This post might be a little controversial, so I welcome any thoughts or feedback in the discussion section. For those of you who don’t know, what separates Kickstarter from other crowdfunding platforms like Indiegogo is that you can only launch an all-or-nothing crowdfunding campaign, which means that you will only receive funds pledged towards your project if you hit your set goal before your project’s fundraising duration is up.
Indiegogo and several other platforms allow you to raise money via what is called “flexible funding,” where you will receive funds even if you do not hit your goal. The platform will take a larger fee (9% vs. 4%), but you will be able to keep the pledges you have accumulated during the length of the campaign.
You would think this is good right? Wouldn’t it be more risky to put everything on the line and do an all-or-nothing crowdfunding campaign? NO! Check out my reasons below as to why. The points below assume that you went with the flexible funding model. I also recommend checking out my post on All-or-Nothing vs. Flexible Funding.
1. You are required by law to fulfill your rewards.
If you are raising money for a game or a cool new widget and you offer backers the ability to own a copy of the game via one of your reward tiers, then you must deliver on that reward tier. This is regardless of whether or not you receive enough funds to produce the game or meet the minimum order quantity required by the manufacturer to make the cool new widget.
For example, if you set a $100k goal to make a game (what is absolutely required to develop it), offer the game at the $25 reward tier, and only raise $10k, how are you going to deliver on the $25 reward tiers? Either they are going to be super late or you are going to have to offer refunds. Otherwise, you will be scamming your backers and taking their hard-earned money without delivering on your promises.
This might mean that your rewards will not be as awesome with a flexible funding campaign (if you can’t offer the product). As one user on FilmMakerForum reports, “I’ve been researching Crowdfunding for a little while now, so while not everyone will care about the perks, the success rate for things WITH perks is MUCH higher than without.” I completely agree with his statement.
If you absolutely need X amount of money to make the product, then either do an all-or-nothing campaign or don’t offer the product as a reward.
2. You are in the business of creating things for other people, not yourself.
I like how Dan Baker put it in his article “Why ‘Flexible Funding’ Campaigns on IndieGoGo are Dangerous.”
“Everybody in business has to pitch their ideas. It’s the ultimate good-idea/bad-idea filter. If your idea is compelling, everybody will jump onboard. If your idea doesn’t hold water, it’ll be shot down, forcing your to re-think your project (and potentially protecting you from a disaster).”
It might be appealing to be able to keep some donations that will help you make this project that you have been working on a reality, but sometimes NOT meeting your all-or-nothing is the best feedback you can get.
As a creator, your work has an intended audience that, in the future, will buy copies of your product if they deem it to solve a pain-point they experience. The best kind of feedback that you can get on your idea is whether or not people will part with their hard-earned money to own a copy of the product and help the campaign hit it’s funding goal.
Sometimes not hitting your goal and not receiving funds is the most valuable type of feedback. It tells you that you need to re-work your value proposition and can lead to an even better project!
3. You are not as incentivized to hit your goal.
Obviously, this point will vary based on the individual. Although I don’t have any statistics to back it up, I do tend to see creators who run flexible funding campaigns to be a little less incentivized to meet their fundraising goal than creators who are running all-or-nothing campaigns.
Think about it. If you don’t hit your goal while running a flexible crowdfunding campaign, then you will simply have to pay a higher fee (9% vs. 4%). If you don’t meet your goal while running a fixed funding campaign, then you won’t receive any funds at all. If you are at 60%, you bet you’re going to be hustling in the final week to hit 100% with an all-or-nothing campaign.
In LaunchAndRelease’s article “7 Ways Flex-Funding Will Hurt Your Music Crowdfunding Campaign” they echo a similar sentiment.
“One thing that flexible funding clearly does is take away any sense of urgency that your project may have.
It’s not as important for your project to hit significant benchmarks like 25%, 50%, 75%, and 100% funded because you are going to keep the money you raise no matter what.
It changes the dynamic of people pitching into the cause or jumping on the bandwagon. They don’t get the chance to celebrate the little victories with you because the importance of hitting the benchmarks has been diminished.”
Conclusion
Flexible funding campaigns have their place, but I would think long and hard as to why you are using this fundraising model, especially if you are creating a consumer product and plan to offer a copy of the product as one of the reward tiers. However, I’d love to hear what you think on the subject. Do you agree? Disagree? leave a comment below.
