Crowdfunding: Flexible versus all or nothing

Crowdfunding: Flexible versus all or nothing

With two successful campaigns under my belt, I like to think I know a thing or two about making crowdfunding work.

However, one thing I’m yet to try is the flexible crowdfunding model, and I’m wondering if, for my next project, I should give it a pop?

What is crowdfunding?

Crowdfunding is a way of raising money for a project by asking for pledges from the public in return for rewards.

So, say you want to raise $8k to self-publish a children’s book, you go to one of the many crowdfunding sites, set up a project and offer rewards such as copies of the book or original illustrations in return for cold hard cash.

Raising your crowdfunding cash – the two main options

Most of the large crowdfunding sites offer one of two main funding models:

  • All or Nothing: You set a fixed, unalterable funding target at the start of the project. If you reach or exceed it you get your cash; if you don’t reach it, you get zilch.
  • Flexible: You set a target, but, even if you don’t reach it, you still get your cash.

The All or Nothing Crowdfunding model: Pros and Cons

Crowdfunding sites offering the All or Nothing Model include:

“At best, all or nothing crowdfunding projects generate something more valuable than the actual funds – they generate a community.”

Reuben Acciano | Social Media & Communications Manager | Pozible

 

The pros:

Okay, I know that the ‘nothing’ part of this funding model is scary. You do all that work and get no cash? Not fair.

But the truth is this model is often better for most crowdfunders, and here’s why:

  • Fear breeds urgency: The ‘nothing’ aspect increase the risk, increases the stakes and generally makes your site a whole lot more exciting to pledgers.
  • Make or break: Your pledges have the power to make or break your project – if they help, your project lives, if they don’t, it dies. This generates more buy-in from your pledges – especially towards the end of your project.
  • Bigger pledges: It’s possible that the All or Nothing model encourages bigger pledges. That person who took up your $1000 award, can really feel that THEY made your project happen.

So, the scary ‘nothing’ part is actually what makes your project, compelling and exciting – both for you and your pledgers.

“With all or nothing, you have no obligation to give pledgers anything if you aren’t funded, and they don’t lose out either, because they aren’t charged.”
Helen Perris | Singer – Songwriter – Piano Girl

 

The cons:

The main con is pretty obvious when you consider that approximately 40% of Pozible projects fail to reach their target: YOU COULD GET NOTHING.

But there are few ways to mitigate this:

  • Encourage close friends to hold back their pledges – so you can save them until the end.
  • Have a contingency in your back pocket: if you’re $500 away from your goal donate it yourself (via a friend or partner).
  • Ask for as little as possible: remember 100% of $2000 is better than 0% of $20,000.

The Flexible Crowdfunding model: Pros and Cons

Indiegogo is probably the best known crowdfunding site that offers the Flexible model.

The pros:

Flexible Funding is obviously more appealing to some as, even if you don’t reach your goal, you’ll walk away with something.

“Flexible funding can be a comforting approach for first time crowdfunders, but bear in mind you may need to pay more commission if you don’t meet your financial goal on some platforms. All or nothing drives the crowdfunder to focus on achieving the goals and should be able deliver on the campaign rewards.”

Anna Maguire | Author of Crowdfund it! 

The cons:

For me, the cons are a little more powerful for the Flexible Funding model:

  • Not enough cash: So you need $20k to make your film, but you only raise $2k, great you’ve got that cash in your pocket but you’re only 10% of the way to reaching your goal. Not great.
  • No urgency: Since the goal is irrelevant, your project is less exciting to people; they don’t have the power to make your dream come true. The pledge, in fact, becomes more like a standard donation.
  • No guarantees: There’s no guarantee pledgers will get their reward. You needed $5k to record your EP, you promised copies in return for pledges, but you didn’t reach your goal, so no EPs. You can literally take the money and run. Your poor pledger gets nothing. Seems a bit off right?

(Note: As far as I am aware, rewards delivery is required if you take the pledger’s money, otherwise you could be breaking consumer protection law.)

Or, if you’re more ethical and don’t want to burn your bridges, you might have to fulfill the rewards out of your own pocket.

Which model to choose?

Deciding which crowdfunding model and which site to choose is an important part of the crowdfunding process.

Some things to consider are:

  • How big is their network?
  • How much of a cut does the site take?
  • How much support and promotion does the site offer you during your campaign?
  • Is the site more suited to a particular type of crowdfunding? E.g. Creative / Start up / Inventions / etc.
  • What’s the lowest budget you could manage with?

I don’t think I could ever see myself going with the flexible funding model; to me it defeats the whole point of crowdfunding. The excitement, sense of community, public involvement and nail biting is what makes crowdfunding so wonderful; without that I’d rather just save up the money myself.

Over to you

Have you tried crowdfunding? Which model did you go for and why?

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Crowdfunding: Flexible versus all or nothing was last modified: by
  • Rick Chen

    All or nothing – because you need to be absolutely transparent and upfront with your audiences, if you don’t have enough, can’t make the project happen, then don’t do it.

    • Yep transparency is a huge part of crowdfunding – if you want complete strangers to give your their hard earned cash!

  • sammy

    Start some good has a two tier system. An all or nothing tipping point but a more dream big situation where you get to keep what you raise past the tipping point

    • Digireado

      I agree Sammy, I like the Tipping Point system on StartSomeGood. That enables focus on what can be delivered on a minimum raise, and to to encourage supporters with what you can achieve with stretch targets.

      • yes one thing I found a bit hard with Pozible is after you reach your total you’re kind of done. It feels greedy to ask for more. When in reality, the more the better! Maybe this tipping point system is the best of both worlds.

        • Digireado

          I agree Kate. I think the tipping point system is a good crowdfunding model.

  • Pingback: 6 things I learned from my Indiegogo Campaign - Kathryn Curtis()

  • Very good article Kate. Generally pledgers will side more with all or nothing projects, just because there is more belief. However there are projects, on which flexible funding can be used as well. In some cases the campaigns may run longer than normal as well. Here is a similar discussion my colleague wrote up on flexible vs all or nothing funding. https://www.thrinacia.com/blog/post/all-or-nothing-aon-vs-keep-it-all-kia

  • Andrea Davies

    Great article – thanks Kate. How does Go Fund Me rate – anyone got experiences – good or bad?

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