Crowd Funding – Understanding the Universal Currency

iPledg - Logo - Low-ResolutionIn an age when all relationships have seemingly become transactional, social commentator Ian MacKenzie has rightly summed up the crowd funding landscape when he said that the currency of crowd funding is not cash, but relationships. In a traditional commercial transaction, goods and services are provided in exchange for payment, and then each of the two parties to the transaction goes their own way. Rarely is there any follow up (sadly), and brand loyalty seems to be waning as consumers become shrewder and increasingly demanding, preferring to compare and jump ship should a better deal come along.

Crowd funding tends to have challenged conventional thinking, as people are now no longer investing for a “slice of the pie”. Their motivation and “buy in” is now being based on a whole new paradigm.

In the case of most crowd funded initiatives, the monies pledged are not simply a transaction, but a gift, thus changing the entire essence of the relationship between the project creator and supporter. In a gift relationship, there is a type of indebtedness – You supported me so I now owe you something back. The whole concept is unique in that it creates communities, with the whole “tribe building” being at the core of why crowd funding has flourished around the globe.

It is true to say that charitable and community projects have never viewed monies raised as part of a regular commercial transaction. However, whilst people do pledge because the feel passionate about the cause or outcome of the project, there is less of a “donate and run” angle to crowd funded projects, and more of one whereby people buy in to the story, the need behind the project, and tend to have the “rewards” (tangible or otherwise) as ongoing recognition and reminder of their involvement. The better run crowd funded charitable and community campaigns also have a greater residual benefit and effect if the project creator communicates with their new “crowd” and continues the ongoing relationship over time, well after the campaign is completed. This can then also be the basis for future, successful crowd funding campaigns and part of an ongoing funding strategy for a series of projects.

Commercial initiatives successfully funded by crowd funding have, at their core the same base formula, again built on relationships. The “first tier” or first followers are usually friends, family, and those that are closest to the project creator. They have been primed (usually well before the project commences) and give the campaign the initial momentum to achieve ultimate success. From those with whom the project creator already has relationships comes the second tier supporters. These are then the newly acquired relationships that become part of the tribe, and they play an essential role in the success of the campaign. They are the ones who will take the campaign to the critical 25% – the point at which strangers will start to buy in. These “strangers” then make up the third tier, pushing the campaign to the next key milestone, that of 30% funding. Those campaigns achieving 30% of their funding target are known to achieve 100% of the funding target in at least 90% of cases. Also, by this point, the crowd has started to well and truly gather, and if the project creator handles things correctly, he will be poised to build a relationship with his crowd that goes well past that of a mere transaction, and will endure throughout the life of the organisation or product lifecycle.

Crowd funding is proving to be so much more about the “crowd” than the “funding”. It is the crowd that will provide the social proof, the advocates through funding and, if well handled and communicated to, will be with the project creator for many years (and many projects) to come.

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