There are two main models of consumer crowdfunding – flexible funding (keep whatever you make) and fixed funding or all-or-nothing (keep everything if you hit your target – but get nothing if you don’t).
Both models have advantages, but lots of people new to crowdfunding think flexible funding is less risky. I strongly advise most clients to go with all-or-nothing funding – and here’s why.
If you want people to back your project, you have to look at it from the backer’s perspective, not from your own as a creator. As a creator, it’s hard not to think about the scary prospect of losing everything. But backers are far more likely to push an all-or-nothing project over the target.
All or Nothing projects tend to raise more money and attract bigger pledges.Crowdfunder
From the backer’s perspective, they want to support a successful project. What does a funding target of £10k actually mean? Does it mean that without that money the project can’t happen? For a flexible funding project, they might wonder why you’d set a target of £10k if the project could still go ahead with just £5k. But if the project really and truly can’t get off the ground without that £10k, then what happens if it only makes £5k? Will it still get made? Or will that £5k just get swallowed up in other costs, and the project won’t happen? These are the questions your backers may have.
What do you do with half a budget?
And as a creator, what happens if you raise less than your target? You’ve not only promised to create your project, but you’ve also promised to fulfil various rewards too – if you don’t have enough money to do either, then you’re risking letting down your backers.
If you have costs of £10k but you only raise £5k, do you have your own personal funds of £5k to cover the shortfall? Or will you try to refund your backers because you can’t produce the thing they’re expecting?
By not releasing funds unless a project meets its goal, this ensures that creators have enough money to do what they promised and they’re not expected to complete a project without the funds necessary to do so. This also assures backers that they’re only funding creative ideas that are set to succeed.Kickstarter
From your backer’s perspective, an all-or-nothing funding target is really clear and simple to understand. If you need to cover certain minimum costs or else you can’t make your project happen, flexible funding doesn’t work for you. If you’re creating a theatre production, making an album, writing a book, setting up a venue, whatever it is: if you need a minimum figure to make it work, then it’s all-or-nothing.
When is flexible funding a good idea?
Sometimes it’s definitely the right solution.
- It’s perfect for projects that scale well – that you can do a little of with a small amount of money, and a lot of with a large amount of money. A product, a book, a recording; anything for which you can take £1k in preorders to create £1k of stuff, or £5k in preorders to create £5k of stuff.
- It’s great for charitable giving – when any and all money will make a difference, no matter how big or small, and when supporters aren’t necessarily expecting to see a direct outcome from their contribution.
If you’re still not sure what would work best for you and you’d like some guidance, get in touch.