05. September 2018
Interview: How to Create a Successful Crowdfunding Campaign – A Step by Step Guide
Crowdfunding is one of the possible ways to get money to develop your project. It doesn’t matter whether you need 5,000 USD for a small exhibition or 100,000 USD for software development. The only thing that matters is your preparedness. With a sophisticated plan, communication strategy, reward system and an active community, you can push your project to infinity and beyond. Jana Hanfová from the Czech rewards-based crowdfunding platform Hithit, however, points out that the real workload doesn’t end once you successfully finish your crowdfunding campaign, it is actually only beginning.
Crowdfunding has come to the media’s attention in recent years thanks to crowdfunding platforms such as Kickstarter and Indiegogo. Artists, entrepreneurs and activists have begun publishing their projects and asking the general public to contribute to their dream. They promise reward for money. Thanks to community support, many original products, services and events have seen the light of day. That’s how rewards-based crowdfunding was born.
However, crowdfunding has deeper historical roots and, moreover, there are several types. In addition to rewards-based crowdfunding, there is donation-based crowdfunding (donations are not expected to be rewarded), equity crowdfunding (for the money provided, the creator of the project gets a share of the company) and debt crowdfunding (the collected money must be returned). Since rewards-based crowdfunding is the most common, we have decided to focus on it.
To Go or Not to Go Into Crowdfunding
For what type of projects is rewards-based crowdfunding suitable?
In this type of crowdfunding, it doesn’t matter whether people want to open a restaurant, start producing shoes or organize a one-time event. It is important that they want to share their idea with the public, can describe it simply and offer donors appropriate rewards.
At what stage is it best to launch the campaign?
Generally, I think the best time is when people already have a prototype. We want the project creators to show us their product. It is also a certainty that they have put effort to its creation and it’s not just a momentary fancy.
When, on the contrary, does crowdfunding not pay off?
If you don’t have people nor enough time, I wouldn’t go into crowdfunding. Or, even when you want to get a patent, and you're afraid someone could steal your idea. The point is to share your idea with as many people as possible. The crowdfunding reward works well for projects that produce products and services but worse for charity and also for applications that are free because backers receive no reward.
How long does a campaign process and its preparation take?
The project itself runs on Hithit for 45 days at the most, but is preceded by long preparation – creating an idea, a prototype, photos and videos, and rewards. If the target amount is collected, creators of the project need to wait two weeks for the money to be processed. When the campaign is over, that’s when the real work starts – distribution of rewards, communication with contributors, and product development. It's definitely a matter of months.
"You have to work pretty hard during the campaign, but the main job starts only afterwards. Everything only starts with a crowdfunding campaign."
When is the best time to run the campaign?
It’s a good idea to start the campaign in advance so that there’s enough time to prepare and distribute rewards. It should never end on the same day when the event is to take place. We don’t recommend running the campaign over Christmas holidays because people don’t use computer for two weeks and plus, they are exhausted after Christmas break. On the contrary, it can work great before Christmas.
How many people are needed to create a campaign?
It depends on the campaign. I think it's good when you're not alone, if even just because we stop being critical towards ourselves when we do something every day. The bigger and more ambitious the project is, the bigger and more ambitious the team should be. It's different if you ask 200 people to contribute 2,000 USD, or if you need to collect hundreds of thousands.
When I decide I want to go into it, how should I proceed?
I see three areas that one has to deal with. First, you have to fill in all the information on the crowdfunding platform – upload texts, pictures, videos and describe rewards. Second, you need to think about the communication plan and how to show the project off to people. Third, you must calculate the target amount well, basing it on a very detailed budget.
How Much Money One Can Get from a Campaign
Do you have any advice for people who are calculating the target amount for the first time?
You should never say less than what is needed for the project so you don’t get into a situation in which you have no money left. When the target amount isn’t reached, the money is returned to donors and the only thing a person loses is their time. But they also receive valuable feedback on the product. Failure can therefore be better than success and being unable to deliver rewards to people on time because you misinterpreted the amount.
How should people calculate the amount?
There are various ways. For a rough idea, you can estimate that you will ask XY people on your social networks to contribute, consider that only 2% (Hithit acquisition) out of this XY will buy your product and then multiply the number with an average Hithit contribution of 40 USD and you will get a rough estimate of the target amount. Or, if you know that the target amount you need is much more ambitious than the channels you have available, you can adjust the communication plan. Alternatively, you can also work with milestones. Matemagus, a mathematical learning application, works with milestones in such a way that the more money they collect, the more arithmetical problems they program.
On the Hithit website, you write that one should always add 20% extra to the target amount. Why?
Because there will be a lot of unplanned spending during the campaign that needs to be counted in the project itself and if this isn’t considered, there might be no money left. People often forget that they invest their own time in the campaign, pay for advertising, or pay for postal fees when distributing rewards.
How much from the selected amount will remain to the project creator?
I wouldn’t dare guess. In addition to the 9% Hithit commission, people are taxed for the amount, but the taxes are done by the people themselves; we don’t get into it. VAT payers have different conditions than non-VAT payers. Moreover, I don’t know the internal costs of each project. I would say that what is more important than how much money is left is how many pieces have been pre-sold or how many customers have been addressed. Getting money is one thing, but getting feedback is even more important.
"The ideal crowdfunding experience is like the iconic pairing of shampoo and conditioner. If you are well prepared, you won’t only get the money needed to develop the product, but also valuable feedback from your fans. Just how these hair products always come in combination, crowdfunding is, together, marketing, pre-sales, and market research."
How many projects ultimately collect the target amount?
We have an almost 50% success rate, which is due to the quality of our pre-selection. There are many projects applying for Hithit, but only a quarter of projects are shown on the site. We only choose those that meet the formal criteria and are in compliance with our moral convictions.
Are you able to say which projects are the most successful on Hithit?
It doesn’t matter whether it’s a theater performance, a new technology or a social project. Success comes to those who are prepared. The best projects are those that have an audience, communicate with fans and care about them. People like to participate in something that they see as important and that they would like to see in the world. And with their relatively small sum, they can contribute to it.
Which projects are you most proud of?
For me, I would mention Bučovický Futsal Championship, which has repeatedly managed to hold an international competition for blind futsal players, as well as Bára Baronová’s publishing house called wo-men, which publishes exquisite books. However, the most successful projects in terms of collecting the largest amount of money for one-time campaign are Nakopni Jatka!, President Blaník or Žít Bezobalu. Projects like Footshop, Štokrle, Skinners, The Žurnál and Frusack are also successful because they exceeded the target amount by several hundred percent.
How to Create Great Rewards and Not Go Crazy
What is important to consider when creating rewards?
It is important to think about the price, the demanding character of production, and the distribution of rewards. Creators often complain about how they messed up their life with making rewards. For example, they offered in-person pick-up of the product in their studio, and now they do nothing but arrange meetings into the future. Communication with contributors, of which there can be several thousand people, is not fun. In addition, some rewards take a long time to make as well as deliver.
How can people make rewards interesting for contributors, but not go crazy?
I have one general piece of advice – think about the life cycle of each reward. Will people understand what you are offering? Is it attractive for them? How do I deliver things to people? Will people pay for shipping or will I? If they pick it up personally, how long can it sit around in the studio or store? Thinking about these details will save you a lot of trouble.
What rewards do you recommend?
What works best is offering things that can’t normally be bought. This can be delivery of a product in a beautiful package, a dedication in a book, an excursion to a factory, a dinner with the creator or the backer’s name on a poster. Companies that offer products can offer a limited number of pieces at a fantastic price. If one doesn’t have a strong fan community yet, these pieces sold at lower price can attract the first customers. For example, Skinners, a company making lightweight footwear, offered their products at a low cost and it helped them greatly.
What if a company produces something intangible, such as software?
They can offer a test month for free or a cheaper software subscription for the entire family. For events, organizers typically offer tickets. Tomáš Studeník organizes an event called FuckUp Nights, for which he sells most of the tickets at the same price. In front the stage, however, there are a number of pillows where people sit during the show and he jokes with them and pours them champagne. It may sound bizarre, but it is an experience for these people and they are willing to pay much more for the “pillow place”. The Gulag Museum, which creates virtual tours and 3D gulag models, has recently offered a recipe for soup which prisoners used to eat in the gulag.
Did it work?
Yes, it was a beautiful demonstration of black humor. Humor inherently belongs to crowdfunding. When we identified a common feature of the successful projects in one selected year, 80% used jokes and fun in their projects. I think that campaigns that do not have a clearly defined product or do not pre-sell products at low cost can use humor to make it more interesting and engaging. Not only do the contributors have fun, but also for the creators, it's better than filling up tables for grant applications.
How to Manage the Rush
The project already has a conceived target amount and a reward system. What should I focus on before publishing the campaign?
You should focus on having good quality photos, videos and texts. I'm not saying that photos need to be done by a super professional photographer, but they should have a certain quality. For example, Bagobago's company made a nice combination of photos and descriptions on them with data such as backpack’s weight, carrying capacity and size. Using these images, they communicated a great deal of information that would otherwise take up a whole paragraph and be boring. For film projects, it's important to have a high quality video to make people believe you can shoot a whole movie. Literary works don’t need extraordinary images, but should be written nicely and without grammatical errors.
Does Hithit help project creators with the visual side of the matter?
We always try to give feedback to the creators to improve the project. Sometimes we warn them that they have wrong or missing information, misspellings, or blurry photos. We sometimes also propose a different form of remuneration and discuss the rewards with them. It always depends on them whether or not they accept our view.
Once everything is done, what is next?
A very stressful period of promotion and marketing starts. People have been working on their product for a long time and now they are simply waiting for what people will say about it. Promotion should involve all possible communication channels – social networks, newsletters, blogs, and forums. People should not forget about paid advertising and PR in media. Everything depends on which target group they want to reach. Some projects don’t have fantastic social networks, but they have tremendous success with them because the community is active on their forums and newsletters, or it meets on a regular basis. That’s what happens with local projects.
Community is clearly important for the success of the campaign. Do you have any tips on how to work with it?
I think it's good to talk to people about the campaign before it starts. Bohempia, a company producing barefoot shoes, has long been exploring what people want, showing them their prototypes, talking to them about pre-sales, and trying to gather them in one place. When their campaign starts, they will already have potential customers who will help them overcome the moment of having no contributions at the beginning.
Besides talking about the campaign in advance, what else works? What kind of content, frequency, which social media channel...?
Unfortunately, it’s not possible to generalize because each project is original. Somebody writes long posts on Facebook and people like to read them while others are paying for paid advertising and it works for them. It's an individual elixir so I wouldn’t dare give specific advice from my position.
Does Hithit help promote projects?
Yes, we’re trying to inform our community about projects on our social networks and in the newsletter. Sometimes we recommend the project to our partners if it makes sense to them. However, I often emphasize that the creators of the project must not rely solely on our help. In the beginning, it should be mainly on them to rally their family, friends and fans. We show projects to people who mostly don’t know the creator. That’s why we’re waiting for the promotion until the project evolves a bit to be believable for the wider public.
The campaign runs for 45 days. What happens afterwards?
If the project succeeds, creators wait for two weeks for the banking data to be verified and then they receive the payment. Subsequently, they should send backers their rewards and work on the product. If the target amount wasn’t collected, the money goes back to the backers.
Do you have any overview of project lifetime after the campaign ends?
At Hithit, we don’t intentionally check projects by looking at whether this and that happened as they said. We don’t have the capacity for it. We monitor the lifetime through people who notify us that they haven’t received a reward or through rewards that we should receive for the money we contributed. Plus, some projects regularly return to Hithit.
Do project creators sometimes get into a scrape?
In most cases, it’s only a delayed delivery of rewards. So far, it hasn’t happened that the creator would completely abandon the whole project and its fans. When people put so much effort into the crowdfunding and do it on their own behalf, by not using the money they would get into an embarrassing situation. Once, one painter collected money for an exhibition and found out he could not do it. He solved the situation by returning money to backers and offering them a different service so he would not lose his credit in their eyes. Four years later, he organized the exhibition. Most creators, especially the successful ones, come well-prepared to Hithit. They have a clear idea of the product, of costs, of what materials they should use, and have consulted it with dozens of people. People who only come with an idea rarely succeed.
What's the secret of the most successful projects?
I think that it’s preparedness, ability to communicate well with fans and offer of interesting rewards. Hithit helps the prepared ones. Many creators tell me that after the crowdfunding campaign, it's much easier for them to get sponsors or investors and they even contact them themselves. Crowdfunding has its own rules – during the campaign you work with customers and collect money and feedback from them, and it can be a huge push for further funding.
Jana Hanfová watches over the development of Hithit.com, a platform which offers rewards-based crowdfunding. Thanks to Hithit, projects such as Jatka 78, the new film President Blaník, and Štokrle, a toilet stool, were supported. She has done consulting for over a thousand projects and still enjoys it.