We love to jump into new things, especially when it comes to MAKING MONEY, and crowdfunding is no exception. I’m guilty of it myself.
You can be successful (and 142,647 Kickstarter projects as of today have been to the tune of $3.6 billion!), but it isn’t a slam dunk. On average, 36% of Kickstarter campaigns succeeded, and Indiegogo’s success rate is even lower: about 34%. The reasons for campaign failures vary, but one thing you CAN bet on is that if you don’t prioritize careful financial planning in advance of your campaign, you run a high risk of not achieving your campaign goal.
Before you get too discouraged, however, let’s look at some other stats: While 10% of Kickstarter projects finished having never received a single pledge, 80% of projects that raised more than 20% of their goal were successfully funded (meaning they reached their goal, as Kickstarter is a fixed funding model, requiring you to make your goal to receive funding). And let’s not forget that one of the reasons for Indiegogo’s low percentage of successes is that they will accept any project; unlike Kickstarter projects which are curated.
Giving yourself the best chance for success in crowdfunding means making sure that crowdfunding is the best financing option for your project or company. Financial planning for your first crowdfunding campaign (whether rewards-based for a project, or equity-based for a company) starts way before the actual campaign—or at least it should.
You need to be able answer four key dollar-related questions before you even decide if CF is your best option, and if so, to design your strategy:
- WHERE are you going?
- HOW MUCH do you need?
- WHY do you need it?; and
- WHAT KIND of money do you need? Continue reading