Researchers Sunil Wattal and Gordon Burtch began innovative research with a simple question: how can people launch crowdfunding campaigns that rise above their competition?
Burtch, who earned his PhD from the Fox School of Business, developed an interest in crowdfunding in 2009, and worked with Wattal, his academic advisor at the Fox School, to study crowdfunding data sets and research ideas.
Below are key takeaways and tips for entrepreneurs and businesses interested in crowdfunding. Wattal’s and Burtch’s full research findings can be found within the Fox School Institute for Business and Information Technology (IBIT) Report.
1. Select the Appropriate Crowdfunding Platform
Not all crowdfunding platforms are alike:
- Donation- and lending-based crowdfunding, in which online donors receive no financial return.
- Rewards-based crowdfunding, or campaigns that prompt individuals to contribute in exchange for incentives like a form of the product for which funds are being raised, or another service.
- Equity-based crowdfunding, which provides donors with an ownership or stake in the project in exchange for donations.
Projects for goods in the technology, books, or gaming sectors are better suited for equity- and lending-based platforms. Research shows that initiatives around public good, charity, or community projects work well on donation- and reward-based models.
2. Strike a Balance with Campaign Duration
The researchers found that the average campaign duration is between 30 and 45 days.
Extended fundraising durations tend to negatively impact a campaign, because backers do not feel an urgency or level of excitement to help the campaign reach its goal. However, some lengthier campaigns may lead to greater attention and awareness of the project’s promotion, and thus finding a balance is important.
3. Establish Realistic Goals
Lofty fundraising goals may lead funders to believe the goals are excessive or unrealistic. That means they are less likely to give. Most crowdfunding platforms do not require the funding campaign to close when a goal is reached, which encourages entrepreneurs to set a lower threshold.
When a goal is met, crowdfunders may fade because they assume the campaign has been fulfilled. To decrease the likelihood of this happening, include in the campaign pitch that the goal will only address a portion of the project’s budget.
4. Maintain Campaign Engagement
Many campaigners make the mistake of underestimating the social aspect of crowdfunding. This happens in the presentation of the product on the campaign page, or in the failure to execute a proper promotional strategy on social media or other marketing channels. Campaigners should create descriptions that are easy-to-read and develop a thorough promotional plan for social media and beyond.
5. Prepare (Don’t Skip This Step!)
Don’t launch a campaign too early. If a project doesn’t appear to be well prepared or organized, crowdfunders may be less inclined to contribute.
What is a successful campaign?
Entrepreneurs and business owners can learn a lot from Pebble watch campaigns, said Burtch and Wattal. Its first campaign generated more than $10 million. The Kickstarter for Pebble Time, a second-generation watch, met its fundraising goal of $500,000 in less than 20 minutes, and went on to eclipse $20 million from more than 70,000 crowdfunders.
The latest campaign for the third-generation watch, Pebble 2, launched in spring 2016 and raised more than $12 million.
“The Pebble Time campaign was a slam-dunk because Pebble already had an established following of backers on Kickstarter from its original campaign,” Burtch says. “Moreover, it had gained a great deal of experience. Nothing beats first-hand experience.”