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How Crowdfunding Works


How Do I Create a Campaign?
Carlos Wong poses with his staff and a cat during an event to promote his Kickstarter campaign for Catfe in Los Angeles. The cafe would allow patrons to interact with cats up for adoption. Wong's goal was $350,000 but he only raised $9,000.
Carlos Wong poses with his staff and a cat during an event to promote his Kickstarter campaign for Catfe in Los Angeles. The cafe would allow patrons to interact with cats up for adoption. Wong's goal was $350,000 but he only raised $9,000.
MARK RALSTON/AFP/Getty Images

In mid-2015, Kickstarter reported its projects have a 37.3 percent success rate; 14 percent of the projects launched never raised one cent. Most of the successfully funded projects raised less than $10,000. So the odds are against you.

That's not to say you shouldn't launch a campaign, of course. But it's smart to know what you're up against. Some of the top groups include Crowdfunder, Crowdrise, IndieGoGo, Kickstarter and RocketHub. These groups aren't the same, though. Crowdfunder is used to raise investment capital, so funders become shareholders who may get a financial return. Crowdrise is for seeking donations to charities and causes [source: Barnett].

Your campaign's success will depend in large part on being able to excite and inspire potential investors. A quality video clip is important. Projects with videos are a whopping two to three times more successful than those relying solely on the printed word. Invest in a professional videographer, and make sure you not only explain your project but also give the personal story behind it. People become more passionate about a project when they learn about its creator. The finished videos should be no longer than three minutes [sources: Andrus, Kuo].

To address concerns about products that may never be delivered, Kickstarter for one prohibits product renderings and simulations in your videos, although CAD designs are OK. You must also talk about the risks and challenges associated with completing your project on your campaign page.

Next, you'll need to start building a support network. People would rather get behind what they view as a popular project instead of being the first one to click "Back This Project." Tap your family and friends, and friends of friends, until you have 20 to 50 supporters ready to jump in the minute your campaign goes live [sources: Kuo, Barbara].

Once your project is up, communicate with your supporters often to keep them in the loop about what you're doing and how things are going. If you're operating under a reward model, pump up those as well. You don't want to simply ask for money and disappear. Keep supporters engaged and excited. If you reach your goal, thank your supporters, and promptly send out their rewards. Then get to work on that project!