Posted on October 29, 2013 By iPledg With 0 comments

Crowd Funding – Understanding the Roles of the Project Creator and the Platform.

iPledg - Logo - Low-ResolutionCrowd funding is work – teamwork. As with any great team, it is essential that the team understand each others’ role so that they do not miss any crucial activities that may impact on achieving the desired outcome. At the nucleus of the team are the project creator and the crowd funding platform itself. The relationship between these two parties is often misunderstood, and it is this misunderstanding that can stand in the way of crowd funding success. But get the alignment right between the project creator and platform, and get each one fulfilling their role, and success is almost guaranteed.

The role of the platform is over represented, either by the platform themselves, or by a hopeful or over-enthusiastic (or ill-informed) project creator. Traditionally, in crowd funding, the platform’s initial role is not to find funders or to direct funders to the project. Most of the grief around crowd funding occurs after the campaign, when the project creator airs their disappointment in the platform not having delivered funders to the campaign. In fact, in 21% of campaigns (from campaigns around the world), not a single cent is pledged, and this is due to the project creator sitting back and waiting for the platform to “do its thing”.

The project creator is the one charged with coming up with the project – that much is obvious. Their role is to then engage the first tier, or their closest network of supporters. Family, friends, workmates, neighbours, etc are those people who best know the project creator, and will usually support them based on the simple fact that they know and like them. If a project creator is unable to get any support from those who know and like them personally, there is little chance that the friends of friends (second tier) or the third tier (those unknown to the project creator) will jump in with their support. In fact, this first step of engagement is critical to the success of the campaign, as a project creator can increase their chances of success from 15% if they have no funds pre-committed to their campaign, to 80% if they get their closest friends and relatives to pre-commit 20% of the target, to an almost 100% chance of success if they get 35% of their funding target from their first tier prior to or shortly after commencement of the campaign.

The role of the platform is divided into two areas, defined by the different support phases of the campaign. Initially, the platform operator acts as facilitator, mentor, and coach, guiding the project creator in the best way to position their campaign, and to ensure the right structure and contents are in place. The more client focused platforms will appoint a case manager to coach and encourage the project creator to also connect with their first tier. Given that the project creator is personally connected to their first tier, no one can do this for them – it must be the role of the project creator to build the first tier support. And the earlier they do so (even before the commencement of the campaign) the better.

Once initial support is established, the role of the platform then shifts from facilitator and coach to promoting the campaign out to the masses. The project creator, by engaging the initial support, really gives the platform operator something to work with. Without this initial support in place, the platform can direct their audience to the campaign, but the crowd will feel little confidence in wishing to jump in. The crowd needs comfort that is offered by “other people” validating the reason to support the campaign. And the “other people” are the project creator’s “first tier” of supporters. Once they are in place, the role of the platform operator is made easier to go to market and leverage the initial support into a fully funded campaign. The more initial support, the greater leverage, and the greater chance of not only funding, but over funding the target.

Regardless of whether the project is one that is seeking equity crowd funding, or whether it be under the pledge model, the same principles apply. The relationship between platform and project creator need to be clearly understood, and with the relationship defined, the scene is set for crowd funding success should both parties fulfill their respective roles.

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