Crowdfunding is a viable source for raising funds for many types of businesses, including content creators.
But, as a backer in the crowdfunding process, you are caught in the middle of two parties who have their own motives for wanting you to pledge, and to increase your pledge to as much as possible.
The two parties are:
- the crowdfunding platform, such as Kickstarter;
- the project creator.
Let’s start by looking at the motives of a project creator. The motives of a crowdfunding platform are analysed separately.
- The project creator is looking to raise as much funds as possible in excess of the funding goal, in addition to using the campaign and backers as input into understanding the market for the product.
- The crowdfunding platform, such as Kickstarter, wants you to pledge as much as possible because they make the 5% service fee once the project is funded.
- Everything on the crowdfunding platform is structured to fulfill these motives.
- Post campaign, the project creator may seek additional funding leveraging the success of the Kickstarter campaign.
It is important to understand why someone would want to launch a funding campaign for their idea on a crowdfunding platform. There are some overlapping motives that the various types project creators have, but, in general, each type has their own set of motives for using crowdfunding as a funding source.
Examples of the general motives are listed below. Each motive has an impact on me as a backer.
Motives of a start-up
A start-up’s motives could include any of the following:
Motives of a business
As business or an experienced project creator on these platforms, the motives most likely would be:
Motives from other project creator types, including content creators
A self-employed project creator would use the campaign as another revenue stream to complement existing revenue streams, to gain experience or to build a portfolio.
A large corporate would typically use crowdfunding to test a product before commercialising it; a non-profit would use crowdfunding as an alternative donation or pledge-drive.
Post crowdfunding campaign
Once the fundraising campaign is completed, a project creator may use the success of the campaign to enable him to realise additional motives, such as securing funding from venture capitalists. These motives are part and parcel of growing a successful business.
As a backer
You need to be able to read between the lines and understand what the project creator’s motives. Their motives translate into how they want to influence backers, including using heuristics, advanced marketing techniques and behavioural crowdfunding.