Crowdfunding has been growing steadily in the UK and predictions are that globally this phenomenon is set for even greater expansion in the next few years.
So, what is it and how can it help you in the creative sector get funding and support for your project?
Let’s start with a quick definition: Crowdfunding is the process whereby a project raises funds (money) from many people (the crowd) by asking for and receiving small amounts from each of the people in the crowd.
Sounds simple, doesn’t it? Well, in principle, it is but actually crowdfunding has three distinct models to choose from; donations, interest and equity.
Working backwards on this list we start with equity, which is perhaps the most recognisable because of a certain popular BBC programme where investors with lots of cash offer to help entrepreneurs (often with no cash) by investing their money in the opportunity for a share in the company – this share is called equity.
Next is the interest model: this is different in that no-one gets a share of the company but rather investors expect a return on their initial investment. Perhaps this is the closest to traditional banking whereby a person takes out a loan and then repays it plus an extra bit as interest - this model works in the same way.
Lastly, we have the donations model. Arguably, this is the most common method in the creative industries sector for raising funds. It works by people offering money in a project for some form of value. Value in this context is hard to define as it can mean almost anything from simply giving cash toward a local community project or receiving something for your money (i.e. a t-shirt, signed copy of artwork or personal appearances as a guest speaker/performer). It all depends on what the investor in the crowd determines to be of value to them.
The key to a successful campaign is communication. Most of the crowdfunding sites will only allow you a limited time to try and meet the money target you set. Often, if you do not reach your target then you get nothing at all from the crowd; however, if you go over the target then you get the whole lot!
For example, imagine you set a target of raising £2,000 within 90 days (3 months).
There are three possibilities in this situation: i) you don’t raise the £2,000 ii) you raise the £2,000 or iii) you raise over £2,000.
In i) you don’t get anything, and in ii) and iii) you get the money.
So, planning your campaign properly is essential and can also be great fun as you start to see your vision become a reality.
Think of it as telling a story to a very wide audience – as with all good stories it has to be told clearly and be understood by the reader. Look at other campaigns and start making notes about what you like and what could work for your campaign.
Eight Top Tips for Crowdfunding Success:
Which of the three crowdfunding models will you use? If you go for donations and decide to offer rewards, you will need to think about the tiers you offer (i.e. the more people give you the ‘better’ the reward) and how and when you will deliver the reward to the individuals that make-up the crowd (i.e. can you post rewards to them?). With interest or equity it gets more complicated and you might need some assistance from a local business advisor – if you do, make sure they understand the legal position of crowdfunding and the expectations and responsibilities you must meet under your country’s laws.
Perhaps the most important element is the initial script on the campaigns page. No matter the model you choose, it has to be eye catching and able to draw the attention of the reader. You will be one of several campaigns on any crowdfunding website and so you need to think carefully about how you present yourself to the reader.
A great tip is to look at other campaigns and see what makes them successful.
Normally the script for the campaigns front page cannot be altered once it is posted to the site, so think carefully about what you are going to say and how.
Words are great but readers can quickly lose interest and get bored, so images are a fantastic way to liven up the campaign page. But make sure the pictures are appropriate and show something connected to the campaign. Photos of the person behind the campaign may help the crowd to feel more ‘connected’ and thus more likely to help you. Images of previous artwork or performances are also a great idea.
Be careful not to overdo the images though, a good balance of words and images are needed.
Most campaigns have a video where the people behind the project present themselves to the world. Humour is great but this needs to be balanced against the seriousness of the project and the benefits the project offers. Be careful not to be too flippant in the video. Remember too that the video does not have to be a high quality production, there are occasions when more amateurish production techniques can help the crowd feel more empathy with you and the project. But this really depends on the scale of the project – if you are a professional games producer asking the crowd for £250,000 then you would be advised to spend a little extra cash and get professional help with the video production.
It is essential you keep the crowd informed through your campaign site (most will allow you to update information to the crowd in addition to the campaigns front page) your blog and your social media. No matter the size of the project, you will need to update all channels of communication at least once a week as this helps to keep momentum in the campaign. Planning these updates is essential and needs careful crafting. Make sure that all the updates are relevant and match each other, stay within the story you have told on the main page and ensure there is no contradiction in the updates.
Also think about communicating the crowdfunding event to a wider audience – for example could you get in the local press, radio, other peoples blogs or on social media pages? All this will help you get coverage for your campaign and help maintain the momentum – the worst thing to happen is that you almost get to the target and then simply run out of steam.
As mentioned above most crowdfunding websites ask you to set a time limit for the campaign so plan out the timeline carefully bearing in mind when you want key events to happen (like updates or certain target milestones). Timelines do not have to be complicated and can be as simple as an arrow with dates on a piece of paper. By planning and thinking about the timeline, it will help you measure the campaign during the ‘live’ phase when you are raising cash. But do not worry too much if things are not going exactly as planned, it may take time for the campaign to gain momentum and you may also find the crowd suddenly offers its cash right at the last minute.
Things you need to consider here include the costs of doing or creating the project and the cost of using a crowdfunding website. They normally take a small percentage for using their site and may also use a service like PayPal to process the money you have been offered – therefore you will need to factor in the cost of the website and the cost of using PayPal. One other expense you need to think about is the cost of delivering the rewards to the crowd. If you are planning to travel or post goods then this also needs taking account off. Generally these are small amounts, but they need to be included in the target amount you are asking for.
It is vital that you get friends, family and fans to make offers early in the campaign. There is evidence to suggest that the more people you can get involved at the beginning of the campaign, the more likely you are to attract other people to put money into the project. Early investments act like a signal to other people that the project is a good one and worthy of funding.
8) Post campaign
So, you have successfully raised the target amount for your project – now you have to deliver on the promises you have made during the campaign. This may include promises about what you are going to do with extra money you have raised.
This is great news and will surely be of interest to local media and the wider local creative communities. Success in crowdfunding is not easy and people will want to hear your story of how you managed to do it. This is a wonderful opportunity for you to make an even bigger network of contacts and who knows, next time you start a crowdfunding campaign, you may have an even greater number of people to help start it!
Equally ensure you have a plan ‘B’. If you fail to raise the target what are your options? How will you continue to get support for the project?
These are the questions that most people put off until the end of the campaign and by then are about ready to give up all together. There is nothing to stop you from trying again. Perhaps a different website would be better or just waiting until the time is right for your project. These are issues that must be taken into consideration in any good plan.