Should you “outsource” your crowdfunding campaign?
For as much attention crowdfunding is getting, what does crowdfunding really boil down to? Fundamentally, only two things:
1. Someone who has an idea but needs money to make it happen.
2. The means and methods of asking others for money.
Basically, it is that simple. Simple things can be complex. There’s no shortage of people with ideas who need money. It’s always been that way. Crowdfunding does not change that and it is by no means a new method of raising funds, either. Largely as the result of Kickstarter, crowdfunding has gained a new “legitimacy” as a respectable means of raising funds. An authentic crowdfunding campaign implies that those who financially support a cause will get something in return – a product or something of symbolic value.
Crowdfunding’s popularity started taking off as the global financial crisis impacted small business loans from banks and other financial institutions. The idea of crowdfunding stepped in to help fill some gaps. With that, we’ve seen the rise of scores of new crowdfunding platforms. We are still in the very early stages and we will see hundreds more rise, many fall, more rise to take their place.
So, what does a crowdfunding platform do? It enables you to mobilize your social network to go to someone else’s web site to pledge support for your project.
Depending upon whether or not it is an All or Nothing effort, you raise your funds, you send out the prizes, the platform receives a commission and that is that. Your campaign ends, life returns to normal. If successful, you pick up a certain amount of prestige and legitimacy that may apply to your next project.
Otherwise, the only distinction is that the crowdfunding platform holds any money pledged and automatically returns it to customers when an All or Nothing campaign fails.
There’s nothing wrong with that, but it is not in every case “optimal”. I would argue in many cases that if you already have a web site for your project, using a crowdfunding platform is not optimal. The number one reason why you would is if you are uncertain whether you will be able to raise the funds to complete the project and fulfill prize commitments (or return the pledges). A crowdfunding platform is a middleman. There are cases where you do need a middleman. That IS the case with the majority of equity-based crowdfunding projects. This is not always the case with non-equity projects.
The largest portion of your campaign’s success will be derived by mobilizing your social network. For the amount of effort involved in putting your campaign together, would you prefer:
A) Sending traffic to someone else’s web site?
B) Sending traffic to your web site?
If you have a web site, you have total control of everything on it. Your site will be there for as long as you maintain your account. You may be able to offer products and services outside the scope of your fundraising project.
If the funding to fulfill your prize commitments is in question, than you should play it safe and go with an existing crowdfunding platform. However, there are a lot of projects where the associated prizes are not entirely dependent upon the campaign’s success. Thus, the structuring of your prizes or rewards for pledges is very important.
Then, the question to ask is, “Will I be more successful running my campaign on my site or Site X’s?”
Factor in all of the additional content you can add to your site by applying to crowdfunding best practices, and ask that question again.
Aside from the escrow service of holding pledged funds until a final outcome is determined, the legitimacy of a fundraising project is not an issue.