Posted on August 14, 2013 By iPledg With 0 comments

Crowd Funding – The Tipping Point to Increase the Chances for Successful Fund Raising

iPledg - Logo - Low-ResolutionCurrently, the international statistics for successfully executed crowd funding campaigns on “all or nothing” sites sits at around 45%. Should a funding campaign fall short of the target, the pledges merely dissolve, and the project creator is then left to ponder where they went wrong, and perhaps have another go with greater effort, better rewards, or a more realistic target. The implementation of the “tipping point” by progressive crowd funding platforms gives project creators a greater chance to get it right the first time, by offering an alternative, more modest target, and giving themselves a greater chance of success.

“All or nothing” has proven to be the fairest format for crowd funding, as project supporters are offered the comfort of the project actually going ahead due to the minimum funding requirement having been met. Sites that offer “get whatever’s pledged” seem to attract negative feedback from project supporters who (knowingly) pledge money to a campaign, but are bound to go through with their pledge despite the target having fallen well short and the project having no reasonable way of proceeding in any format. The question remains – “what happens to their money?” Does it end up just being a kind donation to the project creator who applies these funds to a totally different cause (or even just spending on themselves)? The “all or nothing” model ensures that the money transacts only when the project can proceed in some format, giving project supporters a sense that their pledge is going towards the project for which it was intended.

But project creators are ambitious group. Most have visions of grandeur which must be tempered. Sure, it is wonderful to think big and to dream, but reality and sensibility must prevail. The introduction of a tipping point into campaigns allows project creators to span both – the ambitious target, as well as the more moderate and realistic expectation. Let’s use the example of a project creator wanting to build a most magnificent statue. In their grand view, they see that it must be built out of gold, and the funding target to do so might be $10,000. If they meet or exceed the target, then all is good and the gold statue comes to life. If they fall short, the project does not happen in any way. By introducing a tipping point of 30%, the default position may be to build the statue, but out of something less extravagant like brass rather than gold. OK, the statue may not gleam in the sun as much, but at least the project supporters are still able to support the project into life in some format. In this case a tipping point of 30% or $3,000 means that only 30% of the main $10,000 target needs to be reached and the project creator will see their passion funded in some form.

The tipping point provides a great reality check, allowing project creators and their dreams to truly be judged (and supported) by the public. It is a true form of the democratisation of funding, with the public deciding whether they believe in and want the project to happen at the full target, or if they feel that the lesser, more modest default position is sufficient. The project creator receives the ultimate in feedback, underwritten by the pledges of the project supporters who will tell him whether his initial plans are reasonable or a more realistic target is preferred.

If there was any doubt as to whether a tipping point increases the project creators chance of success, one only has to look as far as iPledg for proof. Since introducing the tipping point concept to their crowd funding platform, iPledg has more than tripled the rate of successful campaigns. The feedback from project creators is that it gives them a second bite of the cherry, and reinforces that the project may need to be scaled down without compromising the result or integrity. Overall, the tipping point concept has been well received.

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