How Crowdfunding Works: Process and Functionality of a Crowdfunding Campaign
Crowdfunding is currently an interesting and popular topic. On sites like Kickstarter, there are numerous projects asking for users’ support or hoping for their financial help. In fact, over the past years, various projects have been successfully funded through campaigns on Kickstarter and similar platforms (and subsequently brought to market) that would likely never have been possible without a crowdfunding campaign. But what exactly is behind crowdfunding? How does such a campaign work, and what should be considered? You will learn that and more in this article.
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- 1 How Crowdfunding Works: Process and Functionality of a Crowdfunding Campaign
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USA | 5% + Anbieter-Kosten | Einer der Marktführer im Crowdfunding. | Kampagne Starten |
The Essentials in Brief
• Crowdfunding describes the financing of a project by the masses.
• Crowdfunding is the only way to realize many projects.
• There is now a variety of crowdfunding platforms on the market.
• Kickstarter is the market leader and the best-known crowdfunding platform.
• Many crowdfunding platforms offer support for the projects.
• On many platforms, users receive a reward for their support.
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Bekannteste Plattform, Marktführer. | Kampagne Starten | |
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Bekannte Indie-Plattform für Games. | Kampagne Starten | |
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Für soziale und medizinische Projekte. | Kampagne Starten | |
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Für ausgefallene Projekte und Ideen. | Kampagne Starten | |
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Venture Capitalist Projekte und Ideen. | Kampagne Starten |
Crowdfunding – what is it anyway?
Before we look at how crowdfunding works and what you should consider, it is important to know what crowdfunding actually is. We will answer this question in this section. Crowdfunding refers to the support or financing of a product by the masses. The respective projects launch a campaign on special websites or crowdfunding platforms for this purpose. Kickstarter is the market leader and one of the best-known providers. The goal is to cover the costs necessary for the full or partial development of a project through revenue from the community. To do this, you register projects on the appropriate crowdfunding platform and present yourself. The users on the platform can then financially support projects that they like.
In this way, promising and interesting projects are given a chance. Many – and not infrequently very good – projects have failed in the past due to a lack of financial resources. Crowdfunding is intended to counteract this. On most platforms, users who support a project receive a small reward. A so-called perk or edge. Since crowdfunding became an option, many projects have been successfully supported and implemented in this way. The offerings range from predominantly technological projects to clothing, board games, and so on. Normally, there are no restrictions on which projects can be supported through crowdfunding and which cannot.
How Does Crowdfunding Work?
For crowdfunding, it is first necessary for the project to choose a crowdfunding platform from which it expects support. There is now a wide selection on the market. However, the best-known provider is Kickstarter, followed by Indiegogo. It is worthwhile to look carefully and compare in advance. Some providers specialize in campaigns from a particular industry or niche. Furthermore, there are differences in costs and the campaign process.
Once you have chosen a provider and it has accepted your campaign, it will be published on the provider’s website for a certain period. During this time, the users of the provider, i.e. the community, have the opportunity to ask questions, leave comments, and financially support your project. At the end of the term, the campaign ends. Whether and how much of the revenues you receive depends on the provider and factors such as whether the campaign goal was reached, etc.
The Process of a Crowdfunding Campaign
In this section, you will learn step by step the process of a crowdfunding campaign. With this information, you should then be able to start your own campaign without any problems.
Step 1: Choosing a Provider
There is a wide variety of crowdfunding platforms on the market, foremost among them Kickstarter.com. Before you can start your own campaign, you must decide on a provider. Care and caution are required here. Some providers specialize in certain projects or industries, and they also differ in terms of process. For example, on some crowdfunding platforms, you only receive your money if the campaign goal (for example, 30,000 USD) is fully reached. Otherwise, the backers get their money back (even at 29,999 USD). Other platforms pay out the revenues at the end of the campaign regardless of whether the goal was reached or not. There are also differences in prices and fees, in inclusive services, etc.
Step 2: Creating Your Crowdfunding Campaign
Once you have chosen a provider, it is time to create your crowdfunding campaign. Depending on the provider and, in some cases, the package you choose, you may receive help and support from the crowdfunding platform. Larger providers like Kickstarter have a dedicated team for this. Smaller providers, on the other hand, do not offer such services. In these cases, you are on your own.
In any case, you should include videos and photos in your campaign, as well as a detailed project description. Furthermore, you should be able to present a roadmap, clear goals, etc. Most crowdfunding platforms review your project and must approve it before publication. In this case, there are often clear instructions and requirements that must be met. This ensures that only projects that really exist, are realistic, and have a chance of success are published. It also helps prevent fraud.
Step 3: Determine Duration and Perks
Before you can launch your crowdfunding campaign, you need to define the perks. These are the benefits that users receive in return for their support. Perks can be offered in multiple tiers. For example, for $10, $50, $100, $200, and $500, etc. You also need to decide on a duration. Most campaigns typically run between two and four weeks. While a duration of over 30 days is possible, it is generally not recommended in crowdfunding. On one hand, you only receive the funds at the end of the project, and on the other hand, longer durations mean that users take more time to decide (“I’ll come back later”) and then simply forget your project.
Step 4: Go Live and Market Your Campaign
Now it’s time. You can go live with your crowdfunding campaign. It is important that you are active. This means responding quickly and reliably to questions, concerns, and comments from users. You also need to market your campaign outside the platform. Social media, press, blogs and trade portals, as well as your project website: links, information, and notes about your project and crowdfunding campaign need to be found everywhere. Otherwise, the desired success will remain elusive. Always remember: the most successful crowdfunding campaigns have reached the majority of their funding shortly after launch, not at the end!
Step 5: End of the Campaign and Payout
The final step is the end of your campaign and the payout. Here, the choice of provider plays an important role. Some platforms, like Kickstarter, only pay out the revenues if the set project goal has been reached. If you fall short of the target amount, the backers get their money back, and you get nothing. Other crowdfunding platforms pay out even if the goal is not reached, and yet other providers offer you the choice between both options. For this reason, careful planning of the campaign is important, and you should by no means set your goal too high.
If everything works out, you will receive your entire revenues (including those exceeding the set goal) within a short time. Only the fees are deducted. These also vary by provider, but most platforms charge a percentage of the revenues as commission.
Anbieter |
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Link |
|---|---|---|---|
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Bekannteste Plattform, Marktführer. | Kampagne Starten | |
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Bekannte Indie-Plattform für Games. | Kampagne Starten | |
| |
Für soziale und medizinische Projekte. | Kampagne Starten | |
| |
Für ausgefallene Projekte und Ideen. | Kampagne Starten | |
| |
Venture Capitalist Projekte und Ideen. | Kampagne Starten |
Advantages and Disadvantages of a Crowdfunding Campaign
In this section, we introduce you to the most important advantages and disadvantages of a crowdfunding campaign. In this way, we aim to help you get an overview of the concept and its possibilities, as well as the risks and negative aspects of a crowdfunding campaign.
The Advantages
A crowdfunding campaign offers a multitude of advantages. You have already encountered most of them throughout the article. Nevertheless, we have summarized the most important advantages of a crowdfunding campaign here once again. They are:
• Financial support for your project.
• Increase in the visibility of your project.
• Crowdfunding is an excellent marketing tool.
• Early building of a community of supporters and interested parties.
The Disadvantages
Of course, despite all the positive aspects, a crowdfunding campaign also involves some disadvantages. You should of course be aware of these as well. You should also always keep the following important disadvantages in mind when deciding on a crowdfunding campaign. Otherwise, there may be unpleasant surprises. The most important disadvantages are:
• Potentially high additional costs.
• Depending on the provider, payout only occurs if the project goal is reached.
• Sometimes high requirements and prerequisites for participation.
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The Process of a Crowdfunding Campaign – Our Conclusion
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USA | 5% + Anbieter-Kosten | Einer der Marktführer im Crowdfunding. | Kampagne Starten |
