This is the third post in our crowdfunding series from Hannah Forbes. Be sure to check out her last article, How to carry out a successful crowdfunding marketing campaign.
In the first post of this series I described the importance of preparing for your campaign and building “campaign momentum”. In this post, I describe this concept in more detail and provide more evidence for why building your network before launch is vital to campaign success.
The 80:20 Crowdfunding Rule
In the last 10 years, crowdfunding has grown from a relatively unknown term to a multimillion pound industry. We have seen huge success stories such as Oculus and Brew Dog, and it’s now regarded as a serious and exciting investment model for new businesses. Behind these successful campaigns, however, are months of preparation and hard work. It is sometimes assumed that the traffic on crowdfunding websites is the key to reach a funding goal but the reality is quite different.
“On average, only 20% of your funding is due to crowdfunding website traffic” (H. Forbes, 2018)
Many projects are launched quickly with the expectation that the crowdfunding website “will do the heavy lifting” and are shocked to realize this is not the case. 80% of your funding comes from those who have connected to your project through your personal network or through your social media. Your priority, therefore, needs to be expanding your business’ network and spreading your message before your campaign begins.
Why is this so important?
Understanding the source of crowdfunding pledges is the first indicator of the importance of a large network. When you look deeper into crowdfunding statistics, however, you find that this large network is only truly beneficial if you convert contacts into pledges within the first 48 hours of your campaign. “Campaign momentum” as described in my first post, means that the more funding you get at the beginning of your campaign, the higher the likelihood of success. Many factors increase your campaign momentum but the most significant is the number of backers you have. As demonstrated in the figure below, even for the same total funding, the higher number of backers means a higher chance of success.
The more people that contribute to your campaign, even for the same amount funded, the higher your chance of success
The exact reasoning for this is something I am still researching. Results so far, however, show that herd mentality is a key contributor to this effect. People are attracted to what others deem to be successful and pledge to projects that have won the approval of others (H. Forbes, 2018). As shown in the figure below, as more people contribute, this effect becomes more powerful and the funding on a campaign begins to increase more rapidly.
This graph shows how more funding at the beginning of your campaign significantly and positively alters the amount of funding you continue to receive throughout your campaign
How do I build my network and engage herd mentality?
The statistics and theories behind crowdfunding dynamics can become complicated but the ultimate route to success is quite straightforward. Create contacts, retain these contacts and create a strategy for conversion. With clients of The Funding Crowd, our first step is to follow the process below:
- How do your current contacts normally interact with your brand?
- To engage your current contacts, promote your crowdfunding campaign on this key interface with a CTA to sign up to a crowdfunding mailing list.
- To reach new contacts, spread the word on social media (using ads if possible) with a CTA to sign up to a crowdfunding mailing list.
- Print new business cards with your crowdfunding launch date and a link to your mailing list; ensure everyone you meet becomes part of your crowdfunding network.
- Send one email 1 week before launch, specifying the launch date and time.
- Send one email at the time of launch to encourage conversion
This process reaches new contacts, retains them by ensuring further contact through email and aims to convert contacts by reaching out at key points in the crowdfunding process.
Want to learn more? Have a project you want to crowdfund?
The Funding Crowd has expertise on crowdfunding built from years of research in the crowdfunding industry. We can help you create amazing campaigns that can; don’t hesitate to get in touch!