How much is too much? What is the right amount of funding to seek in a crowd funding campaign? And am I ready to start my campaign, given the size of my crowd versus the amount I wish to fund? These are all questions that potential crowd funders ask before starting a campaign. All valid questions, but experience has shown us that there are some guidelines as to how much you should ask for in a campaign, and how much might be too much to shoot for.
Firstly, a funding target is not an arbitrary figure, but a carefully calculated and researched amount based on the outcome or deliverables of the project. If your project is to build a widget, the cost to do so should be worked out as close to the final amount as possible. This then gives you the initial funding target for your campaign. Perhaps this amount can be broken down into stages (e.g. the cost of design, the cost of tooling, the cost of manufacture, and the cost of distribution), and if the overall funding requirement seems like too much of an ask, then perhaps the stages can be funded independently rather than trying to bite off too much in one go. This can be quite a strong strategic move, as those who fund a successful campaign will often go on to fund subsequent campaigns by that same campaign creator.
The sweet spot for pledge model crowd funding sits between $1,000 and $30,000. That is, most campaigns that get full funding sit between these amounts. The average size of a successful crowd funding campaign in Australia sits between $6,000 and $7,000. When working out a funding target, the second step (after costing the project to be funded) should be to take a moment to reflect against these numbers, and this will tell you straight away if your funding target is a big target, average, or quite reasonable.
Once you assess whether or not your target is a large one or reasonable by general crowd funding terms, you need to then consider how achievable it will be with your current level of contacts and networks. The best way to do this is to add up all the people with whom you have direct contact – your friends, email contacts, social media followers and connections, etc. Once you total that up and remove the double-ups, take just 10% of that figure, as typically just 10% of your network will pledge to your campaign. If you take into account that the average amount pledged is $50, you should multiply this by the number you arrived at (10% of your crowd) and this should give you a rough draft as to what figure you should aim for. If the amount you arrive at from this exercise is considerably less than your funding requirement, then you have 4 options:-
- You should perhaps aim for a lesser amount. What is it you could fund with fewer funds? Again, could you fund part of the overall project, and then go back for more once you successfully met your initial target?
- It is too early for you to start your campaign, and you should spend more time building up quality, relevant, and engaged contacts so you get closer to the number you require based on the exercise above (10% of your total network pledging and average of $50)
- You could perhaps come up with a schedule of vigorous and robust marketing initiatives, some of which would need to be done prior to the commencement of your crowd funding campaign, while other activities would need to be scheduled to occur early in the funding timeframe to give the campaign sufficient momentum for others to want to join in. You need to remember that you need to get to 25% of your funding target early in the campaign before total strangers jump on board. Think why people would want to back your campaign, and build your campaign description, promotion and rewards (inducements to pledge) to all be in alignment.
- A combination of the above initiatives
Setting a funding target for a crowd funding campaign needs you to assess where your target sits against common practice, and then is less about the amount you want to fund, and more about how your target relates to the potential crowd you can reach. Whilst a crowd funding platform will amplify your message, these effects will only come into play once you have established your own initial momentum. Set a realistic target in relation to the size of your crowd, and have a plan to engage them early, if not before the campaign begins so you have immediate traction. Follow these rules and you will maximise your chance of crowd funding success.