Have you ever conceived of a counseling tool that you wanted to share with others? Do you work at an agency or clinic that can’t fund a special project that you know would help clients? Maybe you’d like to provide a particular service but need a minimum number of participants to make it happen. Crowdfunding could be the answer — an answer that I believe counselors underutilize.
It’s a common desire in our field to generate more than one stream of income. Often this leads to publishing books, creating therapy tools or investigating other opportunities. Sometimes, however, counselors don’t follow through with great ideas because of the financial and business challenges involved. Although some ideas can be pursued with little upfront cost, others may require a substantial investment. In the traditional business world, a business plan for the idea would be required to attract investors or acquire a bank loan. Depending on the concept, it might even require development of a prototype or making other costly upfront investments.
There is an alternative. Crowdfunding is the process of raising money for a project in relatively small increments from a large number of people, typically through the Internet. It is being used successfully to raise money for ideas, personal expenses, artistic endeavors, start-up capital and more. In the case of a tangible product such as a book or game, crowdfunding is a form of presale, giving consumers the opportunity to order the product before it actually exists. The person or company with the idea can pay for the manufacture of the product with the funds being raised while also making a profit, thus raising capital for continued production.
Crowdfunding is not a new concept. In fact, it was used to facilitate the completion of the Statue of Liberty in 1884 (see http://1.usa.gov/1L7oqff). Crowdfunding has, however, experienced explosive growth recently due to the preponderance of Internet platforms promoting the concept. There are more than 500 crowdfunding websites in existence, and in 2013, over $5 billion was invested in projects on these platforms (see bit.ly/1L7oGuR). As I write this, Kickstarter has seen almost $2 billion pledged to nearly 100,000 successfully funded projects since it was launched (see kck.st/1L7p8cu). In fact, Kickstarter is the platform I used to successfully fund my own counseling tool, called Describe (describecards.com). Having made Describe a reality, I wanted to share what I learned with others so they might turn their ideas into realities as well.
Understanding the lingo
One of the most important decisions is choosing which crowdfunding platform to use for a project. This decision can affect all other aspects of the project, including pricing, shipping methods, bonus rewards and even the target funding amount. Understanding the following terms will help you weigh the differences between crowdfunding platforms.
- Creator: The person creating the crowdfunding project. This is the person with the idea or product to fund or sell.
- Backer or patron: Anyone who supports the crowdfunding project by pledging financially.
- Funding goal: The dollar amount the creator is aiming to collect. Ideally, this goal amount will provide the creator with the funds to make the idea or product a reality and possibly make a small amount of profit for future needs. Setting an appropriate funding goal can make or break a project.
- Rewards or perks: The thing(s) offered to backers in return for funds. In the case of something tangible, this is usually the product itself. In the case of an idea or concept, it might be some level of participation or membership. It is common, and even recommended, for different levels of rewards (or combination packages) to be offered to entice backers.
- Stretch goals: Many projects offer additional rewards if the target funding goal is exceeded. These often involve improvements of some kind to the idea or concept being funded.
- Platform fees: Crowdfunding platforms make their money by taking a percentage (typically 5-10 percent) of the funds raised for a project. This is separate from the credit card fees (3-5 percent) that are likely to be incurred.
Choosing a platform
With more than 500 crowdfunding platforms available, many catering to a specific niche, it is important that creators identify the one that best matches their project. It is also important to consider how well-known a platform is because that can have a significant effect on how many people see a project.
The go-to platforms to raise funds for a tangible product are Kickstarter and Indiegogo. Both are well-established, feature similar fees and allow creators to set their funding goals. In each case, money is collected from patrons only after the funding deadline is reached. There are differences between the two platforms, however.
- Kickstarter is an all-or-nothing platform. Creators receive the pledged funds only if their full funding goals are reached. This provides a sense of urgency to each campaign. Indiegogo provides creators the option of collecting the pledged money even if they don’t reach their full funding goals. The platform’s normal fee of 4 percent increases to 9 percent in this situation, however. Still, this may allow creators to move forward with their projects with less money.
- Kickstarter allows only creative projects that produce a specific product (book, game, movie, etc.). Indiegogo allows for a wider range of projects, including those that don’t produce something tangible.
- Kickstarter is the most visited and well-known crowdfunding platform. Indiegogo generally attracts less attention, less traffic and fewer projects.
If fully committed to a project, regardless of whether it is fully funded, or if the item isn’t a tangible product, Indiegogo might be the best choice. In other situations, Kickstarter often is the better option. Patrons tend to be more motivated by the all-or-nothing model, especially when they think the project is worthy of spreading the word to family, friends and colleagues.
Although these two crowdfunding platforms are the best-known, there are other popular platforms of which to be aware.
- GoFundMe provides a platform to raise funds without the promise of rewards to backers or patrons. Often used by individuals and families in need, this platform might also be useful for those wanting to raise smaller funding amounts for personal and small business projects.
- RocketHub is similar to Indiegogo in that you can fund a variety of projects and receive the funding even if the goal isn’t met. An additional interesting twist is that RocketHub has partnered with A&E Network, and projects have a chance to be featured on A&E’s Project Startup (see bit.ly/1L7udSc).
To be clear, this article is focused on donation-based crowdfunding. Investment-based crowdfunding sites are a different breed, with patrons providing funding in exchange for an ownership interest in your company or product. If you’re willing to give up some ownership in exchange for funding, investment-based crowdfunding sites such as Crowdfunder should be considered.
Secrets to success
It’s important to note that not all crowdfunding efforts are successful. Kickstarter reports that only about 37 percent of its projects have been fully funded (see kck.st/1L7vpot). There have also been situations in which a campaign was funded but ultimately failed because the creator did not plan properly for the financial and logistical challenges of following through with the idea. Failure might have meant that the creator actually lost money on the project or was unable to complete it.
Thankfully, a number of great online resources provide guidance for creating successful crowdfunding campaigns. What follows are the areas I focused on (based on the most commonly touted tips I could find) when creating my successful campaign for Describe.
- A crowd: It takes a large number of people to reach funding goals. Statistics vary, but most estimates indicate that only around 5-10 percent of people who hear about a project actually pledge. Furthermore, a significant portion of those who pledge will be family members or friends of the project creator. It is imperative that you build an audience before launching a crowdfunding campaign. Depending on your funding goals, this may need to begin months before the official launch of the campaign. Because crowdfunding involves online platforms, the use of blogs and social media plays an important role in building your audience. This requires more than simply connecting to people through the technology; it involves gathering a core group of supporters who truly believe in the project.
- A story: Backers want to support projects that they identify and connect with. They want to back not just an interesting idea but also the story behind that idea. They need to hear what backing this idea will provide to them and to others and what kind of feeling it will give them.
- Value: People generally want to feel they are getting a good value when they purchase something. It is no different with crowdfunding projects, which means that reward levels need to be priced appropriately. Backers want to feel they are paying a fair price for something that will be of value to them. This might require conducting some market research and asking targeted questions that help you find the sweet spot for pricing. Other elements that typically increase a project’s perceived value include free shipping and allowing backers to have a say in some aspect of the final product.
- Video: A good project video ties everything else together. Video is a great way to show off or talk about your idea while putting a face to it and a story behind it. It is one of the best ways to connect with potential backers and convey the other points discussed earlier.
- Planning: All of the things in this list require planning, and it’s important to examine and think through the details of each one. The timing of the launch, the choice of platform, the determination of reward pricing and many other details will have an effect on the potential success of the campaign. Most campaigns that fail do so because of a lack of planning in some or all facets.
A number of other details can impact a crowdfunding campaign, including time of year, campaign length (30 days is generally recommended) and whether any similar/competing ideas or products are being funded at the same time. Stonemaier Games has an excellent collection of articles for continued reading (see bit.ly/KSStonemaier). You can see that I pulled all of these things together on the Kickstarter page for Describe (bit.ly/KSDescribe). It is important to note that a well-run crowdfunding campaign usually requires the time and effort of a full-time job while it is live. Proper planning can help ensure smooth operation during that time.
Perhaps now is the time for you to make one of your dream projects come to life through the power of crowdfunding.
Rob Reinhardt, a licensed professional counselor supervisor, is a private practice and business consultant who helps counselors create and maintain efficient, successful private practices. Before becoming a professional counselor, he worked as a software developer and director of information technology. Contact him at email@example.com.
Letters to the editor: firstname.lastname@example.org