If you own a small or niche crowdfunding website or platform, you’ve likely found out that the difficult part to running a startup in the crowdfunding space is not the technology component. There are dozens of out-of-the-box software solutions to building a crowdfunding platform. The hard part is actually getting projects for your platform.
It’s the classic chicken and egg problem. Creators want to raise money on an active platform with some kind of a backer community. Backers want to browse interesting new projects. How do you get one, without having the other?
Check out some of my 5 tips below for jumpstarting a new crowdfunding platform and if you’ve recently started a niche platform, I encourage you to share it in the comments section below.
1. Set Reasonable Expectations.
In my article, Ulule vs. KissKissBankBank (French crowdfunding platforms), I included some stats highlighting the funding progress of each of the platforms. Below, I’ve included a few screenshots to give you an idea of how these two platforms progressed, along with the stats from Kickstarter.
Ulule Stats
KissKissBankBank Stats
Kickstarter Stats
As you can see from the above graphs, all three of these platforms began to see a massive uptake in projects and funds pledged around the 2-3 year mark, turning into the famous hockey stick growth (logarithmic growth) chart. This means that you need to be in it for the longterm if you want to receive the benefits of owning a sustainable crowdfunding platform.
2. Research the Business Model
Assuming the standard fee for a crowdfunding platform is ~5%, it might be tempting to think that you will generate most of your revenue from large million dollars projects like these, however, this is not the case.
The sweet spot for crowdfunding platforms seems to be between $1,000-$10,000 in terms of average funding goal/dollars raised for projects.
KissKissBankBank Average Goal (3-8k)
GoFundMe Stats
Kickstarter Average Raised Stats
The “Average successful crowdfunding campaign is around $7,000.” – Fundable.
So what does this all mean? I’d say that when you are starting out, you are going to be making the majority of your revenues off the smaller crowdfunding projects. You may get one or two large ones that catch the media’s attention like when Crowdtilt got a lot of PR from the Jamaican Bobsled Campaign, but it’s going to take a while before you have the traction to attract some of these larger projects organically.
I think these stats also indicate that there will be one or two categories on your platform that will be more popular than others by a large margin (gaming/film/technology/etc). I would be hyper-focused on getting projects in these categories before building out more verticals, otherwise it will divert your attention and be more difficult to get traction.
Finally, although you should be initially focusing on the smaller projects, the large projects will bring in new backers and help you grow your community. For example, in this Kickstarter blog post, the team explains:
“Combined, Double Fine and Order of the Stick raised more than $4.5 million, and their first-time backers have pledged another $1,083,937 to 1,000 other projects. Double Fine and Order of the Stick’s achievements have inspired tons of press and even other projects — as of today more than 35 projects have been launched by first-time backers, and 4 have already been successfully funded. Fellow blockbuster Wasteland 2 launched after being inspired by Double Fine.
These projects illustrate how the Kickstarter ecosystem is strengthened with each new project and backer.”
3. Build an Outreach Strategy
I’d recommend answering the following questions to begin building an outreach strategy:
– What is the value proposition for early adopters of your platform? Why should the choose you?
– Will you be targeting creators who have launched campaigns previously on other platforms, or ones who have never used crowdfunding?
– How will you justify the percentage you are taking? What value are you delivering them. It better not be “I’m giving them a way to raise funds online,” because anyone can do that now a days by hosting their own crowdfunding site or going on another platform.
Once you’ve answered these questions and have begun to narrow down your target market, you can begin brainstorming how to come in contact with these creators. If you’ve decided to target creators who have previously launched on other platforms, I’d recommend checking out some of the communities below and getting involved. You can then pitch creators about your new platform.
For more, be sure to check out: Who’s in the online crowdfunding community? and the Crowdfunding Media List.
If you’re going after creators who have never launched a crowdfunding platform before, then I’d recommend getting involved in communities where these creators are already interacting. For example, some of the entrepreneurship groups mentioned in this article, these 3D Printing groups, or these Etsy seller groups. It would depend on the niche of your platform, but I’d recommend forming a list similar to these. You should also be hyperactive in any communities devoted to creators in your local community.
In terms of general outreach to bloggers and the media, I think these startup PR tips have a lot of merit. However, it’s important to recognize that although PR might drive you some initial traffic, it’s not a longterm strategy to sustainable growth in terms of promoting your platform. I do think it’s a longterm strategy if you are promoting unique projects on your platform. Check out the article below written by Andrew Chen regarding traffic growth in a startup.
I have had a lot of new platforms approach me offering some kind of affiliate commission for getting new projects on their platform. I’d definitely be open to this type of deal for established platforms, where the selling proposition is easier, but I’d be unlikely to make this kind of a deal with a new platform. However, if you find a blogger in your niche (gaming, etc) that is enthusiastic about the problem you are solving, they may be willing to help get you initial traffic for a slice of equity or profit, in the way that Alex Ohanian helps Crowdtilt get projects/generate interest due his relationship with Reddit (he is an investor/adviser for Crowdtilt).
Ultimately, I would rely on direct sales/direct relationship building to get projects initially. You can pay for traffic (which will be important to determining the best way to convert visitors into backers/creators), but I don’t think this is a sustainable strategy for a startup just beginning. You need to first get a community going via grassroots methods.
4. Study Traffic Patterns
Check out the image below from this blog post via Pozible, an Australian-based crowdfunding platform.
In addition to reasearching stats put out by major crowdfunding platforms, you can research campaigns on platforms using these techniques to discover where their pledges are coming from, which social networks, and which traffic sources. You can then use this information to help creators on your platform and when you are helping them get traction with their projects.
To increase your growth rate, you could also advise creators to use a tool like Thunderclap to spread the word about their campaign. I’ve written up my experience using Thunderclap in this post.
The end goal might be to host a crowdfunding platform where creators sign up, create projects, and market them on their own, but in order to get there, you are going to have to do things that don’t scale. This means that you are going to have to get our hands dirty helping creators market their crowdfunding campaigns on a daily basis.
5. Community Building Takes Time: Showcase the Best
Going back to Pozible, take a look at their pie chart below showing the number of backers who support more than one project.
11% of backers have pledged to more than one project at the time this blog post was published. On Kickstarter, a larger platform, the number are a little different.
“29.64% of the overall backer community has backed more than one project.
0.10% of the overall backer community has backed more than 50 projects.
Interestingly, 62% of all money pledged has been contributed by returning backers.” – Source.
These numbers yield some insight into why it seems like 2-3 years is the critical period a new platform must go through before beginning to see breakout success. First, they must attract smaller projects. Then, they must attract a few noteworthy projects that garner media attention. Over time, the number of backers that use their platform grows and eventually they have a small community on their hands.
In coordination with the growth they experience on their platform, their email list and social media profiles begin to grow, making it easier to showcase remarkable projects and bring in new backers.
I think the best way to encourage this community to grow is to get awesome projects and showcase those projects to generate discussion. What makes it difficult is that there is a high turnover rate for creators or customers (30-60 day average project duration). It might take several stops and starts before you begin seeing some momentum with your platform, but that seems to be natural based on the stats shown in section 1.
Conclusion
If you’d like to speak more in-depth about how to get projects for your platform, feel free to shoot me an email or leave a comment below. It’s exciting to watch some of the new platforms breaking out. Patreon just recently announced that “Company revenues grew 10x in the last five months” and they have raised a $15 million series A funding round.
