If you’re thinking of starting a crowdfunding campaign, you may have come across the two terms “all or nothing” and “flexible funding.”
When fundraising for an all or nothing crowdfunding campaign, you will only receive the pledges that you have accumulated throughout the duration of the campaign if you meet your fundraising goal before the clock winds down.
For example, if you have a fundraising goal of $10,000 and have only raised $9,000 by the end of your 30 day campaign, you will not receive any funds and your backers will not have their credit cards charged.
When fundraising for a flexible funding campaign, you will receive the pledges that you have accumulated throughout the duration of the campaign even if you do not meet your fundraising goal.
For example, if you raise $4,000 in 30 days with a $5,000 goal, you would still be allowed to keep the $4,000 and your backers’ credit cards would be charged.
How does your choice impact the fundraising process?
Fees
Often times, if you choose to run a flexible funding campaign over an all or nothing campaign, you will end up paying higher platform fees. For example, if you were to launch a flexible funding campaign on Indiegogo, you would end up paying a 9% fee of funds raised if you didn’t meet your goal. However, you would pay the standard 4% fee if you did meet your goal.
UPDATE: Now you’ll pay 5% fee for both funding types.
According to Indiegogo, this “encourages people to set reasonable goals and promote their campaigns.” Essentially, it is more costly if you fail with a flexible funding campaign, but at least you will receive funds for your project.
Incentive
Arguably, when you are running an all or nothing crowdfunding campaign, you are naturally motivated to work harder to reach you fundraising goal. Otherwise, if you don’t work hard to drive traffic to the page and convince backers that you have a worthwhile project, then you won’t receive any funds at all for your endeavor, even if you’ve managed to attract some backers.
If you are working with a team, this can be a powerful motivator. It encourages everyone to work hard throughout the duration of the campaign so that their efforts are not in vain.
Selling Point
When convincing friends, family members, and strangers to back your dream, selecting an all or nothing campaign gives you one important selling point. Your backers’ credit cards will not be charged unless you reach your fundraising goal.
This feature adds an element of insurance for your contributors. They are not just donating money or giving money away to your pet project. You will only receive their funds if you work hard, hustle, and secure enough pledges to meet the minimum goal needed to make your dream a reality. It’s not charity. It’s an investment.
Project Completion
The best crowdfunding projects are transparent and create a sense of community around the mission or goal. It’s difficult to maintain that community if you end up shipping your rewards extremely late. You may also receive complaints from backers and angry comments on your project.
It might seem like a nice deal to receive some funds for your project via flexible funding, but if these funds don’t allow you to follow through with all of your backer rewards, or allow you to distribute copies of the product, then it could be some time before your supporters are compensated for their financial contributions.
My Recommendation
If distributing your rewards (often times a copy of the product), is dependent on receiving enough funds to actually produce the product, then I’d recommend going with an all or nothing campaign.
If your project is more cause related or donation based, then a flexible funding campaign may be more appropriate because it ensures that you will at least receive some funds that can be used to forward your cause.
I do think that creators might underestimate the impact that an all or nothing campaign can have on the morale of your team or your backers.
For example, if you are $3,00 away from your goal and you communicated to your supports that if x% of them raised their contribution by x amount, the project would become a reality, then your supporters would be much more likely to raise their pledge amount than if you were doing a flexible funding campaign. With a flexible funding campaign you would receive funds regardless whether of or not you reached your fundraising goal.
Questions? Comments? Thoughts?
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