On the popular Kickstarter site, only 37 percent of campaigns are successful, according to statistics on the company’s website. And numerous news sites have estimated the success rate for the donation-based crowdfunding platform Indiegogo is even lower.
(It should be noted that Indiegogo has an option that allows campaigners to keep whatever they raise, whether they meet their goal or not.)
Still, experts and users of sites such as Indiegogo, Go Fund Me and Kickstarter view the platforms as a viable way for businesses to raise money in the digital age.
Crowdfunding is an alternative to a bank loan or investor, which are “few and far between,” said Suzanne Bergmeister, entrepreneur-in-residence at the University of Louisville and founder of the consulting company Sunflower Business Ventures Inc.
In addition, it exposes entrepreneurs to a wider audience than simply family and friends.
Running a successful campaign also can be a positive indication to investors that a business is worthy of investment.
“It is a way of proving there is a market,” Bergmeister said. “It is an indicator of how good your startup is going to be.”
“Crowdfunding is going to change the way business is done on a global scale,” said Bill Huston, co-founder of My Crowd ROCKS, a Louisville-based startup that helps run campaigns.
Crowdfunding is still new to many people, Huston said, and the pool of donors will only continue to grow.
His company’s success rate is 70 percent. My Crowd ROCKS manages some campaigns from start to finish, while only handling social media on other campaigns — it’s up to the client.
People who are unsuccessful in crowdfunding campaigns tend to make at least one of a few mistakes, Huston said. They set their goal too high; they keep the campaign running too long; or they don’t have a plan for marketing their campaign.
“A lot of times what I find is a lot of people are engineers and technicians who come up with a great idea, but they don’t understand business,” he said. “They really don’t understand marketing and finding your target customer.”
Huston suggests creating a marketing campaign that includes spreading the word to people prior to the launch of the crowdfunding campaign.
The best campaign is only 30 days, he added; any longer and potential donors tend to bookmark the page for the future and sometimes never return to donate. A 30-day campaign — especially ones that offer special gifts for early givers — create a sense of urgency, Huston said.
Louisville Crowdfunding Stories
Deeb has run two Kickstarter campaigns and was able to create a business from the campaigns. The first was to make and sell intricate playing cards that he’d designed. Deeb ultimately raised $146,596, more than $140,000 over his goal.
“Kickstarter allows you put up a concept without having to put really any work into prototyping. You can really present an idea through Kickstarter before it costs you much money,” he said, which was fortunate because “I definitely didn’t have any money.”
Deeb noted that he didn’t suddenly become crazy rich via successful crowdfunding.
“I might be doing slightly better than breaking even on the second project,” he said. “This isn’t a cash-in moment. This is a jumpstart.”