Most crowdfunding campaigns fail. I’ve heard 60%. I’ve heard more. Last April, we ran a crowdfunding campaign for our first startup and, though we succeeded, the experience gave us a lot of insight into the challenges, and a pretty clear idea of why so many fail.
It’s all about the community
It boils down to one thing: a community with a real, quantifiable intent to purchase. In our experience, that excluded Facebook, Twitter, or Instagram. In fact, there was only one type of community that ended up showing actual intent: email subscribers. And unfortunately for crowdfunders, a good email list takes a lot of time to build.
Why not social media
It’s important to think about the communities you build in terms of whether you “own” them or “rent” them. You rent your community on Facebook, Twitter, and Instagram, but you own your email subscribers. The difference is that if you post something on your Facebook page, you’re not sure that your fans will see it, but if you send a newsletter you know it arrived in their inbox. Compare the 2-5% of Facebook’s organic reach with our email campaign open rates of 22.9% to 69.7%. Big difference.
Even in my original research for our marketing strategy, I noticed that there was simply no correlation between Facebook likes and crowdfunding success. There were campaigns with mind-blowing success that had tiny Facebook footprints and there were campaigns with extraordinary performance that had a great Facebook community. This suggests that Facebook fans, Twitter followers, and Instagram followers don’t convert in reliable ways. So the lesson is not to rely on them.
I’m not saying forgo social media completely. In fact, you can use your email subscribers to correctly harness the power of social media. Remember that your email subscribers have more intent, period. One went though a double opt-in process and another absent-mindedly clicked an ad. If your subscribers are more likely to pledge to your campaign, they’re even more likely to share your campaign.
The benefits are twofold. Personal shares will be seen much more and friends of fans have a greater chance of being your target market. In fact, I recommend creating dedicated landing pages just for subscribers to share your campaign on social media. Social media has a place, but don’t get hung up on how many likes you have. Everything should start with your email list.
The problem with email
But there’s a problem with email too. It takes a lot of effort to gain one subscriber, and you might need 10,000. To start consistently gaining subscribers, you should build a landing page, create content, and drive traffic. Then, you continuously optimize. Maybe you get to 100 subscribers, or 500, or 1,000 before your campaign starts. That’s great.
But, unfortunately, that’s probably not enough, not by a long shot. The reality of crowdfunding is that you do it to take advantage of the crowdfunding platform’s buzz but there’s just too many damn campaigns out there. You simply won’t succeed unless you’ve already raised a big enough community of people who are certain to back your product. It all comes down to math.
As an example, my dad is an amazing photographer. He wants to do a crowdfunding campaign because his dream is to publish a photography book. The publishing world is notoriously fierce and crowdfunding, in theory, offers an alternative pathway. The question I would ask him is how many people are in his community who would buy his book? Let’s dig into the numbers.
Say 1 out of every 5-10 email subscribers has purchased one of his photographs and would back a high-quality book for $75. Now say he wants to do a fairly standard run of 1000 books. That means he would need 5,000-10,000 email subscribers. 5,000 to 10,000. That’s a lot. My father would have to do a lot of marketing to make it happen and that’s why it’s no surprise that when you go to the Photography section of Kickstarter, you see A LOT of dead projects. He has a full-time job and takes photographs on the weekend. When does he have the time to do all that stuff I mentioned?
These numbers get even more depressing when you’re trying to introduce something entirely new to the world. Take our campaign for Pulse Play, a smartwatch for tennis and racket sport fans. The conversion rate is mostly untested. There’s tennis players out there, sure, but there’s also little precedent for technology in the sport besides Babolat Play. Doing that math, we would’ve needed 5,000-10,000 subscribers optimistically; realistically, the number could run higher than 25,000.
A little disclaimer
OK, OK, this is a little crazy, I admit. I’m talking about guaranteeing your crowdfunding campaign succeeds because you’ve lined up hundreds to thousands of real customers. Who can do that without a final product? The answer is you can, but not without time and dedicated marketing efforts.
Yes, we’ve all read that before, but I’ve never heard anybody spell out the full extent of it. We’re talking several months of hard work. Don’t get me wrong, there really are some products that with the right messaging and support will sell themselves, and maybe that could be your campaign, but probably not. Better to start building that email list.
The other mostly unspoken truth is that most campaigns that do cross their crowdfunding goals succeed thanks to friends and family. They’ll buy from you no matter what. But there’s something important to remember here. Most of us aren’t connectors who have thousands of contacts who will help prop up a campaign. If there’s any indication you’ll be relying on friends and family, make sure you’re not trying to raise too much money. Doing some simple math applies here as well.
I believe in crowdfunding, I really do. I know some incredible products have emerged from it that would’ve struggled otherwise. The funding they received enabled the founders to find investors and take their budding startups to new levels. When crowdfunding works, it really works. But the effort that goes into it shouldn’t be discounted. Crowdfunding campaigns are a lot like startups, really. Most fail, but every runaway success hides the immense work it took to get there. Let’s stop pretending and start working to reverse the rate of failure.