Posted on June 4, 2013 By iPledg With 0 comments

Crowd Funding – When “Near Enough” IS Good Enough

final logo new small-01We all have dreams. Many of us like to dream big, and reality can bite hard, causing our dreams to dissolve infront of our eyes if we fall short in any way. The same can be said for the “all or nothing” form of crowd funding, when the stretch-targets we set ourselves are slightly out of reach of the potential of our crowd – Fall a few dollars short and you get nothing. But now with the Tipping Point-method, project creators are able to still fund their passion if the money they raise falls just short of their ultimate goal.

The Tipping Point method is simple – Project creators set their funding goal just like they would in conventional crowd funding. The project description is the same (a bit about the team, the project and what will be done if the funding target is met or exceeded). And the rewards are set out as inducements as per normal. The difference is in the setting of a tipping point, almost like a safety net. A tipping point is merely a lesser funding target that allows the project to still go ahead, albeit in a lesser grandiose format, or to a lesser specification.

Let’s say your project is to build a statue out of gold, and your target was $5,000 to enable you to do so. You put the word out to your crowd, and they respond by pledging their support and by spreading the word to their networks and beyond. It all starts off very nicely and the dollars come rolling in. During the funding campaign, you lose some momentum, and the flow slows a little, so you give it a final push in the last days of your funding timeframe. You get to the end of the campaign, and you have raised 98% of your funding target. The net result in traditional “All or nothing” crowd funding would be that you get nothing. We would consider this a tragedy given all the hard work and good intention of the project creator and the crowd.

But with the Tipping Point method, you could still set the campaign up as above, but with one major difference – you could set a tipping point at a lesser amount than your original $5,000 target, and this would be a compromise position for your project. In this case, you could perhaps set a tipping point of $3,000 (60% of the ultimate target) and build the statue out of silver if the ultimate target was not reached. If the $3,000 target was met, you would still have time for your campaign to meet the $5,000 ultimate goal, but if you fell short of the ultimate target at the end of the funding timeframe, you would still get the funds raised by the campaign, and the project could still proceed (making the statue out of silver rather than gold). A win for the project creator, the crowd, and for crowd funding in general!

In the real world, there was recently a classic case demonstrating the benefit of having a tipping point. On iPledg, there was a recent project involving the saving of the Sumatran species of elephant. The funding target of $5,000 was almost met, but funds raised fell 2% short of the ultimate target in the funding timeframe. Under the conditions of traditional ‘all or nothing” crowd funding, the project would have dissolved and whilst no one would have parted with any money (because the money in such a model would not transact unless the target was met or exceeded), the project creator would not have received a cent of the funds raised. Fortunately, in this case, there was a tipping point of 60% of the ultimate target (i.e. $3,000) so whilst the campaign fell short of its ultimate target, it did succeed and did transact because it did meet (and exceed) the tipping point.

So the project, whilst falling a shade short of the target, did go ahead. Interestingly enough, even though they did not quite raise the money to fund their ultimate goal, they did well exceed their tipping point. From that time, the project was live and the cause for which they were raising funds was set to benefit in one way or another. Even more interestingly, given that “the crowd” saw that the campaign had gone so close to reaching the ultimate target, the balance of funds did come in shortly after the campaign ended. In such cases, it is also not uncommon for the providers of the items for which the funds are being raised to discount the goods by the few percent to allow the project to go ahead anyway. It is just another way in which the good intent of the crowd is harnessed by crowd funding.

The tipping point model with iPledg is ensuring that more projects can go ahead. It provides a safety net for project creators to maximise the chance of their project proceeding in one form or another, and (at the same time) is a reality check for over ambitious targets. Ultimately the crowd will decide the projects that will proceed and which ones will not, and combined with a tipping point that offers the crowd a choice as to how the project will proceed, the Tipping Point Model provides the most pure form of democratisation of funding.

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