations are 2x more likely to succeed.

Research strategy

The best practices presented were based on academic studies and benchmark reports. Although there are plenty of sources covering the theme, the research team refrained from using blog posts not corroborated by hard data as we felt they might be inaccurate or biased. For that reason, after extensive research, we expanded our date scope to 36 months, instead of our standard of 24 months, to include the benchmark report published in 2017. The decision to do so was based on the sample size, broad approach covering multiple practices and details contained in the report, unavailable in more recent sources.
We simplified the findings of “Predicting outcomes in crowdfunding campaigns with textual, visual, and linguistic signals” to present a more clear report; however, the data behind their conclusions is readily available.
We chose to present the information in a more continuous flow, as opposed to multiple topics, as the practices are a conglomerate of smaller practices since videos include images, speech, narrative, descriptions, length, and tone, and each category has micro best practices to follow.
Part
03
of three
Part
03

Successful Crowdfunding Campaign - Best Practices

Three best practices for creating a successful crowdfunding campaign are posting frequent updates, sharing with personal network, and utilizing video.

POSTING FREQUENT UPDATES

WHAT IT IS
  • The majority of crowdfunding platforms give creators the possibility to post updates related to their progress.
  • There are seven main types of updates: asking people to share the campaign on social media, reporting progress, adding something new to the project, reminding about the deadline, answering questions, adding new reward levels, and thanking donors for their contributions.
  • According to ConversionXL, reminding about the deadline have the biggest impact, followed by reporting progress, adding new rewards, and asking for spreading the word on social media.
  • It is recommended to post updates every five days, always on the same day of the week. Even if they are brief and simple, they allow interacting with supporters.
  • To keep the updates interesting and personal, campaign creators should consider including videos and photos.
HOW IT CAN HELP
  • Updates show that the creator of the campaign is invested in it.
  • They also help supporters understand the context around the project they are supporting and keep them engaged.
  • With regular updates, donors become more trusting, as they can see where their donations are going. Also, they are more eager to continue contributing, because they have a better picture of the impact they are having.
  • If the updates continue after the campaign has ended and its creator shares progress from manufacturing or asks for design-related ideas, the investors are more likely to become devoted supporters and customers.
WHY IT IS CONSIDERED A BEST PRACTICE
  • 59% of projects with updates reached their funding goal, compared to 33% of those without them.
  • Campaigns that post updates every five days raise three times more than others.
  • An average successful crowdfunding project has four updates.

SHARING WITH PERSONAL NETWORK

WHAT IT IS
  • Creators are advised to do marketing around their campaigns, which mainly involves sharing them with their personal networks.
  • It is especially important to do it at the beginning of the project, so it can get noticed. According to Storyblaster, it is even better to start interacting with the potential audience before the launch of the campaign.
  • When sharing updates through email and social media throughout the campaign, creators should be careful not to pressure their audience. Fundly recommends doing it once a week.
  • Additionally, if those who are running campaigns decide to start dedicated Facebook, Twitter or Instagram profiles, they should remember about the 80/20 rule. 80% of the posts should be informative, while 20% should include a direct call to action.
  • When using Twitter and Instagram, it is a good practice to use a custom hashtag, which will make the right audience gather around the project.
HOW IT CAN HELP
  • In crowdfunding, most donations come from supporters who are either emotionally or personally connected with the campaign creator.
  • It's even more significant in the early stages of the project, when supporters tend to be friends, family, or coworkers, because they are the main group that knows about it and is familiar with it.
  • They are the ones who can get the campaign going and inspire others, who are outside the creator's personal network, to donate in later stages.
  • With this type of fundraising, the personal network is the strongest asset even for large business projects.
WHY IT IS CONSIDERED A BEST PRACTICE
  • 12% of Facebook shares, 3% of Twitter shares, and 53% of email shares result in donations.
  • Depending on how many Facebook friends a person has, the likeliness of his campaign being successful increases. With every 10, 100, 1000 friends, the chances of success grow by 9%, 20%, 40%, respectively.
  • Creators that market their campaigns daily in their networks raise three times more.

UTILIZING VIDEO

WHAT IT IS
  • The main message of the campaign doesn't have to be conveyed through written words only. The creators may also utilize images and videos, with the latter being considered particularly good for telling a powerful story.
  • With people having short attention spans, videos should be around 30-seconds long. It's too little time to go into details of the project, which is why it is recommended to focus on the story and the people behind it.
  • A proven structure for a successful crowdfunding video involves the following steps: a personal introduction, telling the story of the project, presenting a clear call to action, explaining the rewards, and playing on the viewer's emotions by talking about what will happen if the project fails.
  • When making a video, it's important to look into the camera and stay authentic, which will trigger the most desirable reaction in the viewers.
  • To sound more confident and keep the viewers interested, the creator of the campaign should think through every line of the script and memorize it well.
  • Additionally, a video has to look professional, so creators need to be mindful of lightning, audio quality, and post-production.
HOW IT CAN HELP
  • Utilizing video makes potential supporters more self-aware, which is the psychological effect of looking into a pair of eyes.
  • A video helps to create an emotional connection and establish a more direct relationship with viewers.
  • Videos engage supporters more than plain text, which is why it may be a good idea to use them not only in the initial stage but also as a creative way to share updates.
WHY IT IS CONSIDERED A BEST PRACTICE
  • According to research, campaigns that include personal video raise 105% more compared to those that don't.
  • On Kickstarter, 50% of campaigns that featured a video were successful, as opposed to 30% of those that didn't use it.

RESEARCH STRATEGY

To uncover the best practices for creating a successful crowdfunding campaign, we analyzed four most relevant and recent sources on the topic that we found:

  • SimpleTexting's "Crowdfunding Best Practices for Nonprofits and Businesses"
  • Fundly's "Crowdfunding 101: Raising Money and Awareness Online"
  • CXL's "19 Psychological Tactics for Successful Crowdfunding Campaigns"
  • Oberlo's "Everything You Need to Know About Crowdfunding in 2019"

All of those sources included sets of best practices. We compared them and chose those that appeared most frequently. Posting regular updates was included on four lists, sharing with personal network and utilizing video — on three.
Sources
Sources