Crowdfunding industry reports and statistics unambiguously show how impressive the crowdfunding boom has been. Almost 6.5 million crowdfunding campaigns were launched just last year, totalling $34 billion of capital raised worldwide.
There is a downside to these incredible numbers though – almost 80% of all campaigns fail to meet their fundraising goals. Such a high failure rate can often be pinned down to the viability and execution of a campaign, from poor ideas to bad implementation. But what if part of the problem could be explained by the structural faults of the existing crowdfunding market rather than the incompetence of fundraisers?
By far most money today is being raised through the huge crowdfunding mega-sites like GoFundMe, Kickstarter and Indiegogo. They have dominated the market by providing centralised marketplaces with large pools of funders and fundraisers. This model is not exclusive to the crowdfunding sector – economies of scale and network effects are viable benefits of centralisation, especially online. But is it the only or, for that matter, the best way to go about crowdfunding? The proliferation of new solutions that enable fundraisers to bypass the mega-sites seems to prove that it is not. The emerging model of “do-it-yourself” (DIY) or “independent” crowdfunding expects the project creators to use personal websites and platforms, rather than public ones, thus taking advantage of more liberty in picking the right solutions to attract capital.
What are the Perks of Do-It-Yourself Crowdfunding?
We can identify ten key perks of DIY crowdfunding:
Perk #1. No imposed time limits. The mega-sites tend to limit crowdfunding campaigns to a few weeks. While they argue this is a motivating factor for funders as it creates a sense of urgency, it actually might be detrimental to many projects. In particular, first-timers typically need some time to move up the steep learning curve and gain footing in the basic rules of outreach, acquisition and retention of funders. It’s not about the time limit being good or bad – it’s about your freedom to set it (or not) as you deem appropriate for a given campaign.
Perk #2. “Always something”. Most mega-sites have an “all-or-nothing” policy: either you raise the entire goal amount in the limited period or you’re left with nothing. Again, this can have merit in some cases, but DIY allows you to decide whether it works for you. For instance, if you raise only half of the money but find another way to fund the other half (be it an angel investor, a bank loan or else), you can still get the would-be-failed project completed.
Perk #3. Control. Privacy policies of many mega-sites tend to disadvantage the fundraisers. For instance, users’ contact information and other data are likely to be the property of the mega-site, which means, in most cases, you won’t be able to contact your funders or would-be-funders directly. Doing it yourself, you own the process from A to Z.
Perk #4. No entry barriers. Approximately one in four campaigns are rejected by the mega-sites due to the restrictions in terms of investment sector or crowdfunding type (see different crowdfunding models explained here), or on some other grounds that are often far from transparent. DIY allows you to fully realise the basic philosophy of crowdfunding of accessibility and non-restriction – for example, you can pick and combine different crowdfunding models for each project.
Perk #5. No direct competition. Individual crowdfunding campaigns simply won’t get lost between the thousands of other projects all gathered on a single platform. Of course, you will have a harder time drawing the attention to your, comparatively tiny, platform, but once you get the clicks, the potential funders won’t be distracted by endless lists of competing campaigns.
Perk #6. Customisation. Loyalty rewards, gamification, customised mailers, gadgets – there are tons of features you can include to make your campaign more appealing. You won’t be able to take advantage of them using a one-size-fits-all platform.
Perk #7. Engaging the crowd. DIY crowdfunding backers tend to be more “active”, meaning they have a larger and more direct involvement in the venture they fund, e.g. through participation in the decision-making or provision of time and expertise. This allows fundraisers to extract additional value from funders, increase the feeling of community, and encourage new ideas for the development of the venture.
Perk #8. Cost reduction. The mega-site gets a percentage (typically 5%) of the sum collected. Of course, developing your own crowdfunding site is not exactly free but, over the long term, it can prove much more cost-effective.
Perk #9. Building a brand value. All the customisation and individualisation features combined, allow you to build a distinct brand, unconstrained by the arbitrary rules and templates that in the end blur the distinct differences between projects.
Perl #10. Drawing new customers. Every crowdfunding campaign involves plenty of marketing and publicity efforts. A side effect can be widening of your customer pool, who learn about your product/service/project through the campaign. This can potentially have a greater impact when the campaign is more connected to your organisation’s offer (e.g. crowdfunding platform integrated with your website, rather than hanging on a third-party platform).
In short, DIY crowdfunding gives individuals the initiative to shape the process according to their specific needs. Doing it yourself gives you far more flexibility in designing and running your crowdfunding campaign and allows you to disregard the arbitrary, often capricious, rules of the big platforms.
What should you think about when creating your own crowdfunding platform?
There are many questions you’ll have to ask yourself before jumping into DIY crowdfunding. Among the essential ones are:
Where are the projects going to come from? Businesses or organisations that intend to use the crowdfunding platform to fund their own development will likely be the exclusive campaign creators. However, you might consider including others into the campaign creation, depending on your model and needs. Financial institutions can broaden their offering by setting up a dedicated crowdfunding space for their customers to create and fund each other’s ventures. Schools and universities can use the platform to fund internal projects (e.g. to modernise the library) but also encourage bottom-up activities (raising capital for student start-ups, joint sponsoring of music/sport/culture events, etc.).
Who is the target audience? Do you have an established relationship with the potential users (e.g. your financial institution’s clients)? Do you intend to engage a very specific group of close stakeholders (e.g. parents of your school’s pupils)? Or do you want to tap into a new pool of potential customers and investors?
How to market the platform? Getting the word out about your new crowdfunding venture will likely make or break your project. There are plenty of avenues for marketing your platform that you can leverage, but you have to carefully design a marketing plan and pick the right tools, depending on your goals and target audience.
What laws and rules should you adhere to? The first step is to ensure the platform is compliant with international KYC (Know Your Customer) and AML (Anti-Money Laundering) standards. You will also need to understand and obey the national financial, or other, regulations. Last but not least, it is vital to guarantee technical security (including reliable payment methods, data protection and so on).
Once you have the basics set, you can get on with customising your crowdfunding platform, creating a quality user experience, designing mechanisms to engage your crowd, and taking the full benefit of the above-mentioned DIY crowdfunding perks.
How to build your own crowdfunding platform
There are several ways to start your crowdfunding platform:
Option #1. Build it yourself. If you’re really tech-savvy and/or have a strong IT team at hand, this might work just fine. In any case, though, this option might eventually prove time-consuming and expensive, and you might stumble into serious headaches from legal compliance to technical security to daily management.
Option #2. Use a ready-made product. An increasing number of white-label and open-source crowdfunding software solutions are popping up, aiming to meet the needs of DIY fundraisers. Some web hosting providers offer even crowdfunding add-ons that you can simply integrate with your existing website. This helps save time and money on not having to reinvent the wheel. However, using a ready template severely limits customisation opportunities – the single biggest benefit of doing-it-yourself.
Option #3. Use a comprehensive, flexible solution such as Smallbrooks. Using a white-label might do the work for a simple, one-time crowdfunding campaign. If you need a more complex solution that will allow you to make use of all the advantages of DIY crowdfunding and have the technical aspect of it handled for you, this is probably the best option. Smallbrooks offers “an IT solution that makes it fast, easy and affordable to get your own crowdfunding platform, tailor-made to fit your crowd, country, currency and context”. It uses the core crowdfunding functionality from a common toolbox (no need to reinvent the wheel each time) but allows for almost unlimited customisation of the platform. This makes the process relatively fast, easy and affordable, keeps you in control and ensures the quality and security of the backend.
At the end of the day, there are unlimited options to go about starting your own crowdfunding website, from choosing the provider (or building it yourself) to designing the functionalities of the platform to marketing the campaigns to the right crowd. The key takeaway here is that this new DIY trend, along with the proliferation of new tools and services that facilitate it, can enable fundraisers to bypass portals like Kickstarter, making crowdfunding more decentralised and democratic. Given crowdfunding’s democratic nature, this seems only fitting.