Crowdfunding can be a great way to obtain funds for your project. One of the most important considerations when setting up a campaign is the goal you set. A report by The Crowdfunding Centre, a London-based market research firm, notes that between 69-89 percent of campaigns do not reach their target goals. While many factors, including attractiveness of your page and how your campaign is promoted, affect campaign success, how high or low you set your goal plays a large part in determining if you will get the funds you need.
Making Your Project a Winner
Kendall Almerico, a crowdfunding attorney, says there is a “psychology to crowdfunding from the donor’s perspective.” Remember that potential backers can always see the up-to-date progress of your goal. If you set a high goal and have only raised a small amount of money, donors are often less likely to jump on board, even if they like your project. They may reason that your goal is unattainable, and that their small contribution is unlikely to help the project succeed.
Human nature applies to crowdfunding efforts: people like to back winners. Thus, Almerico states that instead of setting a very high goal that might pay for your entire project, smart crowdfunders first find money elsewhere. He suggests obtaining 25 percent or more of your financial support before even putting a campaign together – even if that 25 percent is just in pledges and you haven’t collected the money yet. Seeing a lower, more attainable goal may encourage potential donors to contribute to your campaign.
Note that this is also why it’s important to reach out to as many people as possible before you launch. The more money you raise on the day you launch, the more successful your project is likely to be.
Getting what you need
Experts say that oftentimes the biggest error you can make is to set your internal goal as your crowdfunding goal. Instead, you must set a realistic, achievable goal. Eric Ries, author of The Lean Startup, refers to this as the Minimum Viable Goal (MVG). In layman’s terms, your goal should be the least amount of money necessary to fulfill your project.
Remember that because crowdfunding often does not pull in as much money as the campaigner hopes, you should not set a goal of $100,000 unless $100,000 is the absolute minimum amount you need to deliver on your project. If your minimum is $70,000 or $50,000, make that your goal instead.
All platforms are not created equal
Each of the more than 2,000 crowdfunding platforms available around the world set their own rules on when and how you receive your funds. Kickstarter, one of the most-used platforms, has an all-or-nothing rule, in order to minimize risk for all involved. What that means for you is that if you set a goal of $50,000 and only receive $35,000 in backing, no funds will be collected from your donors and your efforts for marketing and gathering support will go unrewarded.
When it comes to crowdfunding goals, just remember to start at the beginning: budget well, and think about your audience and what they have to give. Set your goal accordingly to set your campaign up for success. For more information about how to run a successful crowdfunding campaign, tune into the Art of the Kickstart podcast, subscribe to our newsletter or get in touch.