Crowdfunding is on the rise.
In fact, Kickstarter just reported that 3.3 million people from every corner of the globe pledged nearly a half a billion dollars to help make 22,252 crowdfund projects successful in 2014.
At eFulfillment Service, we work with crowdfunders to fulfill and ship orders to their backers all over the world. We see them using a variety of platforms to raise funds, so I thought it’d be nice to do a post discussing some of their similarities and differences, and cover a few cool crowdfunded projects. Let’s start with a quick overview of crowdfunding…
What is Crowdfunding?
Just as the name suggests, crowdfunding is basically using a crowd to help fund some type of project. It could be a new product, a charitable cause, or even funds raised for yourself or someone you know.
Rather than pitching your idea to one potential venture capitalist at a time, crowdfunding websites are a nice alternative because they allow inventors, startups and established businesses to connect with millions of consumers around the world that are passionate about a range of topics. The consumers have become investors. And because there’s power in the masses, crowdfund websites have helped people and businesses raise thousands (and in some cases millions) of dollars to fund their projects.
In many cases, crowdfunders use these platforms so they can raise money to actually develop or manufacture the idea or product that they’ve come up with. And as payback for donating to the project, crowdfunders typically give their backers some type of “reward,” which is often the actual product or service they’re funding.
So that’s crowdfunding in general. But there are quite a few types of crowdfund websites out there, so let’s dive into a few, and then I’ll talk about a few projects I like.
Kickstarter is the 500 lb. gorilla in the crowdfunding space right now.
Kickstarter.com receives over 5 million estimated visitors each month, and people turn to Kickstarter to raise funds for a wide range of projects, from film, to music, to food, design, technology and fashion.
My favorite part of Kickstarter is the diversity of projects from around the world. You can go there to find something unique and innovative in so many different areas. And not only are the products unique, Kickstarters are finding new and innovative ways to promote their campaigns and their passions.
Here are the basics of Kickstarter…
— You set a funding goal for your project
— You set a timeframe to reach that goal, usually either 30 or 60 days
— If you don’t reach your goal, you don’t get any of the funds
— There’s no cost to get started, although you pay Kickstarter 5% of the funds raised, on top of the credit card processing fees to receive payments from your backers
There are a few distinctions with Kickstarter compared to other crowdfund alternatives. One is its size. It’s the largest, most well-known crowdfund website. Another is that Kickstarter requires you to reach your goal to receive funds, whereas with most others, whatever money you raise, you keep.
It may seem like you’re getting cheated with Kickstarter by not getting funds unless you reach your goal, but the potential exposure is tough to beat. Also, there’s value in the strategy of setting goals. The last thing you want is to fall short of your goal and have to use money out of your pocket to get rewards to your backers.
I have seen many Kickstarters launch projects and not reach their goal, and come back for a second (or even third) time. It’s a learning experience, and Kickstarters will take the advice the community has given, make improvements, modify the goal, and relaunch with a winning strategy. Here’s a handy Kickstarter reference guide we put together with some tips for a successful campaign.
Another very well-known crowdfund community is Indiegogo.
This alternative to Kickstarter actually has more focus areas than Kickstarter, everything from animals, art, education, design, video, technology, photography, and sports.
Here’s the jist with Indiegogo…
— Indigogo is reported to have about 1 million visitors per month
— You can choose a flexible or fixed goal with your project
— With flexible goals, if you don’t reach them, you still get the funds from those that backed your project, but you also need to make sure you’re able to fulfill the rewards
— Like Kickstarter, there’s no cost to get started
— If you reach your goal, you pay Indiegogo 4% of funds raised; if you don’t reach your goal, you pay 9% of the funds raised
While not as big as Kickstarter in terms of visitors, it has been known to generate huge funds, including several projects raising over a million dollars.
What I like about Indiegogo is that it gives crowdfunders the option to choose a flexible or fixed goal. That itself can be a tough decision. Flexible goals can be tempting, but just make sure you’re collecting enough from each backer to produce the goods and, if there’s a deliverable involved, enough to ship it to the backer.
RocketHub isn’t as big as Kickstarter or Indiegogo, but it’s definitely a vibrant crowdfund platform with thousands of project creators and backers.
With RocketHub, projects tend to fall in the category of art, business, science or social, although it offers other categories. RocketHub backers come from all over the world.
Here are a few more details on RocketHub…
— RocketHub is estimated to have nearly 40,000 visitors each month
— Like Indiegogo, RocketHub lets you keep the funds, even if you don’t reach your goal
— RH is also similar to Indiegogo in that the commission they take is based on whether or not you reach your goal….4% if you do, 8% if you don’t; there are also processing fees
— Projects can range from 30 to 75 days
One unique thing about RH is that it encourages users to help build exposure for projects by voting on them. By voting on projects, users earn badges. The more badges, the more prominent their status, and more likely other crowdfunders will come to them for advice.
Another cool thing about RocketHub is its partnership with A&E. Together, they launched PROJECT STARTUP to help build exposure for crowdfunders and their campaigns, which means those who use RocketHub have the opportunity to be featured on A&E and receive greater funds. RocketHub offers users a Success School to improve their chances of success, and provides resources and tools to increase your chances of being picked up by A&E.
Fundable is a more “corporate” alternative to Kickstarter. As they state on their website….”Fundable is just for businesses.”
The people who started Fundable have a business mindset and were founders of startup businesses themselves. What makes Fundable unique is that, not only does it allow for regular donations in exchange for rewards, crowdfunders can also raise funds in exchange for equity in their businesses.
Here’s an overview of Fundable…
— Fundable allows funds to be raised via reward or equity campaigns
— Reward-based campaigns are recommended for startups looking to raise less than $50,000 in capital
— Equity-based campaigns are recommended when startups and businesses are trying to raise over $50,000, or if those businesses do not have a developed product or service that can be marketed with a rewards campaign
— Fundable charges a flat rate of $179 per month along with credit card processing fees for rewards campaigns
— Fundable do NOT keep a percentage of funds earned
I like how Fundable is focused on crowdfunding for businesses. I also like that they give fundraisers the opportunity to offer stock in their businesses. While doing so means you’re giving up some equity, this stock option can attract larger, more serious and accredited investors, and allow startups to raise much more capital than with reward campaigns.
Integrate Crowdfunding into Your Own Website
Another alternative to Kickstarter or any of the other three platforms mentioned above is accepting pre-orders on your own website.
There are platforms like Celery that allow businesses to easily set up their own websites to accept pre-orders. With Celery, you can take credit card numbers now for pre-orders, but not charge your backers’ cards until their orders ship. Once you receive your inventory, you can easily switch from pre-orders to in-stock merchandise.
With this approach, crowdfunders need to weigh the benefits and drawbacks. By launching on Kickstarter, Indiegogo or other established platforms, crowdfunders benefit from the heavy traffic these platforms generate. But, as we’ve discussed, they also come with fairly hefty fees, so crowdfunders are able keep more of the funds they raise with tools like Celery, and also may benefit from a branding perspective, as traffic will be driven to their own websites.
Noteworthy Crowdfunded Projects
There have been thousands of really cool, successful crowdfund projects that have launched on these and other platforms. I’ve picked out just a few of them that I personally like for various reasons….
I had to include the Coolest Cooler on my list because, back in late August, it set a new record for the most-funded campaign on Kickstarter at over $13.2 million! Yeah, I guess people like coolers.
Coolest obviously is no ordinary cooler, though. It touts itself as the “21st Century Cooler” and comes equipped with a rechargeable blender, USB charger, bluetooth speaker, LED light, divided cooler storage, and more.
One of the reasons I like Coolest is that the inventor, Ryan Grepper, didn’t give up after failing to reach his goal the first time that he launched a Kickstarter project in November of 2013. After making some improvements to Coolest, he decided to relaunch in July of 2014 with a $50,000 goal, and one of the things he learned is that the timing of the campaign really does make a difference.
A whopping 62,642 people backed their project on Kickstarter. But with all that success comes its challenges, as Grepper just announced to backers that fulfillment and shipping of their Kickstarter orders will be delayed at least a few months.
Flic: The Wireless Smart Button
Flic is actually still an active crowdfund project on Indiegogo.
Flic is described as a “wireless shortcut button that allows you to perform any action with a single click.” How it works is that the user can program the wireless button to perform a range of actions that correspond with mobile apps. For example, you can program the button to make a phone call, take a picture, turn on a light, control music, share your GPS location with others, and more.
There are a few things I really like about Flic. One is the product itself, which is incredibly simple, flexible and useful. The second is the presentation from the team at Flic. One consistent trend with successful crowdfund projects is that they are extremely visual, and the Flic team did an excellent job of visually conveying the range of applications with Flic. Lastly, they are great at communicating with their funders. They shared the story behind Flic, introduced their team, and outlined a detailed timeline, from launch of their Indiegogo campaign to the actual order fulfillment and shipping. They also added updates throughout the campaign, including the announcement of new Flic features and accessories.
TITIN Tech is the world’s only weighted compression gear, and the company recently raised $1 million on Fundable.
The Founder and CEO of TITIN, Patrick Whaley, shares the story behind TITIN on their Fundable profile page, which started way back when he was in elementary school. Patrick created the weighted clothing in part as a way to help him recover after a gunshot wound he sustained during an armed robbery.
What I like about TITIN, aside from the product itself, is the decision to launch on Fundable instead of a different crowdfund platform. Patrick had a lofty goal of $1 million, which made equity funding a more viable option.
Raising $1 million isn’t easy, nor is getting the attention of larger equity investors. What made Patrick’s decision to launch on Fundable a good one is that not only is his product able to appeal to a large market, he has also gotten the attention of several prominent athletes that are already using it, and he has a patent on the product. Together, those 3 things made it ripe for an equity campaign on Fundable as opposed to a rewards campaign on another crowdfunding alternative.
For inventors, startups or established businesses, crowdfunding can be a great way to help fund a range of projects. And while it all sounds great, make no mistake, it isn’t easy.
One of the most important things a crowdfunder can do is evaluate platforms….Kickstarter vs. Indiegogo vs. other alternatives like RocketHub, Fundable and others.
It’s also crucial to carefully plan everything ahead of time, from the timing of project launch, to the content you’re going to present to backers, to how you plan to fulfill and ship your rewards and pre-orders once the project’s complete.
Another key to being successful with crowdfunding is building as much support as you can before you actually launch. And to be successful over the long-term, make sure to account for potential imitators and protect your intellectual property as much as you can.
Best of luck with your campaign!