There are many platforms for crowdfunding. The difference between them is in scale, market geography, levels of trust, terms of cooperation and product requirements. Using some of them as an example, we will show how crowdfunding platforms work.
Leader among crowdfunding platforms. A feature of Kickstarter is working with creative areas: from comics and illustrations to games and technology. The platform unites more than 19 million people worldwide. Since 2009, more than $5 billion has been raised for the development of various projects with the help of Kickstarter and over 189,000 projects have been funded (as of October 2020).
The projects that get launched on Kickstarter are carefully selected. For example, anyone can be the author of the project, but only a permanent resident of one of 22 countries can launch a campaign on the site: from North and South America, Western Europe, and some Asian countries. This means that in order to enter this platform, Ukrainian entrepreneurs need to find a partner who will legally represent a business project.
The platform operates on an all-or-nothing basis. If the declared amount is not collected, the money is returned to the backers. If the project has reached the goal, a payment in the amount of 5% of the total amount of funds raised passes. Another 3-3.5% will go to the commission of the Stripe payment system.
An international platform that can be used for almost any project: from small business products to charity. Since 2008, more than 800,000 projects have been implemented with the help of the platform, and its audience is about 9 million people around the world.
Indiegogo differs from Kickstarter in more liberal rules: there is no approved application process. Almost anyone with a bank account can run a campaign on this site. The exception is residents of countries and territories that are subject to US sanctions.
Indiegogo also has the option to extend the duration of the campaign. But the audience of the site and the size of investments are lower than those of Kickstarter. However, there are no restrictions on fundraising on an all-or-nothing basis. Participants are offered several types of funding: flexible – a commission of 4% if the required amount is collected, and 9% – if the goal is not achieved, but the author wants to keep the money raised; fixed – if the campaign has reached the goal, then 4% goes to the site, and 0% – if the required amount is not collected, and the money is returned to the backers.
For additional fees and campaign terms, visit Indiegogo.
Platform with direct online sale of shares of companies. Here, the investor and the entrepreneur themselves agree on the transfer of funds. Crowdfunder does not work with non-profit organizations and does not process transactions.
With the help of the platform, more than $150 million has been raised, and the total number of users has exceeded 227,000. Crowdfunder cooperates with 19,000 accredited investors. In 2019, the amount of investment liabilities amounted to more than $468 million.
The platform provides different tariff plans – from free placement to premium ($499 per month) for personal support in attracting investors.
“Total cost”
The platform allows you to test the product on the Ukrainian market and get support. Basically, they collect money for social projects, but media, educational initiatives, as well as projects in the field of IT, renewable energy and responsible entrepreneurship can submit their applications.
Since 2012, the platform has funded 385 projects worth more than UAH 32 million. “Spilnokosht” unites about 52,000 backers. The campaign itself lasts 180 days. The authors of the application can extend it for the same period, as well as determine the number of tranches to receive funds. When transferring the collected money, 10% is withheld from the amount to support the platform.
How to get backer support
Take into account the motives of sponsors and work on the idea. The Beckers want to be part of the creation of a new and potentially successful product, as well as one of the first in the world to receive an exclusive product. Therefore, it is important to understand the needs of the target audience, take into account the realities of the market and remember that 70% of success depends on the product itself. Its attractiveness is based on “three pillars”: functionality, design and price. We are talking about both new products and a standard product in an interesting design. Another 20% falls on the design of the page: the more competently and understandably the idea is spelled out in English, the better the photo, gif, video, the higher the likelihood that backers will like it. The rest depends on PR and trust.
Use chips. Rewards for the first backers can be added to the working arsenal – bonuses or getting a product at a reduced price. To increase and maintain the interest of potential sponsors throughout the campaign, it is also worth updating the offer at least four times. For example, think over surprises or create intrigue: declare an additional offer at the end of the campaign.
Maintain communication throughout the campaign. Regular and prompt communication in real time 24/7 is necessary for a business idea to be seen, interested in, loved and supported.
Be responsible. A campaign on a crowdfunding site is an opportunity to announce your product to the whole world. It is necessary to provide maximum support and fulfill 100% of obligations within the stated time. In the event of force majeure, it is necessary to promptly inform the backers about the situation, inform what measures are being taken to solve the problem, and maintain communication until the client receives the product.
What to do before starting a campaign
A successful crowdfunding campaign requires a solid approach.
- Analyze the market or projects with a similar theme or product, predict the possible number of orders.
- Study in detail the requirements of the crowdfunding platform, as well as the available site analytics.
- Assess production capacity. You need to think through different scenarios – from the worst to the successful – and calculate the readiness to fulfill your obligations.
- Form a strong team that will be able to communicate with backers in different languages at any time of the day, taking into account the multicultural audience.
- Work out the logistics. It is necessary to study the delivery methods (postal, express delivery and cargo transportation) in different regions, taking into account customs and tax aspects.
- Consider force majeure. Unforeseen situations can occur at any stage, so it is important to think over contingency plans and allow time for delivery with a margin.
- Engage trusted resellers: If the platform has limitations for creating a campaign (like Kickstarter, for example), you need to find a partner. To do this, you can use the services of an intermediary (by all means check the reviews of other clients) or ask foreign friends to become creators. Partners can not only apply, but also develop a marketing strategy for promotion in new markets.
- Make a good presentation. Tell honestly about the company and the product so that the backers are inspired by the idea. Specify a timeline with the prescribed stages of the project: the timing of production, testing, preparation of documentation, development of packaging and delivery of the product.
- Plan a marketing strategy to attract and evenly maintain the interest of the target audience on the site during the campaign.
- Think over a PR strategy: interaction with specialized media and bloggers will allow you to get additional traffic and attract backers.
- Consider launching social media ads if it suits your goals and specific situation.
- Create a PayPal account that allows you to easily return funds if necessary without high fees.
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