Predicting Potential Crowdfunding Costs

A breakdown of the potential crowdfunding costs

Reward crowdfunding requires a lot of time and effort to get the campaign right. You can upload your pitch to the platform, but without time and money, it will likely not get seen. Crowdfunding is a brilliant way for existing businesses and new start-ups to enter the market. However, often crowdfunding newbies aren’t aware of some of the hidden costs involved in crowdfunding.

Bringing a crowd

It is a common misconception that your future backers will be sitting watching your chosen platform, waiting to click *back*. Half of the battle of crowdfunding is communicating and persuading why someone should support your campaign or need your product. On top of that, you need to find that support externally to your crowdfunding platform.

As a general rule of thumb, you want to be confident of securing 1/3 of your target before launching. This could be contacting your existing database, or building one from scratch with, and these elements take time and resources.

Collating resources

On a basic level, your crowdfunding campaign needs to persuasively “sell” a reason to support your project. It is not a guarantee that you will receive a product in return. This is why your reward tiers are called “perks”. It is important to build genuine trust from your audience. The more humanised or dynamic your campaign, the more likely backers will want to get involved.

As product launch experts, we do not recommend simply planting your campaign on the platform and leaving it to grow. Without water and light, your campaign will remain a seedling. A successful campaign needs dedicated time and resources put into it to show results. It is important to ensure new potential backers are being reached and all questions are being answered.

Creating visuals

Especially when it comes to visual elements such as your crowdfunding video and any product photography, this can be costly. However, these elements are highly influential when it comes to campaign attraction and trustability. If you don’t have a physical prototype, show renders or sketches (but check what your chosen platform allows).

Your crowdfunding video is the first touchpoint for anyone who visits your campaign. It needs to demonstrate your product, its features, the development or future plans for the funding. It is your chance to attract and engage, and humanise your campaign. This can be done on a tighter budget, but the storyboarding and messaging are vital to getting your message right. Your video can be produced by yourselves or by video production experts, but it needs to be persuasive. Many first time crowdfunders don’t realise the required time and monetary investment for your video.

Developing a pitch

Now that your potential backer has watched your crowdfunding video, they will read your pitch. It is best to embellish your pitch with engaging and informative graphics. Give a detailed surmise of exactly what your campaign will offer and your detailed plans to succeed. It is all about trust and attraction. Backers want to know that you are worth investing in. Plus, that the perks they are receiving are valuable and unique to their needs. Pitches often include contextual information, technical specifications and evidence of previous interest from any media outlets.

Rewarding perks

Your reward tiers need to offer exciting returns for backer investment. For example, a product, experience or specific use for the funds. Offering a range of different sized rewards will mean that backers can pledge as much as they can want. Larger pledges can be achieved by offering multiple perks such as 5 x your product or an exclusive experience. This can be beneficial to meet your goal faster.

Directing traffic flow

It is essential to direct multiple streams of traffic towards your campaign for the full 30 days. This ensures that potential backers are seeing your campaign. We would recommend pointing social advertising at your campaign ahead of the launch (for sign-ups). It is also recommended to advertise during the campaign to ensure that you are reaching your custom audience demographic.

This is not only via social media advertising but also crowdfunding partners, press, media influencers and affiliates.

Maintaining momentum

In order to maintain momentum, you need to find new ways to encourage backing throughout the campaign. At the start of the launch, a limited super early bird discount is recommended. As the campaign continues, the price goes up. Sometimes, backers need a nudge in order to stay interested.

For example, arranging and publishing product reviews or news features to direct to the campaign. We would recommend keeping a handful of review samples available to offer to relevant and interested influencers (if possible). Make sure to do this ahead of time to hear back from key industry voices.

Arranging affiliates

Crowdfunding is its own unique community, with a large pool of recurring backers following crowdfunding platforms and affiliate sites. Further to this, there will be affiliate sites dedicated to specific products such as tech & gadgets or home appliances. These opportunities are very rich in value for your project, but will incur campaign costs.

Keeping a small budget aside for affiliate sites is recommended. These sites can advertise you on their backer newsletters or home page. Furthermore, users can sign up to become affiliates, receiving a percentage back for any sales they direct to you.

Engaging your platform

Crowdfunding platforms like Kickstarter and Indiegogo do not provide any internal support for campaigns until you hit your external goal. Once you hit your goal, platforms will show a greater interest. Their support can include newsletters, marketplace features and advertising. Up until this point, it is down to your team to manage the campaign.

Indiegogo has recently deployed a new Beta feature, meaning that you can pay to advertise on the platform earlier. It is worth noting that, as this is an earlier feature, they do not select every campaign and they may not come back to you in the 30 days. To ensure visibility, other methods are recommended in tandem.

Giving away commission

It is important to remember that whichever platform you select, crowdfunding platforms will require a cut of the final funding. For reward crowdfunding, this is typically around 10% of the final amount, including commission and processing fees. This is also relevant to equity campaigns (roughly 6-8%). Platform commission will be collected on completion of the campaign.

We would take this into account when calculating your desired funding goals for the project. Considering this will ensure your desired the funds for development and delivery are reserved.

Delivering your campaign

Yay, success! Your campaign has completed. If you have successfully achieved or succeeded your funding goal, that is fantastic. At this point, you will be contacted by your platform and the commission will be taken ahead of funding receipt. After this, your next steps are actualising your development plan and preparing to manufacture your perks. Read our blog on the importance of product delivery.

If you did not successfully complete your campaign but received some backing, depending on your funding set-up, you have two options. Complete anyway with your own external funds, or refund backers for their pledges (recommended if you aren’t going to complete).

For Indiegogo, you have the InDemand option, which you select at the start of your campaign. This opts you in for their marketplace functionality after 30 days. This means you can continue to sell your product on the platform for up to 6 months. This gives you further visibility whilst developing your final product for delivery.

Getting your head around the crowdfunding costs

Hopefully this sheds some light on the crowdfunding costs you could expect. This is all to say that crowdfunding is a fantastic route to market, but not a decision to make lightly. Depending on your internal team or outsourced marketing and PR, you will have a long list of tasks throughout the process. These tasks can often incur costs that aren’t advertised by crowdfunding platforms themselves.

With realistic goals and a range of optimised traffic streams in place, you are set to enter the crowdfunding space!

Would you like to learn more about crowdfunding, campaign costs and whether it is right for you? We would be more than happy to jump on a call to run through our process and give some advice.