Crowdfunding: How to raise heaps of cash
Aussie soloist, Darren Yeow, raised $30,000 in three hours for his Kickstarter project – over $120,000 in total. Let’s learn more.
LL: Hi Darren, thanks for chatting to me today.
DY: My pleasure, Lucinda! I appreciate the opportunity to give back to your great community.
LL: Fantastic! So what is crowdfunding?
DY: Crowdfunding is a way to raise finance for a project by approaching a large group of individuals through a crowdfunding platform, such as Kickstarter. It means you don’t have to save money over a long period of time, borrow money from banks or raise money from investors, where the funds often come with various conditions.
LL: What did you seek funding for?
DY: My product is called the Nomad Art Satchel, which is a niche product specifically for writers, designers, entrepreneurs and artists who need to record ideas or sketch on-the-go. I created it because there was nothing suitable on the market. I started emailing some great artists for their thoughts on my design, which helped me shave down the product requirements. After 14 months of endless testing, a million revisions, and manufacturing headaches/successes, we were ready to seek crowdfunding.
LL: How do people get started with a Kickstarter crowdfunding project?
DY: You head over to Kickstarter and click ‘start a project’. Your idea must be a project, so it has to be something that has a clear end, like you’re making an album, publishing a book, or in our case, manufacturing an art satchel for designers. You can’t raise money for a holiday or business trip, for example.
"Once launch happened, it was a surreal flurry of activity… I think we crossed the $15,000 mark within 20 minutes."
LL: Does Kickstarter have a say in the actual design or direction of your product?
DY: No, you retain 100% rights and have complete control over the project direction.
LL: Great, so you click on ‘Start a project’ and…?
DY: You nominate a category. Your project has to fit into one of the Kickstarter categories: art, comics, dance, design, fashion, film, food, games, music, photography, publishing, technology and theatre. You also nominate the length of time you want your project to go for (generally around 30 days); and what your funding goal is. The funding goal is the absolute minimum cash amount needed to complete the project. In our case, it was $30,000. Once you’ve submitted your project, Kickstarter will assess it to make sure it meets all their guidelines. If it does, your project can go live and you can start promoting your project to your contacts through social media and so on.
LL: Do you have immediate access to the money? What happens if you don’t meet the minimum funding goal?
DY: People pledge an amount and provide their credit card details securely to Kickstarter, but their credit cards are only charged at the end date of the project and only if the funding goal has been raised. You can raise more money but not less. If you haven’t reached the minimum goal the investors haven’t lost any money and you aren’t charged any fees.
LL: If you do reach your funding goal, what are the fees?
DY: Currently Kickstarter collect a 5% fee from the funding total, as well as payment processing fees of usually 3% per pledge.
LL: Is the main benefit to investors the fact that they receive the product they’ve helped to fund? Or do they also receive a share of profits?
DY: Creators can’t offer equity or any sort of financial incentives such as a share of profits, ownership etc.
There are a couple of benefits for the investors, and not all of them involve actually receiving the product. For example, in our case, to receive the product you needed to pledge a minimum of $129.00 or more, so people had the option of pledging less amounts to get different things. Five dollars or more got them a digital poster. Fifteen dollars or more got them an online design membership. These serve as rewards.
But it’s not just about receiving product or rewards, it’s about being part of a community that’s backing an exciting, common project. As a result you get access to exclusive information as well as being able to tap into a communal hype. It’s exciting.
LL: Speaking of exciting, your funding goal was $30,000 and you raised over $120,000. Why did people keep pledging money even though you’d reached your goal?
DY: With Kickstarter there’s a thing called ‘Stretch goals’. So if we raised $50,000 we could manufacture our art satchel with a tripod interface. If we raised over $95,000 then all backers would receive art video tutorials created by me.
LL: Now to the $120,000 question! How did you raise so much money in such a short time?
DY: It was a combination of factors. Firstly, I’ve developed a decent following on social media in my specific niche of commercial and digital artists in the entertainment fields of video games, film, etc. I follow others on social media, and I’ve also supported a number of well-known artists in their own Kickstarter projects (they did the same for me).
Six months before the campaign I showed early samples and prototypes to other artists for their feedback. I also involved top tier designers and artists in my video campaign, so I had respected people endorsing my product.
At that same time I involved the art community through social media by posting pictures, designs and 3D render images.
We built a buzz around the launch too. A week before the campaign we’d count down and release new photos and art on a daily basis…to the point where people were just begging for the product to be released already! On launch day, I did an hourly count down and people in the US and other parts of the world were staying up at midnight to make sure they got their early bird specials.
LL: Hitting the launch button must have been quite a mixture of excitement and apprehension?
DY: It’s one of the most nerve-wracking things I have ever done – the moment of truth had arrived. Once launch happened, it was a surreal flurry and my pricing fears were allayed – I think we crossed the $15,000 mark within 20 minutes.
LL: Were you doing cartwheels? Or at least madly sketching them?
DY: I went outside to the backyard to chill out for a while under the warmth of the sun…it was such a great feeling.
LL: The campaign is over and you’ve raised stacks. What now?
DY: The real work begins! I will be overseeing the production of every unit for this first run. Beyond that, I hope to expand the Nomad range.
LL: Sounds exciting! Darren, thanks so much for your time and invaluable information. You’ve given us some great ideas about how to successfully raise money through crowdfunding. Wishing you every success with your product.
DY: You’re welcome, Lucinda, and thank you!
What are your experiences with crowdfunding? Share your thoughts here.