Crowdfunding, the practice of raising small amounts of money from large numbers of people, has enabled people around the world to start new businesses, fund initiatives, and raise money for themselves and others. Yet, not all crowdfunding efforts reach their desired goal. Why do some succeed, while others fail? This course will reveal the science behind successful crowdfunding, drawing on data from hundreds of thousands of campaigns. You’ll learn different types of crowdfunding approaches, and receive detailed advice on what to do (and what not to do) when crowdfunding. You’ll also have the unique opportunity to go behind-the-scenes with key players in the field with exclusive interviews from the founder of Indiegogo to successful campaign creators, to get the information you need to set your crowdfunding initiative up for success.
What Sort of Preparation Should You Do?
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From the course by University of Pennsylvania
Crowdfunding
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From the lesson
Module 2
In this module, you’ll explore how to prepare for a successful campaign, including how much time you should expect to spend and how much money you should seek to raise. By looking at the different types of rewards and reward levels, you’ll be able to weigh the benefits and costs of reward types for your campaign, and find the right balance that will work for your budget. Then you’ll learn about both successful strategies and common pitfalls in preparing for your crowdfunding campaign, such as the use of helpers or consultants. By the end of this module, you’ll have built effective strategies for preparing and budgeting your crowdfunding campaign, and be able to tackle any issue that your campaign might face in achieving its goal.
Meet the Instructors
Ethan MollickAssociate Professor
Associate Professor of Management- Wharton School
So for this lecture, I want to talk about the kind of preparation that goes
into a crowdfunding campaign.
The most successful campaigns actually spend a huge amount of time before
the campaign launches thinking about how to prepare and what to do properly.
And we'll talk about that, realistic time frame expectations and
other issues in this lecture.
So I want to talk about why preparation is import for
success, what you need to repair, and the kinds of hours you can expect to spend.
So the first step in preparation is to assemble your team or
not assemble your team.
So about two-thirds of projects on Kickstarter were created by individuals,
and the remaining third by teams.
And I suspect there's very similar numbers for other forms of crowdfunding as well.
For those actually on teams, the average team size is about three people.
So they're not very large teams.
And the teams tend to be mostly among friends.
But spouses were also quite common.
So these tend to be groups of friends that you work with.
Sometimes husband and wife teams.
And those are the most common groups to raise crowdfunding.
But it's also extremely common actually the majority raise money on their own.
So here is some news to pay attention to.
While most people do do crowdfunding projects on the side,
not as their full-time job,
about 19% of people make crowdfunding their full-time job on Kickstarter.
You should expect to spend a lot of hours outside of your work or
whatever else you do raising money.
So what you see here are three different charts.
And they show you in orange the amount of money, the amount of time that people
spent per week in hours before the campaign preparing.
Red is during the campaign and blue is after the campaign fulfilling whatever
promises that they made during the crowdfunding campaign.
And what you can see, there are the three groups, all projects, projects that tried
to raise over $10,000 and projects that tried to raise over $100,000.
And what you can see, is first of all,
the larger your project the more hours you tend to spend.
But even for all projects overall, people spend at least 12 hours a week preparing
for the campaign, over 15 hours a week during the campaign making it run and
a similar amount of hours afterwards keeping the campaign going.
So that's actually a very large number of hours.
You'll spend over 40 overall on average
with the number of weeks that you expect to spend this.
But hours per week, you should expect to spend at least 15 hours a week,
on average, on your campaign in preparation.
So what should we be doing during this preparation time?
The first thing is, you should be doing your research.
So you should start by looking at other projects that do similar
things to what you do.
So what other campaigns have raised money successfully?
What other efforts have successfully raised cash and
understand what those things have done,
why they've been successful, how you're different from them.
I got a lot of advice that you should read some basic site guides,
so almost every crowdfunding site has a guide of how to raise money.
Go through those guides.
Go through guides like appearing sites to make sure you know how to do this.
So some simple web searching to get some advice.
Watch the rest of the videos in the series.
All of that kind of basic research can help you out, and start preparing early.
Here is another quote from one of my survey respondents.
They said when people ask me how to have a successful Kickstarter campaign,
I tell them we work for five years prior to this campaign building relationships,
connecting with donors and putting ourselves out there at screenings and
festivals.
So this was a successful campaign,
but it was built in five years of relationships and networking.
Now this is obviously for
a film project, not all projects spend five years doing the work.
In fact, on average we spend a few weeks.
On the other hand, you should think about this kind of model,
which is you're doing a lot of preparation work, laying the basis for
a successful campaign before it starts.
Doing research, meeting people, building connections,
all of this is absolutely critical.
So one way to understand whether your campaign is going to succeed or
fail is actually talk to people before hand.
So holding everything secret from even friends or potential customers or
backers is not necessarily a good idea.
So think about doing some customer interviews to make sure
that you'll find backers for your campaign.
So you want to find out if people see a need for your idea and
if they understand your pitch.
You can go out and
talk to potential backers to understand why they might back a project like yours.
And about how they are currently addressing their concerns.
So if they currently wish they had a 3D printer but
don't, why have they not bought a 3D printer and how are they addressing
the concerns that you might bring to the table with your 3D printer.
You might want to also talk about potential buyers of products.
So store managers or retailers or
other backers, people who run film festivals, video game reviewers.
Depending on your category think about talking to people who are not just
going to back your project, but people who would help major projects successful.
And then also think about talking to experts to make sure you
understand all the pitfalls of your project.
So talking to people in manufacturing or fulfillment and
understand is your plan realistic in advance.
A few conversations could solve a huge number of problems that might sink your
campaign, make it not reach it's goal or even worse, you might successfully raise
money and then find out what you are trying to do is impossible.
Do the ground work in advance to solve these problems so
you do not have to worry about this.
Your planning time is not going to be wasted.
So I look statistically using a pretty simple statistical model
at the number of hours people spent on a project and
how much the hours spent in preparation changed the outcome of the project.
And so you should take this as sort of a loose number, but
I think it's representative,
which is an average successful project that has ten hours of prep time a week.
Makes $9,000 less than a successful project that had 40 hours of prep time.
So those numbers scale, depending on what your goal is.
But it's worth thinking about that the hours of prep that you spend actually make
a difference.
And as we'll talk about in a moment when we talk about how to do pitching,
you should think about things like building prototypes in advance.
Think about doing budgeting and figuring out your logistic planning.
Go through a risk reduction.
Where are the risks?
What do you not know, how do you find out more answers to
problems that are unresolved in your campaign,
about how you going to do budgeting, how you'll deal with bank accounts?
How are you going to hire people?
The more you think this in advance the more you reduce risk of failure later.
Think about a media plan.
How are you going to get your information out to the media and
make them interested in what you're trying to pitch?
And how are you going to go and produce the videos and
the pitches you need to kind of make your stuff successful,
make sure there's no grammatical and spelling errors?
So there's a lot of things to do in planning.
The more of it you do in advance, the more successful you're likely to be.
So an interesting question I often get is about whether you should consultants or
helpers on your projects.
I found that about 8% of successful projects actually use
specialized consultants.
But a lot more people hire people to help with particular roles, shipping or
accounting or helping produce videos.
Generally I find people feel happy with the choices they have made.
But I should have warn you that I can't find any statistical impact
of using consultants on your campaign.
So maybe he make you more likely to succeed, I can't judge that.
But campaigns that higher specialize traffic consultants raise no more money
than of those that do not hire those consultants.
So this might be because there's some very good consultants and
very bad consultants out there.
But you should realize that consulting is not going to solve all your problems
you specialized consultants can be useful.
But they're not going to significantly change the impact of your campaign.
So you should consider using consultants that are helpers
if you have time to find and manage good people, if you really do need the help and
if you don't expect them to do magic.
So, one problem I find in entrepreneurs overall is,
they don't know how to do some things, so they hire someone to do it.
And they realize that because that person doesn't understand
the context of the community they're in, the thing they're trying to build,
the innovation that they're working on.
That consultant actually is not that helpful or
that helper is not that helpful.
Because they need a lot of things explained to them.
So make sure that you hire a consultant to do a narrow task that you can't do and
then you manage them very closely.
And also, if you don't have the money to hire a consultant or
helpers, you should realize statistically that doesn't make a big difference.
And you shouldn't stress over this kind of issue.
So summarize, you should think about your preparation time as
an important part of your campaign.
Generally time spent in preparation will make your campaign more successful, but
you should expect to spend this as almost like it was a half-time job.
Even if you're working a real job,
15 to 20 hours is a very realistic amount to spend preparing for a campaign.
And the more prep work you put in at the beginning,
the more likely you are to succeed later on.
You can use consultants or helpers, but
don't expect them to magically solve all your problems.
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