Crowdfunding
First, for such a locally-based cause as ours (bringing bagels to Detroit), having a small following before launching helped quickly spread our campaign and gain early donations. On June 6th, when we launched, we already had 447 “likes” on Facebook. We also already had a few articles written in local blogs and publications. We did this through engaging with the community beforehand; for example, first selling bagels as a fundraiser for the Downtown Synagogue. Now, if your campaign is less local, say a product or online service that you’re looking to ship anywhere, it’d help to focus on building some virtual following with people you know will help with both donations and spreading the word.
Next, we had to choose our crowdfunding platform. The main considerations for us were fees and ease of use. Kickstarter charges 5% plus another 3-5% for credit card fees (depending on if the transaction is >$10). IndieGoGo charges between 4-9%, depending on if you make your goal or not, plus a 3% third-party processing fee. Paypal charges 2.9% plus 30 cents per transaction if your monthly receipts are under $3,000, and then 2.5% plus 30 cents per transaction between $3,000 and $10,000.
There are a lot of what-ifs on figuring which is the most cost-effective, but let’s say we successfully raise $10,000 from 200 different people (making the average donation $50), and that half of the transactions are $5. So, $500 will be at the highest rate for processing fees, and the remaining $9,500 will be at the lower rate. Working out the math for comparisons like this is going to be iffy, because so much varies on whether your project is successful or not, how many transactions, and how big those transactions are – all things you cannot know for sure. But let’s say these are what we expect.
| Platform | Cost Calculation | Total Cost | Total Profit | Fee % |
| Kickstarter | ($10k*.05)+($9500*.025)+($500*.05)+(100 trans*.30)+(100 trans*.05) | $797.50 | $9,202.50 | 7.98% |
| IndieGoGo | ($10k*.04)+($10k*.03) | $700 | $9,300 | 7% |
| PayPal | ($10k*.025)+(200 transactions *.30) | $310 | $9,690 | 3.1% |
With the math worked out, is it worth it to save $400 and build our own site? Let’s say I paid myself $20/hour, I could take 20 hours and come out even, and learn a whole bunch along the way. Also, with using PayPal on our own, we kept any money we raised, even if we didn’t meet our goal. Thinking that the extra traffic Kickstarter would draw wouldn’t be much for our locally-focused project, we made our own site.
After selecting a platform, choose some awesome rewards. This is easily the most fun you will have with a campaign. We offered bagels, dozens of bagels, and rewards most rational people would choose, but we also mixed it up with free bagels for life, a bagel making class, a date with one of us, or bagel artwork.
Depending on your target audience and goal, choose your donation levels. We wanted to have as many donators as possible to build our community, so we allowed people to support as with as low as $2. There will also be a level that will be the most popular. For us, it was a dozen bagels for $20. Try to predict which will be your most popular and think about increasing that level a few dollars to maximize donations.
Finally, sell your story. Making a video is mandatory. Pictures are a plus. Have a defined purpose for the money being raised. We chose an oven – and we still hear people ask if we raised the money for the oven. The oven sticks in people’s heads. Make a deadline (Kickstarter found that a shorter duration leads to better success). Make updates. Make update videos. Thank people when they donate. Thank everyone at the end. Give them their rewards.