Reward-Based Crowdfunding Forum

Earlier this week, I was in the audience for a terrific roundtable discussion on reward-based crowdfunding at IDEA Works FW.  The discussion was led by Hayden Blackburn, the Director of IDEA Works FW, and included an interview with Stephen and Carrie Fitzwater, the founders of Modern Lantern, a designer and retailer of battery-operated cordless lamps (here is their website). Modern Lantern have raised over $15,000 in crowdfunding on Kickstarter to help bring their lamps to life.  

I learned a lot about rewards-based crowdfunding at the event.  For those that don't know, crowdfunding involves seeking funding for a project through small contributions from a large number of people, typically over the internet using websites such as Kickstarter.  Importantly, rewards-based crowdfunding does not involve an investment in securities, such as stock of a company (that's called "equity crowdfunding"). Contributors to a reward-based crowdfunding effort typically expect to receive something in return for their contribution, however, such as a discounted purchase price for a product under development, an extra role in a movie under development, a t-shirt or other swag from the company, and certainly some psychic benefit of knowing you have helped get a young company or project off the ground.

Below are a few take-aways  from the discussion, in no particular order:

• DON'T EXPECT TO RAISE BIG BUCKS. Reward-based crowdfunding is generally not a way to raise a lot of funds. According to Kickstarter's statistics (available here), although their site has raised of $2.4 billion for over 100,000 projects, about 70% of the projects that successfully used the website for fundraising raised less than $10,000. Less than 0.2% of all successful Kickstarter projects raised $1 million or more.   
• CHOOSE THE RIGHT PLATFORM. There are more than 190 websites that offer crowdfunding platforms, with more being added all of the time. Some of the more well-known crowdfunding platforms are Kickstarter, Indiegogo and GoFundMe. Different platforms focus on different types of crowdfunding projects (tech, movies, music, medical expenses, etc.), so a company seeking crowdfunding will want to make sure its project fits into the general focus of the crowdfunding platform it chooses to use.
• MAKE A GREAT VIDEO ABOUT YOUR PROJECT. Kickstarter permits (and strongly encourages) you to prepare a video (perhaps 1-3 minutes long) describing your project. This is where potential crowdfunding contributors are likely to go first to learn about you, your project, your funding needs, and why they should care, so putting together a compelling video is an important part of the crowdfunding process.  It should tell your story in a way that makes the viewer care about and get invested in your success.
• DRIVE TRAFFIC TO YOUR PROJECT PAGE. Do not expect Kickstarter to do any advertising for you. Getting a project accepted by Kickstarter (yes, they must approve your project before you can use their platform - other platform (such as Indiegogo) have a less rigorous admission process) is only part of the battle for funding.  You should plan to have a robust campaign to drive traffic of potential contributors to your Kickstarter project page.  E-mail blasts and social media "likes" to a broad range of potentially interested contributors is critical to a successful crowdfunding campaign. Media contacts who might help you promote your project and/or a coordinated series of press releases can also enhance your visibility. 
• FOLLOW UP TO BUILD SUPPORT AND LOYAL CUSTOMERS. Perhaps more important than the funds that can be raised through crowdfunding, is the core of customers, supporters and fans of your product or service that can be grown and cultivated through an effective crowdfunding campaign and thoughtful interaction and follow-up throughout and after the crowdfunding campaign. An earlier contributor to your project is likely to feel invested in your success (literally and figuratively!) much more than a traditional customer.
• COOL SUCCESS STORY. One interesting reward-based crowdfunding success story is Rocketbook, which has raised over $500,000 on Kickstarter for its cloud-connected, microwavable notebook.  The product allows you to take notes, store your notes on the cloud, then erase your notes in the microwave and re-use the notebook!  You can read more about it here.

Thanks to Hayden and his team for putting on a very interesting and informative event.