MZ) The rewards-based creative field is primarily my area of expertise, and much of what I say may not apply to the other forms of crowdfunding, so I will answer your questions from that perspective.
In my opinion, many of the projects I see attempting to raise funds on the well-established crowdfunding platforms have a difficult time gaining visibility. Those sites have hundreds of pages containing thousands of projects, and if your project does not trigger their algorithms, it will be buried deep within the site. They do this by design; it’s called the merit-based system. It works well for them, but it also diminishes the chances for a lot of potential good ideas that are unable to get noticed and spread their message effectively.
Today’s Internet user does not have the time or patience to look through all those pages, so there is not as much cross contributions on the lower-profile campaigns as you would think. Those sites have excellent name recognition and have high traffic, but what good are those things if your project is virtually invisible? I think that’s one of the factors for their low rates of successfully funded projects. I think a website can hit a saturation point where there is a diminishing return when so many projects are hosted at once.
Don’t misunderstand me; I have great respect for Kickstarter and Indiegogo, and I love what they do and stand for. They were the inspiration for me to get into crowdfunding in the first place, so I’m not knocking them. I’m currently supporting several projects on both sites too. Their model works extremely well, as evidenced by the thousands of projects they fund every year. I also mention Indiegogo and Kickstarter, not to single them out, but because they are the most relevant to my field and this conversation, and you really can’t talk about crowdfunding without them.
I would also like to balance my comments in regards to the Big Two’s success rates. Crowdfunding is a testing ground and you can never achieve 100% success rate due to the design of the model. Not all ideas are viable or appeal to the crowd. Crowdfunding is freedom of choice in its purest form, and since contributors have direct control of the outcome, it would be unfair to blame it all on the platform. There will always be projects that do not inspire the crowd, no matter what platform they use, or how much exposure it receives; it’s just the nature of the beast. The only point that I’m trying to make is that it’s easy to get isolated on those sites due to the amount of projects they host, where their name recognition and traffic are of no benefit to many crowdfunders. Your campaign becomes a needle in a haystack.
With that being said, there are smaller platforms that are doing very well and have better success rates than the larger ones. One of my favorite sites out there right now is Pozible. Pozible has one of the better overall success rates that I have seen. Pozible boasts a 55% success rate, while the latest figures I read in Forbes listed Indiegogo at only 20% and Kickstarter at 44%. Higher success rates can be achieved, even on a site with fewer resources than the Big Two.
I also like the new programs at Pozible. In my opinion, Pozible is run by a very innovative group of forward thinkers. They are on the leading edge of crowdfunding right now, even though their market share is not as sizeable as the other sites I mentioned. Pozible has also shown more of an interest in the needs of their crowdfunders, which is what we are doing, only in different ways.
CFB) Can you elaborate on some of those ways?
MZ) Well, as you know, one of the services we offer that we believe can make a difference in the results of our campaigns is marketing and consulting services. Before I go any further, I would like to go on record and say: these services do not guarantee success for every project and, even with these services, a crowdfunder should do their own groundwork by raising awareness and attracting contributors to their projects.
Studies have shown that over 90% of all successful crowdfunding campaigns were initially funded between 20-30% within their own network. Furthermore, marketing will not make prospective contributors like an idea any more or less. Yes, the consulting can shape the message more effectively, but the marketing can only expose more people to it, and isn’t that one of the fundamental functions of crowdfunding- to make as many people aware of your project and let them decide if they wish to be involved in it?
Crowdfunding is an early vetting or validating process for an idea, and in the end the crowd will decide if they like your concept or not. Much of the success of a crowdfunding project will rely on the creator’s ability to inspire the crowd. There are large firms that are now using crowdsourcing, not to raise money, but to gauge insight into their target customer’s desires and behavior. They use crowdsourcing for product validation; it’s like a new version of a focus group.
I would like to address another topic that’s related, if you don’t mind. I have heard some criticism from very knowledgeable and respected people within our industry regarding crowdfunding marketing services. The comments went something like, “you are being paid for marketing and some of those projects still don’t get funded”, or “you should only take on clients that you think you can help.” These are valid points which I would like to address in a friendly, constructive dialogue. My answer to those comments is this: It is impossible to know who or what will be successful or not; it’s only when a project is presented to the crowd do we know what will happen.
How many startup companies were told they would never have a chance to succeed in the marketplace, and then went on to succeed beyond anyone’s wildest expectation? What about the bear coat on Kickstarter? I think the actual name was the Grizz Coat. Their goal was $2500, and they received over $25,000. Who could have predicted that? I never would have thought the coat would have been successful, and not only was it successful, it surpassed its goal by tenfold. There are countless examples of this, and the point is that no one ever really knows how successful a project will be until it actually goes live.
If we start picking and choosing who to offer these services based on our limited knowledge and unpredictable trends of what ideas will be successful or who we think we can help-which is one and the same-we undermine the whole spirit of what crowdfunding is about: which is to removing barriers to give the power directly to the people to choose. And that means people on both sides of the equation, crowdfunders and contributors. If someone thinks he or she has the best idea in the world that they truly believe in and want to purchase marketing services for it, who are we to tell them no?
We cannot deny these services to people who want to help raise awareness of what could possibly be their lifelong dream. This free flow of ideas, absent of judgment, will allow the most innovative creations to be noticed and supported, even if it looks like a crazy or unconventional idea to some of us at first.
Another comment that I heard was, “do these marketing services bring in the right kind of contributors to the projects?” Because of the diverse nature of crowdfunding, it would be impossible to know who the right contributors are for every particular project. We bring contributors that are knowledgeable and interested in crowdfunding. To break that down beyond that by project, genre, demographics, etc. would put the costs of these services well out of reach for the average crowdfunder.
Keep in mind, the cost of a marketing package on our platform starts at less than the price of the average monthly smartphone or cable bill. I don’t think that’s too much of a sacrifice to help fund your vision, if you really believe in it.
However, I do consider it our responsibility to make our clients aware of the fact that these services do not guarantee success for every project and not to raise their expectations into thinking it does. Again, much of the success of a project will have nothing to do with the platform it’s on or the exposure it receives. The crowd has the final say, which goes back to the validation point I made a minute ago.
Another thing to consider is, there are people that had and will have great ideas but lack the resources and marketing ability to spread awareness (as is the case with many crowdfunders), and if they cannot get noticed, the world will be deprived of what could be a really good idea. Marketing services can at least give their idea a better chance to be discovered by a wider audience and be successful.
Marketing services also distribute the project’s links to many different places that lead back to the host site, where it can receive contributions. This is a great benefit when dealing with any platform, particularly the large ones. For many people, using those links is the only way they know about a project at all.
I have seen some really cool campaigns using the all-or-nothing model fall just short of their goal, and I would think to myself, if they had just made a few more people aware of their project, they might have made it over the finish line. We think our marketing services can be of value to those people.
CFB) What advice can you give crowdfunders to have a successful crowdfunding campaign?
MZ) The only advice I can give is to maximize the chances of success. Some ideas will resonate and some won’t, and that’s just how it is. The point is to afford your idea the best possible chance of success.
Before I get into campaign advice, one of the first things that I think people who want to use crowdfunding should be made aware of is that most creative crowdfunding projects are the equivalent of starting a business (some smaller projects excluded), whether the project manager knows it or not. I think people should first look within themselves and see if taking on this task is within their makeup. This will take some soul searching if they have never started a business before.
Having an idea and implementing it are two completely different steps. It’s one of the reasons that most savvy VC investors focus as much, if not more, on the team presenting a concept than they do on the concept itself. The investors know where the heavy lifting is required, and it’s not in the idea; it’s in the execution of the idea.
There are so many factors and nuances involved in what makes a successful or unsuccessful campaign and every project is different. I will try to touch on some of the main points that apply to most creative projects.
My advice to anyone who is serious about using crowdfunding would be to start first and foremost with a thorough business plan, and not for the reasons you may think. Yes, a business plan will be quite useful when your campaign starts and beyond, but it’s also beneficial to the creator. A business plan can bolster your own belief in your idea, allowing you to have unshakable confidence in it moving forward. When creating a proper business plan, you’ll be forced to address all aspects of your idea: the risks and challenges and ways to find solutions to overcome them.
I would recommend a crowdfunder do comprehensive R&D (research & development) on his or her concept before they present it to the public. They should carefully craft a plan to penetrate the market they intend to enter.
The good news is there is more information at our fingertips today than ever before. By using Google searches, scouring the Internet, and talking with people in your field, a project creator can obtain extremely useful information that can help them with their concept, strategy, and execution. You can research and see the mistakes that others have made and see their successes, too.
Knowledge of what makes a successful or unsuccessful campaign will be a huge benefit when designing one from the start. Look through and study other crowdfunding campaigns, successful and unsuccessful, because so much can be learned by that process alone.
A pre-launch must: One of the most important components and often overlooked step is to start building buzz and gaining momentum for your idea amongst your own network before you go live. The opening weeks of a campaign are extremely important and will set the tone for the remainder of your fund raise. Campaigns with slow starts often have a difficult time making up ground as the clock starts running down. People usually do not contribute to a campaign that has little participation in it at its later stages. If you can gain early momentum and validation for your idea, it will go a long way in the success of your campaign.
One very effective way to gain support and momentum is to see if your project’s goals align with any organized groups. If so, you should seek their support. For example, let’s say you want to make a documentary on a certain cause or you designed something that will appeal to a certain group of consumers. Contact the administrator of the Facebook page for those groups or wherever else they can be reached, and see if they can lend their support. They might even want to help you with the film or product.
This is just an example, and while some projects may not be able to do this, connecting with some of these groups that have millions of social media followers can give you amazing exposure beyond your immediate social network, and they may even be your target audience. Be creative when you raise awareness for your idea.
When you are ready to go live, your plan should be delineated in clear and concise terms and illustrations to the crowd, using total transparency. You should tell the crowd where you intend to spend the funds you raise, using a budget overview. Make the best video you can explaining what your goals are, and remember, your video is the face of your project, and for some contributors, that is all they will ever see, so make it count.
And lastly, rewards: rewards-based creative crowdfunding is not a charity. The rewards you offer will have a direct correlation to the success of your campaign; make sure they are desirable at realistic price points. Don’t forget to add the costs for your rewards into your budget, too.
We usually only hear about the crowdfunding success stories, like the Pebble Watch, Amanda Palmer, or The Veronica Mars Project. People new to crowdfunding think that all they have to do is upload their project and the platform will do the rest. Nothing could be further from the truth. What we seldom hear about is all the effort and outreach that went into these very successful campaigns. This is one of the main misconceptions about crowdfunding, and we want to educate all the newcomers to this form of funding and let them know how it really works.
Crowdfunding portals are not ATM machines; you have to put effort into these projects to get successfully funded. And then, if and when you do get funded, the work doesn’t end there. Don’t forget your reputation is on the line in most cases. If you don’t deliver what you said you would, it can have a negative impact on your social standing as well as any future business ventures you plan to start.
We view crowdfunding as the best way, and sometimes the only way for people to finance their dream. We just want people to go into it with their eyes wide open, knowing all aspects of it.
CFB) What are your thoughts on equity crowdfunding?
MZ) Equity crowdfunding is a complex subject, and I don’t to pretend to know everything there is to know about it either. Even our attorneys, who specialize in securities law, have voiced their concerns over the lack of clarity in the new laws. I will address the model that we use and have put the most time and resources into first, which is the Title II Regulation 506(c) exemption. The way this model functions is a project can only be offered to accredited investors. I don’t consider this model to be “equity crowdfunding,” I would call it platform-based equity funding because you cannot offer these projects to the crowd, only accredited investors can participate.
Also, because of the regulatory costs involved in presenting projects in this way, I would not recommend this to the casual entrepreneur, only experienced teams with well-developed concepts should apply for this form of funding. There are many rules that apply to this model too, and if they are not followed to the letter of law, the SEC could close your portal down for a year, which is the kiss of death for any site. Most of the information about our equity offerings is in a locked portion of our site where only accredited investors can review all the offering material.
Title III equity crowdfunding is the model that I am less familiar with because it is not legal yet and still in the commenting phase. The little I do know about it is that it will be very costly for the portal owners to not only start but to maintain on an ongoing basis. It also has different liability issues that concern us. The preliminary numbers I have seen, if correct, lead us to believe it may not be viable for us. Title III rules and regulations will have to unfold more, and we would need to see some changes for us to consider ever using that model.
CFB) What makes Vision Launch different from other sites, and how do you plan on competing with these 800lb gorillas in the industry you mentioned earlier?
MZ) With the growth of this industry, I believe there will be room for many platforms to exist. There will also be a thinning out process, leaving only the best sites standing, as is the case in all business. Kickstarter and Indiegogo have certainly cemented their market share, but there will be room for other platforms who service their customers in new ways. That’s where we can fill a void.
We will do this by offering useful services and providing better visibility for our campaigns.
In addition to the services we offer, our platform fee for our all-or-nothing model is lower than Kickstarter’s, and our policies are not as strict. Our payment service is also simpler to use if you don’t have an Amazon account.
Our flexible-funding model fee is lower than Indiegogo’s, and our platform is more responsible.
Not long ago, I saw a project raising funds for a school on Indiegogo using their flex-funding model. The project manager was asking for 30 million dollars and promised personalized plaques on the school for their rewards. I think the project netted around $2000, and they kept the money, obviously not building the school or honoring their promised rewards.
That is just one example off the top of my head but, this is not an isolated incident with Indiegogo’s flex- funding model. We don’t agree with that practice, and it’s not something we feel comfortable with.
We created our responsible flexible-funding model in wherein the project manager will submit two budgets to us, an optimum budget and the minimum amount required to complete their project and fulfill their rewards. The minimum amount is designed to ensure that contributors will still receive their rewards, and if they don’t reach the minimum goal, the funds are returned to the contributors.
We also offer other services that the Big Two don’t, including marketing and consulting services and reward fulfillment. Once our client’s projects, are complete, we will offer them access to a retail area on our site that will allow them to monetize their finished product with very favorable terms. We have equity funding available for certain projects so we are scalable to different project managers or business’ needs. We are developing more services that we intend to roll out this year which will further enhance the use of our platform for our clients.
I want to reiterate that we have a lot of respect for Kickstarter and Indiegogo and we admire what they do. They are the pioneers of this industry and if it were not for them, there would be no Vision Launch or a lot of great other crowdfunding sites. I just think like any early model; it can be improved upon, and that’s what we are doing with our platform.
Improving the model is also the only way we can earn our own market share. We are not an 800lb gorilla, but we can use our size to our advantage, offering a more personalized service to our clients with better visibility for their campaigns on our platform. Being smaller makes us more nimble too, allowing us to try new things and better adapt to the rapidly changing landscape in the crowdfunding space.
Will Vision Launch be an overnight success? Maybe not, but we know if we follow our passion and offer a valuable service to our community, the rest will take care of itself.
CFB) Why did you start Vision Launch, and what do you plan to accomplish with it?
MZ) We started working on our concept in early 2013, and at the risk of sounding corny, I will use an old but true quote, “choose a job you love and you will never have to work a day in your life.” It’s really true for us in this instance, and it is definitely a big part in why we started Vision Launch.
One of the reasons we love the whole concept of crowdfunding is that it unleashes creativity, and allows anyone a chance to realize new and exciting visions. We see so many intelligent minds in the world today creating unique innovations and we want to be a part of it. Being on the leading edge of creation is very exciting to us.
Our goal is to raise awareness and fund small and large ideas that can add positive value to our daily existence, whether it be a gadget that can make life easier for us, or a solution to an existing challenge we face as a society and everything in between. We also see great value in entertaining and enlightening people with new interesting subject matter and traditional fare, too. We want to help bring creative ideas to life in all forms.
There are millions of people that are currently out of work, many of them with brilliant minds and all of them can be creative in some form or another. We want to inspire as many of those people as we can and inform them about the opportunities crowdfunding can afford. We want to let them know that anything is possible, and you’re only held back by limitations in your own mind. People are realizing their dreams every day with crowdfunding. This is not just a theory, and there are many examples to point to that support it.
We are learning new ideas through quantum physics and new science that tell us the world does not operate the way we thought it does, and things like intention and focus are far more powerful than we had previously been led to believe. We live in a day and age where all things are possible if you truly believe it, and there is really no limit to what kind of ideas that could be crowdfunded into existence. The thought of this is extremely exciting to us.
We are also at a time in history where we could use some reflection on our practices and actions from the previous centuries up until the present moment. Young artists and creators coming up through non-traditional venues can expose those things to us showing it from a whole new perspective.
We can bring to light the things that no longer work in our society, and find solutions to them with bold new ideas that can then be facilitated through crowdfunding. These are some of the things we want to accomplish with Vision Launch.
CFB) Where do you see the future of crowdfunding heading?
MZ) That’s a good question. There is so much happening so fast in this space that it’s really hard to get any medium to long range visibility, other than the growth is phenomenal and seems to be increasing. I’m sure it will level off at some point, but I don’t think that will happen anytime soon. One of the things about this industry that encourages me is that most of the people I talk with, young or old, don’t yet know what crowdfunding is. I know that is anecdotal evidence, but it’s one of the reasons why I think that there will be more growth to come. I think we can confidently say that crowdfunding is here to stay, in one form or another.
As far as Title III equity crowdfunding is concerned, much will depend on the legislation that’s enacted, so it’s really difficult to tell. My concern is that its costs and over-regulation will increase friction and stifle access and creativity to what could be a really exciting prospect. But then again, who knows what the future will bring and how things could change. We will certainly be keeping a watchful eye on how Title III will unfold in the future.