From the crowd. How to raise money thanks to the crowd?
Who has already launched a crowdfunding campaign?
Who has already participated in a crowdfunding campaign?
Crowdfunding is a collective way of raising money for venture projects by asking a large pool of interconnected individuals for a small amount of money. It has been speculated that the financial climate after the global economic crisis gave rise to the culture of crowdfunding. However, the first online crowdfunded project is thought to have occurred as early as 1997, when the rock band Marillion was looking to finance a tour after their album release.
A considerable growth in Europe between 2012 and 2017
On the European market, alternative methods of financing projects grew very rapidly, with the market size reaching more than 10,44 billion euros as of 2017.
For instance in France, it means that in 2017:
- 33381 projects funded thanks to a crowdfunding campaign
- Almost 4 millions of French people participated in a crowdfunding campaign
An old principle, a new method
- Remember the punk period with the subscription in the magazine/fanzine
- It was only to give the opportunity to artists to have enough money to make an album
- Internet has facilitated this king of raising
3 kinds of crowdfunding platforms:
- With rewards: Reward-based platform like Kickstarter (US), Ulule (FR), FundedByMe (Sweden), Booomerang (Denmark)
- Lending-based platform like Unilend or Babyloan
- Investment : Equity-based like Crowdcube (UK), Wiseed (FR)...
We are going to focus on the reward-based platform
How does it work?
Crowdfunding allows the financing of creative, collaborative, innovative and solidarity projects.
- It is the all-or-nothing principle: project funds are recovered only if the project meets or exceeds the collection goal
- If the project does not reach its goal, everyone is reimbursed
- In exchange for a technical solution, the platforms take a commission on the total sum (5% or 8%)
Typology of projects
- Audiovisual : 28%
- Solidarity: 15%
- Music: 13%
- Entertainment: 9%
- Sport: 3%
Cultural projects represent 60% of funded project
The success rate is 68%
Why launching a crowdfunding campaign?
- Diversifying his revenue streams
- Looking for financing over a short period
- Expanding your audience and/or strengthening your relationship with your community
- Testing your project with a wider audience
- Validating or invalidating a concept
- Using crowdfunding as communication tools
How to define your project?
- The project must be clear: what is the money going for? Is it for the video clip? Is to make a CD? Is it to record your music?
- What is your budget? You can't ask for the entire budget of your project. If you do that, it means that you ask people to be confident with your project but you don't show them that YOU are confident in YOUR project
- What is the duration of your project? What is the schedule of your project?
- What are the rewards?
- What type of communication for your crowdfunding campaign?
- No text too long, no one reads them entirely
- A presentation video is better than a huge text
- If you plan to launch a crowdfunding campaign, take your time: 3 months are necessary to think and build it, but also to think about asking for money. It is not an easy position
- Your campaign should be in line with your mood board (Think about the questions list I sent you)
- It is better to begin your campaign in the beginning of a week
- It is better to end your campaign on Thursday or Friday
- The optimum duration is 40/45 days
- The optimum hours for collecting money are: 10am, 2pm, 5pm, 9pm
The 3 crowdfunding rings:
- The first ring: your family, your friends
- The second ring: the network of your first ring
- The third ring: unknown people
>> It is very easy to reach out the first ring but you have to prepare them before. They have to be engaged very soon in your process. If nobody gives you some money in the beginning, no one will give you money. Nobody wants to be the first one.
>> Encourage your first ring to share your campaign. It is the only way to reach out the second and the third ring
>> The third ring is very hard to reach out. If you success in it, it means that your campaign is becoming viral. Congrats !
Practical exercise: your turn
- Build your own crowdfunding campaign. You plan to launch your album next year, but you don't have enough money. You still need 3500 euros.
- What is your strategy? duration, period, text or video
- Plan your communication schedule (twice a week)
- Think about the rewards (minimum 7)
By Chloé Nataf