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.
As a prospective backer, if I see a project with a funding target of £10k, what does that mean? Does it mean ‘if we don’t raise this money we can’t make the thing’? Or does it mean ‘we’ll make it no matter what, at our own cost, but if we can raise £10k that would really help?’. 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 thing I backed won’t actually happen at all?
And as a creator, what happens if you raise less than your target? If you have costs of £10k but you only raise £5k, do you have your own funds of £5k to cover the shortfall? Or will you have to refund your backers because you can’t produce the thing they’re expecting?
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.