Posted on Tuesday April 14th 2015
Crowdfunding is the financing model of the people, of communities. But every crowdfunding platform has different terms and conditions and works a bit differently from the others. It’s important to be clear on what works for you, so you choose the right one to fundraise for your project. Carefully think through all the implications before deciding.
Here’s some reasons why we champion All-or-Nothing fundraising, and why we’re not convinced that Flexible Funding is good for creative projects…
What’s the difference between all-or-nothing and flexible funding?
Fund it operates an All-or-Nothing policy – if you don’t raise 100% of your target in the time you have selected, then we take no money from your pledgors, and you don’t receive any funds.
This is a really GOOD thing. Seriously. It protects you and your idea. And, it protects your fans.
Consider the alternative.
Some crowdfunding platforms have begun to provide Flexible Funding, where the money is taken from your pledgers straight away. After the (much higher) charge per pledge, the project creator receives any money pledged to their project, irrespective of whether they’ve raised what they needed OR whether it’s enough to deliver the rewards they’ve promised their funders.
But I just need some money, so how would that be bad?
Say you’ve worked out that you need to raise €5,000 to record and duplicate your debut CD. If (using Flexible Funding) you raise €800 from 40 people giving €20 each to receive a copy of the CD – once your campaign finishes, you’ve now got a big problem. How will you fulfill those rewards? Will you have to borrow €4,200 from somewhere? How will you pay that AND the interest back? Or will you cut back on everything, make 40 copies of something inferior to what you’d hoped for, which leaves you artistically compromised and reputationally at risk because your fans were expecting much more?
Does this change fans’ behaviour then?
We’ve seen that only a very small number of Irish projects are proving successful on Flexible Funding sites, and raising the full amount that they need.
We’ve seen evidence too that audiences are holding back from pledging support, as they don’t want to be part of something that only a handful of people end up supporting. As a funder, there is more incentive to pledge to a project when you are guaranteed only to be charged if the project creator will have the means to deliver their creation and your rewards.
This simply doesn’t happen with all-or-nothing funding, as everyone is part of a project succeeding, but is protected if it doesn’t hit its target. And you are risk free as you don’t have to deliver your rewards unless you raise everything you need to do so.
What does choosing Flexible Funding say about you, and your creative dreams?
The target chosen by a project creator represents the minimum amount they need to pull the project off and create their rewards successfully. By selecting to Flexibly Fund a project – what you’re communicating to your fans is that you don’t REALLY need that amount. That you’ll be happy to take anything. That your target is ‘best-case-scenario’. That’s not very compelling, is it? Where’s the ticking clock, the race to the deadline? Why would people jump on board and push the project to their network to help you get over the line in time – when really, there is no line?
As a project creator, by declaring your willingness to accept any funds, it undermines your credibility, your belief in your ability to achieve your goal and deliver the project you truly wish to achieve.
The psychology of targets encourages funders to rally around to help you reach your goal. If there is no consequence to falling short, there is much less drive to bring you over the line.
Still want to see the hard evidence?
Fund it’s success rate has always been above 72% – nearly 3 out of every 4 projects that go live are successful. We’ve seen of late that over on the flexible funding sites, as few as 1 in 10 projects is making anywhere close to its funding goal. That’s devastating, and it’s easily avoidable.
That’s why we think flexible funding is a bad deal for creativity. We hope you agree.