Crowdfunding: Candid comments from funders

By Alan Duggan Time of article published Dec 29, 2018

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Evidence suggests that psychology plays a critical role in the success of crowdfunding ventures. 

Writing in the website, author and blogger Nick Kolenda said he scoured academic research on crowdfunding, philanthropy and helping behaviour in a bid to understand when and why people donated money.

One of the problems he encountered was the habit of using “aggregate framing” to describe a project rather than focusing on the specific benefits that would be delivered by donations. As a result, potential contributors felt no real connection with projects. Another crowdfunding weakness, according to Kolenda, was a tendency to focus on the project itself while not paying attention to the people behind it – that is, their reputation, academic qualifications and past successes.

Said Kolenda: “That’s a big mistake. Sure, potential donors are investing in the project. But they’re also investing in you. Donors must feel safe giving you – someone they’ve never met before – their hard-earned money.”

Investors refer to the importance of treating donors as intelligent adults rather than naïve suckers with money to waste, citing a “very good professional and compelling video” as a critical element of the sales pitch. They expect project creators to have done their homework and to explain very clearly why their product or service is unique or superior.

Crowdfunding platform StartMe asked several “serial” funders what advice they would give to people seeking to raise money through crowdfunding. Here are some of their (paraphrased) responses:

“The number one reason I’d say projects fail is that they ask for too much money. I know product design and manufacturing doesn’t come cheap, but if you have a small item you want to produce that will have a final price of maybe R2 000 or less, don’t be surprised when you have trouble raising many tens of thousands of rand for it.”

“Whatever you need in terms of money, be sure to explain in as much detail as possible how the money will be used. This applies as much to products as it does to things like film or music production.”

“There seem to be too many generic projects. If you want your project funded, you had better be unique. Look at the Trevz eco-friendly watch project or the wind turbine project… these are unique ideas that we can get excited about.”

“Tell me who you are. I want to know whom I’m supporting.”


Case study #1: Sugarbird Fynbos Gin

If you don’t drink gin but have heard of a product called Sugarbird, it’s probably due to a record-breaking – and by all accounts, thoroughly professional – rewards-based crowdfunding campaign on the Thundafund platform.

As spokesman Nicholas Dilley tells it, the success of the campaign (it raised an impressive R1 086 973) was due largely to the “strong drive and entrepreneurial vision” of its creators. One of these was entrepreneur Rob Heyns, who said it became apparent to him that most South Africans knew very little about rewards-based crowdfunding.

So Heyns and his team set out to fix that. Their Sugarbird Gin campaign, launched on the Thundafund platform in October last year, exceeded its R750 000 target by the following month. That was an impressive feat by any measure, but the team decided they could do better, and within a remarkably short time had ousted previous record-holder Fokofpolisiekar to achieve top spot, with funding of over R1 million.

Along the way, they learnt a lot about rewards-based crowdfunding and how to tackle its major challenges, said Heyns. Among their lessons, according to Heyns, were: 

Trust. “Without this, you are dead in the water. This is generally approached by using a reputable platform and making a founder-driven, sincere and authentic video. However, you are asking people to part with money for a potential fly-by-night operation and then wait for 30 to 60 days before receiving anything, if they are lucky.

“We partnered with well-trusted brands, but anything that can add trust and credibility is massive. In fact, until you can do this, the rest of your campaign is a waste of time and will most likely fail. One of our largest single transactions came from someone who knew of us via a previous business success, combined with a referral from a credible local celebrity.”

Demystification. “Crowdfunding can confuse people. Most people assume that you are either begging for free money or giving away equity. They also assume that you have to be small and pitiful to deserve their help. But who would buy from small, pitiful and not credible? Explaining, educating and being open is key toward overcoming this.”

Rewards-based reality. “Don’t get too carried away with crowdfunding jargon and technicalities. Rewards-based crowdfunding is essentially a form of e-commerce. So, apply all the basics and rules of e-commerce business and treat it as an e-commerce marketing campaign. Stick to the basics of online retail.”

Game of numbers. “The more eyeballs, the better. The more effectively you can convert each eyeball into a backer/buyer, the better. I would suggest using PR, social media, digital marketing, events and anything you can think of that will get people to your page and view your video.”

Compelling offer. “We adjusted our product offering every week, based on what people were buying, creating more similar rewards and dumping the rewards that had no sales. We also tested different communications and marketing methods and then put effort behind the methods that brought conversions to our campaign.

PR and influencers. “A surprising number of campaigns go live with a ‘build it and they will come’ approach. This pretty much works only if your database is huge or your video is amazing. The chances of someone seeing your campaign and deciding to back it are tiny.

“Spreading the word through PR agencies that have access to databases as well as the knowledge of what to write for these databases, and how to manage the relationships, is very impactful. The biggest conversions came from people who shared our story and goal at no charge… simply because they believed in what we were offering.”

The power of a good story, and leading with purpose and mission. “No one will write about or read about, let alone support your project it if it’s same-same and has no impact. When coming together to start this business, we looked at what was mutually important. This included a passion for great crafted products that bring people together, a desire to take great local products abroad, a need to be part of something bigger by adding value to others … and having a good time while doing the above.

“The PR people we worked with as well as some talented writer friends helped us to get these thoughts onto paper, and we shared them. We had no idea if any of these would get any uptake but were lucky enough to have our entrepreneurial focus on developing new entrepreneurs get some traction. When we topped Fokofpolisiekar and broke records, it really took our PR to the next level, which backs up the value of crowdfunding as a way to build demand for your brand. We received a lot of support from people who wanted us to get from number two to number one.”

A little help from my friends. “We called on friends’ networks and family wherever applicable, not just in spreading the word or donating, but also in taking part in the campaign and helping to produce and market the campaign. If you have a large audience and a lot of cash to spend, you won’t need this, but for a pure start-up like ourselves, this is as valuable as PR, influencers and free staff.”

Some hustle for good luck. “I knew going in that it would be a lot of work, but I was surprised just how much back and forth communication and co-ordinating was actually needed. Our efforts brought in over 150 backers, but in the end, eight or so backers brought in over 60% of the revenue. Each of these came through via a direct sell or pitch of some sort, and made all the difference.”

Thinking out of the box. “To start the potential interest in the campaign, we included some pretty outlandish rewards, such as having Ryan Gosling hand-deliver your signed bottle of gin for R900 000. These did generate interest but (luckily) no direct sales. Halfway through the campaign, we could see that the small (one bottle for R270) rewards were not going to add up to our total of R750 000, so we started developing a mix of different price points to drive the sales. We also removed the slow movers and then got really creative…”

So, how do you really bring in the bucks needed to make a campaign successful? “Larger rewards, for a start. However, the big trick is to think about what really motivates people, and that is generally self-gain in different guises. The weakness of a rewards-based campaign is no upside for those who back you on your mission. This needs to be challenged.

“It was this thinking that led us to invent the ‘buy batch and share the profits’ reward, allowing people to support us and gain from the upside without too much risk or commitment and without the drawn-out formality of equity. The backer-incentivising reward is what eventually blew our campaign out of the park.” (Source: Rob Heyns)

Case history #2: Running for her dad

Zanele Hlatshwayo, a Google video specialist from Orlando West, Soweto, has pledged to run 18 races in a bid to “redefine” her father’s legacy after he took his own life in June 2008 at the age of 47. Her BackaBuddy campaign aims to raise R180 000 for the South African Depression and Anxiety Group (SADAG).

Said the 33-year-old athlete: “My father was my hero. He was the man who was there for me every step of the way. He never missed a parents’ meeting, prize-giving or graduation ceremony. He taught me that I can be whoever I want to be, and that all my goals are possible.”

She was 24 when her father died. “I couldn't understand why he had to leave me. I was angry, broken and ashamed that the strongest man I’d ever known took his own life.” At first, said Zanele, she was running away from her pain, but over time, running became a coping mechanism.

“Now, running has become my sacred space where I get to heal and clear my head, but most of all where I get to conquer.” On July 27, Zanele will be competing in the gruelling Washie 100 Miler in the Eastern Cape.

“I want to demystify mental illness and create a dialogue so that people no longer have to suffer for silence. If my BackaBuddy campaign saves one life, my purpose on this earth would have been fulfilled.” (Source: BackaBuddy).


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