How to raise startup capital for business

how to raise money for startup company and how to raise money for software startup
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Published Date:16-07-2017
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Don’t start a crowdfunding campaign without it “ ” - Brian Fargo, Creator, Wasteland 2 THE Crowdfunding bible HOW TO RAISE MONEY FOR ANY STARTUP, VIDEO GAME, OR PROJECT By SCOTT STEINBERG with RUSEL DeMARIA Edited by JON KIMMICH Foreword by ERIC MIGICOVSkY, Creator, Pebble: E-Paper WatchTHE Crowdfunding bible W H AT T HE Y ’ R E S AY I N G “Every entrepreneur thinking about jumping into the wild world of crowdfunding needs to read this.” – J. Jennings Moss, Editor, “A must-read for anyone who wants to use the power of people, the Internet and social media to get projects off the ground.” – Rich DeMuro, Tech Reporter, KTLA-TV “Don’t start a crowdfunding campaign without it ” – Brian Fargo, Creator, Wasteland 2 “A comprehensive look at the benet fi s and, more importantly, the potential pitfalls of crowdfunding that any developer ought to read before getting started.” - James Brightman, US Editor, GamesIndustry International THE crowdfunding biblEADDITIONAL RESOURCES: STRATEGIC CONSULTING PRODUCT TESTING MARKET RESEARCH EXPERT WITNESSES FREE BOOK FOR DOWNLOAD: SMALL BUSINESS TIPS, TECH TRENDS, AND ONLINE MARKETING ADVICE As Seen On: social media expert series SOCIAL MEDIA CONSULTANTS: FACEBOOK, TWITTER, GOOGLE+ (PLUS), YOUTUBE AND MORE WORK, LIFE AND FAMILY TIPS PRODUCT NEWS, REVIEWS AND TRENDS THE crowdfunding biblE THE crowdfunding biblETHE CROWDFUNDING BIBLE: Published By: HOW TO RAISE MONEY FOR ANY STARTUP, VIDEO GAME, OR PROJECT SCOTT STEINBERG WRITERS WANTED With Rusel DeMaria for technology and business books Edited by Jon Kimmich THE crowdfunding biblE THE crowdfunding biblED E DIC A T I O N THE CROWDFUNDING BIBLE: HOW TO RAISE MONEY FOR ANY STARTUP, To Z, for whom endless possibilities await, and every aspiring entrepreneur – with barriers to market entry rapidly crumbling, there’s no better time to VIDEO GAME, OR PROJECT act than the present. As dozens of enterprising new creators and startups are proving, General Electric’s not the only with the power to bring good things to All Rights Reserved © 2012 by Overload Entertainment, LLC life: Get out there and start something today. No part of this book may be reproduced or transmitted in any form or by any means – graphic, electronic or mechanical – including photocopying, recording, taping or by any information storage retrieval system, without the written permission of the publisher. LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO WARRANTIES OR REPRESENATIONS REGARDING THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. 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To order copies or to request permission to reprint, contact the publisher at: Published by READ.ME THE crowdfunding biblE THE crowdfunding biblEF OR E W OR D here’s no denying that crowdfunding represents a fundamental change in the way that T technologies, products and entrepreneurs are evaluated. Until recently, a relatively small number of very wealthy individuals held the purse strings of the creative world. Venture capitalists and angels were the gatekeepers to Silicon Valley, and they were quite selective. Innovation and creativity yearned for realization, and countless opportunities and ideas were lost forever – but out of the need for innovation came innovation itself. Just as the PC brought computers to the masses, so too does crowdfunding put funding for innovation in the hands of, well… the crowd. Crowdfunding remains a financial instrument in transition. It’s impossible to say what it will look like in five years, but it is equally dic ffi ult to envision a future without crowdfunding. After pounding the pavement and meeting various investors, I thought that I would not be able to carry through with my plan for Pebble. Just a few years ago it would have been dead without the support of investors. But thanks to Kickstarter and crowdfunding, and the tens of thousands of people who helped back us, my innovation is coming to life, and I hope the world will be a better place as a result. My journey is exactly why crowdfunding is so important: Innovation cannot be lost to a VC’s inbox. Innovation is too important for one man, or one firm, to pass judgment on. My innovation is not a world-changer, and yet fifty thousand people gave me millions of yeses when I couldn’t even get a venture capital firm to give me a single no. Innovation serves and benefits the masses, and deserves to be judged by them. Crowdfunding may not yet be totally there yet, but I for one am excited to see what its future holds. – Eric Migicovsky THE crowdfunding biblE THE crowdfunding biblE 1sive merchandise, advance access to new releases, or more personal incentives. In the case of An Introduction to Crowdfunding a movie, for example, donating 20 might get you a copy of the DVD, 50 a signed poster, and 500 an executive producer credit. For a larger donation (say, 2500), you might get a personal ant to start your own business or have a great idea for tomorrow’s next million-dollar handwritten thank you note from the director, invite to an exclusive launch party, or even a bit invention? Congratulations – crowdfunding gives you the power to bring entire busi- part in the movie itself. Wnesses and better widgets to life overnight. But what is crowdfunding exactly, how does it compare to crowdsourcing, and (more importantly) how can you use it to provide ven- ture capital for any project or startup? In this book you’ll find some handy hints, tips and how-to guides, as well as commentary from leading experts and crowdfunding veterans, to harnessing the ultimate in people power. Following is a detailed overview of guiding business principles and case studies that you, as a modern entrepreneur, can utilize to create your own successful crowdfunding campaign. Note that while many examples here may come from the video games and interactive entertainment industry (among the fields that have benefited most financially from this practice), they’re also applicable to many other consumer-facing sectors, including consumer electronics, periodicals, books, film, television, fashion and even special events and community projects. Worth keep - ing in mind too: As we go to press, close to 10 million in project funding has been raised in the last three months within the games industry alone, with success stories including Double Fine (3.3M), Wasteland 2 (2.9M+), Shadowrun Returns (1.4M+) and more. Given the volume of public attention and dollars such campaigns have attracted, it’s fully anticipated that this growth curve will continue in virtually every vertical – at least for the foreseeable future. The good news for aspiring inventors and startups: With the right project and assets to convey your vision to potential backers, and a detailed understanding of how to engage with An offshoot of crowdsourcing – a business practice that involves asking user communities to today’s audiences, anyone can make their dreams a reality. Better yet, you too can participate in submit ideas or contributions, e.g. possible designs for your firm’s new logo – crowdfunding has this exciting new means of funding, and launch nearly any promising new project or business. recently grown in popularity. Many small projects have gotten the support they’ve needed to Ready to dive in headr fi st and begin raising attention and capital for your latest and greatest get off the ground, while a few very high-prolfi e projects, such as Double Fine’s new adventure ideas? Let’s begin by taking a deeper look at what crowdfunding means, and how exactly the game (which netted its first million in just 24 hours and turned the heads of many hopeful game field works. developers) are quickly kicking down the doors for larger, full-scale ventures. What is Crowdfunding? Advantages of the Crowdfunding Model Simply put, crowdfunding is the process of asking the general public for donations that Crowdfunding doesn’t just help you finance your projects – it also lets you gauge public provide startup capital for new ventures. Using the technique, entrepreneurs and small busi- interest before launching new products or inadvertently spending millions on goods destined ness owners can bypass venture capitalists and angel investors entirely and instead pitch ideas to collect dust in a warehouse. Some even say it’s the best thing to happen to business since straight to everyday Internet users, who provide financial backing. (At the same time, you will Apple’s App Store. More important to note though is that you don’t have to be a large, success- also gain early validation of project concepts and the projected scope of target markets.) Using ful business to tap into its power – and that nearly any venture from art exhibitions to charity services like Kickstarter and IndieGogo, creators essentially build web pages that host informa- fundraisers can benefit. Whether looking to boost interest in a new neighborhood record store tion, photos and promotional videos on products, projects or services they’re looking to get or skate park, or your grandkids’ school fair, even everyday individuals can enjoy the heightened funded. Viewers are then oe ff red special rewards in exchange for pledges that support their support and publicity such campaigns bring. efforts. Rather than equity or a share of prot fi s though, benefits often take the form of exclu - Furthermore, this strategy not only allows you to gauge the scope of general consumer in- THE crowdfunding biblE THE crowdfunding biblE 2 3terest in, and test the validity of, new concepts. It also gives you a direct conduit to shoppers, in- individual promotional aspects or overarching campaigns resonate with target consumers. cluding those who are willing early financial supporters, and consequently the likeliest to spend more on updates and future releases. (A value proposition that becomes even more attractive if You can sometimes make much more than you ever intended, or asked for. Under traditional your product incorporates opportunities for the post-release purchase of additional content, e.g. investment scenarios, entrepreneurs must typically supply detailed business plans and budgets that via add-ons, expansions and microtransactions…) As an added benet fi , crowdfunding addition - justify their funding requests, negotiate the transfer of ownership stakes, and haggle over the actual ally allows you to start forging early and strong relationships with committed customers, who value of their enterprise. Some companies and projects may require multiple rounds of funding, will ultimately become your product’s top advocates upon release. each of which demands additional negotiations and compromises, with the added risk (and stress) From an entrepreneur’s standpoint, it’s hard to argue with the results. Under typical sce- of having to prove the validity and worth of your project at each step. With crowdfunding, if your narios, business owners make educated guesses about products that people will be interested product resonates strongly with your audience, you may well exceed your funding target. Success- in, and how much they’ll be willing to buy. Using crowdfunding, they can instead test ideas at ful campaigns have raised as much as 4x or even 8x their original funding goals. little up-front cost and then spend accordingly. What’s more, crowdfunding provides a better way to generate interest in projects and pre-orders up-front. Not only are customers more emo- Lucky or well-run crowdfunding projects can begin sourcing contributions with as little as a tionally invested in the development process, they’re also more emotionally invested in the end polished pitch – and may exceed funding goals many times over, without having to justify each result. Advance purchases also provide working capital to fuel production, and rewards oe ff red additional dollar contributed. (Caveat: Such scenarios are not necessarily the norm, but happen often in exchange for fans’ support provide a positive way to give back to deserving contributors. Best enough to take into consideration when debating which investment channels to use.) Unlike tradi- of all, crowdfunding lets you launch big ideas with next to no advance costs, and launch them tional investment ventures, which adhere closely to predefined game plans and budgets, some right from your kitchen table. Even better, you can monitor and manage the process from your projects may even grow in feature set, scope and/or ambition with the extra money generated. home computer, laptop or even your iPad. One point to be aware of, however: As the market for pre-retailing your product develops, the Another signic fi ant advantage of crowdfunding is that you don’t give away any ownership bar will be raised as to what customers expect in terms of “sales materials” for crowdfunding or equity stake in the venture. Traditional sources of investment typically require that you give efforts. You should always benchmark your project materials against those of similar campaigns up a portion of a company or project in exchange for their support. Moreover, investors fre- in your chosen field or genre. quently expect a quick return on investment (ROI), often at odds with entrepreneurs’ focus on long-term value creation – and can even inu fl ence your project in ways you hadn’t anticipated, If at first you don’t succeed… Should you fail to meet your goal, you lose nothing (other than and sometimes don’t welcome. In contrast to the crowdfunding model, which affords backers time and the occasional dent to your public image) and can try again, with an improved plan no formal creative or commercial power over your project, traditional investment models, and and presentation. Generally, if you fail to impress investors, you can consider yourself very lucky if investors, can often hold your feet to the fire at any time. they’ll give you a second chance. Bear in mind when considering rebooting campaigns, though: Here are some pros and cons to crowdfunding vs. traditional investment vehicles: If you are targeting the same customers or audience, they may well remember your earlier cam- paign, and its failure may have negative consequences. Crowdfunding Pros You can pre-sell your product or service, and depending on the costs associated with it, you may be able to get more than the actual retail value from backers who believe in your project. You control everything, including costs, timing, delivery, creative vision and execution, market- You’re also mitigating risk and earning capital that can be directly applied towards production ing and customer interactions. and marketing costs at the same time. You keep your equity: Projects and businesses remain 100% yours. An unexpected benefit of crowdfunding campaigns is that you will often receive very useful advice – and even tangible oe ff rs of assistance – from backers, who, after all, want you to suc - You get to test and prove out the popularity of your model, using as little as a prototype or ceed and will do everything they can to help you get there. preproduction materials. Your backers become your built-in marketing team and crew of brand evangelists, helping to You may also be able to test elements of your product’s marketing approach and how well promote your project to all their friends and contacts. THE crowdfunding biblE THE crowdfunding biblE 4 5Crowdfunding Cons With crowdfunding, you assume responsibility for dealing with an often larger and potentially more diverse set of backers than under traditional investment scenarios – all of whom may have It’s stressful. Talk to almost anyone who has run a crowdfunding project, and they’ll tell you die ff ring expectations and demands. Likewise, few examples exist thus far that illustrate the that running a campaign isn’t easy, and that it’s usually filled with unexpected ups and downs ramic fi ations of crowdfunded products that have not been released, or where a product was – even when successful. On the emotional roller coaster scale, think Space Mountain… not the pitched and funded, but a wildly die ff rent product was ultimately released. Consider the poten - kiddie rides. tial impact to your projects, livelihood and business. Plotting successful crowdfunding ventures demands a die ff rent kind of preparation than tra - Finally, no matter how interesting your project is, know that you will be competing against ditional product pitches. You’re reaching out to end consumers, not professional investors – a other projects – many of which may be vying for the same target audience, share of voice and completely die ff rent and far more diverse audience. This may require knowledge of consumer pool of disposable income. And, as crowdfunding grows in popularity and notoriety, the com- marketing, social networks and social marketing techniques in order to converse with these cus- mercial landscape will become even more competitive. tomers, as well as some familiarity with customer acquisition and conversion as well. It puts you and your ideas out directly in front of the public – and, potentially, the line of fire. Crowdfunding isn’t for the faint of heart or the terminally bashful. There’s also no opportunity to THE REALITY OF CROWDFUNDING operate in stealth mode, meaning that competitors may be able to capitalize on public knowl- “If you think crowdfunding is easy, guess again: It’s definitely not. It’s actually edge of your company or product. pretty scary, because you have to be prepared to put yourself out there on dis- play for the public. It’s the Internet and you have to expect mixed feedback.” Success requires investing tireless effort into ongoing social marketing campaigns, and con - Jane Jensen, Pinkerton Road: A Year of Adventure stant self-promotion, throughout the entire duration of the fundraising campaign. If you’re shy, guarded or soft-spoken by nature, you’ll have to get over these tendencies to run a successful crowdfunding campaign – or find someone else to serve as a project spokesperson. Kicking it Forward It requires that you be very creative about drumming up interest in your project, and it means you will be constantly looking for new ways to publicize, promote and otherwise call attention to your campaigns and surrounding eo ff rts. ompetition for crowdfunding dollars is already high, and destined to become even more competitive as time passes. Sometimes it pays to give back: That’s why Brian Fargo, It doesn’t always work. That’s not to say that you should be discouraged about the chances Cwhose successful Wasteland 2 campaign earned nearly 3 million, recommends embrac- of successfully crowdfunding a project, but you do have to be realistic, and prepare yourself for ing the Kick It Forward concept – a pledge by those who’ve successfully crowdfunded ventures potential failure. This often means having to have a Plan B – and C, D, etc. to donate 5% of the prot fi s (after shipping and expenses) from their finished projects to fund other crowdfunding projects. In his own words: Crowdfunding requires that your project – whatever its theme, scope or contents – be some- “Any developer that puts the “Kicking it Forward” badge on their Kickstarter project page thing that interests a suc ffi ient number of people strongly enough to motivate them to part is agreeing that they will put 5% of their finished product prot fi s back into other Kickstarter with hard-earned cash. Part of the process of evaluating whether to undertake a crowdfunding projects. To be abundantly clear, this is only money that the developer earns as prot A fi FTER effort is to take a careful, critical look at your project and assess the size of the potential audience the project ships and AFTER they have paid their expenses. This is NOT a suggestion to invest to whom it will appeal, as well as the perceived value it will bring them. When you are executing money they received from people who invested into their project via Kickstarter.” the campaign, you’ll have to target this market specic fi ally, and you’ll need to strategize how to Note that while the concept of Kicking It Forward started on Kickstarter, it may quickly engage them where they consume media, news, opinions and insights on a regular, running spread to other crowdfunding sites under a variety of die ff rent names and forms. This ingenious basis – no small task. idea helps assure that more projects will get funded in the future, allowing the backers of proj- ects that support Kicking It Forward to oe ff r continued support to the crowdfunding move - THE crowdfunding biblE THE crowdfunding biblE 6 7ment. We recommend considering it for any campaign. Besides being a kind gesture that lets to secure financial backing. Other scenarios may see you having to forego a share of prot fi s, pay you also set a good example, positively give back to the community and help others meet their a licensing fee on every transaction, or be forced to meet stringent project milestones or deliver- funding goals, the goodwill it generates can be priceless. Creators can use all the support they ables at the risk of losing funding, the IP being created or even the entire business itself. can get – and you yourself may even need to call in a favor yourself from them someday, draw- ing upon their connections, customers and/or business savvy. If you didn’t raise enough to fund your project fully from initial investors, miscalculated budgetary needs or scheduling slips and development dic ffi ulties raise production costs, you may find yourself in an untenable position – and may end up scrambling to make payroll and/ Traditional Investment Pros or forced to give away more equity to secure additional funds from further sources. Note that crowdfunding can be a means of closing funding gaps without having to take on additional A relationship that’s supposed to be strictly business: Each party clearly spells out and under- debt or incur another round of equity financing, though – should they be necessary – backers stands what’s being oe ff red in exchange for the other’s support – duties and obligations, at least may be every bit as skeptical (if not more so) of secondary funding rounds as traditional investors. in theory, begin and end at what’s on the signed contract. Investors operate on a timeline. Many look for a quick turnaround on their investment. While The scope of projects, as well as their general feature set and budgetary demands, are typi- the actual amount of time varies by project, deal and individual preference, as a general rule, cally outlined at the outset of the relationship, and – for better or worse – cannot often deviate, it pays to realize: They’re not oe ff ring the equivalent of a 30-year home mortgage. In general, because of the fixed nature of schedules, plans and funding. This allows for greater focus. n fi ancial backers expect to make a high return on investment on funds placed into your project/ company in a short amount of time. This may or may not conform directly to your comfort zone, You can get right down to work. Once you have secured funding, you are ready to begin div- and may give investors’ undue leverage over the venture – because they hold the money, they ing into the business of running your business on a day to day basis. often hold the majority of the cards. You get validation. Traditional investors often have extensive experience with the kinds of As pointed out in the Pros section prior, advice and introductions provided by investors can projects they fund, and don’t fund projects they don’t see a need for or personally believe in. So often be very valuable. But it can sometimes be just as devastating as well, because outside if you’ve pitched an investor successfully, you have already convinced one of the world’s tough- parties’ vision and goals for any venture don’t necessarily align with your own. Investors ulti- est and most demanding audiences that your ideas have merit. mately want projects to go in a direction that realizes the maximum amount of profit for them in the least amount of time. Some may not afford you the time, support or freedom of creative You often get support and expert advice. Wise investors will many times step in and oe ff r you vision you need to develop your project or company to its full potential – at least, insofar as you counsel or request (and unfortunately sometimes demand) a course correction if they see your define success. business or leadership team floundering or headed in what they believe to be the wrong direc - tion. Often, this advice is well worth considering. Likewise, it’s important to remember that con- nections can be equally important as cash itself: Frequently, investors will open doors, make intro- THE BENEFITS OF CROWDFUNDING ductions and provide entrees to new clients or arenas worth several times their weight in gold. “Crowdfunding was the best way that Wasteland 2 could have happened. Any other funding method would have had strings and people who had ideas at- When things go well, and your project is moving forward, investors will actively do what they tached to it. I believe that there’s a direct correlation between developers with can to speed ventures along and help you succeed – assistance that shouldn’t be discounted, independence and quality. To be sure, the people at companies like Blizzard, given the considerable financial and professional clout they can often bring to bear. Valve and other top software makers are very talented, but they also get to de- termine when projects are done. They do what they think is right.” Traditional Investment Cons -Brian Fargo, Wasteland 2 Under most scenarios, receiving investment from outside sources requires giving away equity in your intellectual property (IP) or project – and sometimes in your whole company – in order THE crowdfunding biblE THE crowdfunding biblE 8 9Have you mapped out your reward tiers? How will you oe ff r these rewards, and what dollar Who Should Consider Crowdfunding? amount will you attach to them? 13. Can you oe ff r meaningful rewards at a variety of investment levels to attract all potential patrons? 14. What specic o fi r unique rewards will you use to get people talking? Can you create any sin - IMPROVING YOUR CHANCES OF SUCCESS gular ones that can be utilized in social media campaigns or for press outreach? “To improve chances of success, you want to build a project or product where 15. Do you understand all the personal and professional demands that the process of running a you think you’re filling a hole. Part of the trick is showing people things that crowdfunding campaign demands from creators? Are you prepared to put 110% effort into they either a) haven’t seen in a long time or b) things they haven’t seen before.” making your crowdfunding project a success? -Brian Fargo, Wasteland 2 16. Do you have at least some marketing, public relations and social media connections and savvy? There are several factors to consider if you are thinking about using a crowdfunding model 17. What promotional campaign activities do you plan to pursue leading up to and during to finance a business, product, project, service or event. launch? How will you keep the buzz going after your crowdfunding project debuts? 18. Are you ready and able to take a big personal risk? 1. How good is your idea – really? Are you certain that people will be interested in it? 19. Do you – and at least a few other people you can look to for support, whether financial, 2. Why is your product, service or venture destined to sell – what value does it oe ff r the cus - emotional or otherwise – fully believe in your project? tomer? 20. Who can you turn to for help, whether in terms of assistance with asset creation, financial 3. What die ff rentiates your project from existing competitors, or alternatives that have come backing, raising awareness or just help spreading the word? before? Are you utilizing an existing brand, IP or personality that has a pre-existing base of fans or consumers? (Using an existing, if perhaps older, brand or IP which consumers have Most importantly: Have you examined other crowdfunding projects – both successes and fond memories of can be a very effective strategy.) failures – to understand which approaches, techniques and strategies work or tend to result in 4. Can you express your idea simply and at the same time get people excited about it? If not, failure? it may be that the idea isn’t all that compelling, or that you may not be the right person to communicate or present it. If you can satisfactorily answer all of these questions with a straight face, and believe with 5. Do you have something tangible to show when presenting your venture – some visual as- certainty in your ability to deliver on all, there’s a good chance that you can be successful, if you pect of your project that can help other people visualize it? follow the guidelines you’ll find later in this book. 6. How well do you know and understand your target audience? 7. Do you have cond fi ence in your ability to reach out and connect with potential backers? Have you planned which vehicles you will use to reach out and connect with them? 8. Have you calculated just how much money you need – truly need – to get your ideas off the DON’T BE FOOLED ground? “Crowdfunding isn’t for all projects, or projects of all sizes. With the success of 9. Have you factored in all financial variables, including the costs of reward fullfi lment, pay - crowdfunding, should a publisher of Activision’s size suddenly say, let’s go do ments to the crowdfunding service, and taxes? the next Call of Duty on Kickstarter, or offer a super-long pre-sale? Not likely. In 10. Have you been sensible enough to build a budget that allows for breathing room in certain the end, smaller teams and projects make more sense for the format.” areas, and factors in conservative projections? -Jordan Weisman, Shadowrun Returns 11. Are you positive that you can fullfi l all your promises, including completing the project in the allotted timeframe, and delivering on all features and content covered in your pitch? Have you considered the impact on your product’s brand identity, or your own personal brand, should your campaign not succeed? 12. Do you have some great rewards in mind to give backers and fans incentive to donate? THE crowdfunding biblE THE crowdfunding biblE 10 11instance, small New Zealand company Grinding Gears ran a closed beta of its action role-playing Preparing for Your game (RPG) project Path of Exile for several months, after which it sent out a message to all the title’s beta testers with special oe ff rs in exchange for donations, such as access to open beta Crowdfunding Adventure programs for friends of backers or additional in-game cash at launch. In addition to the project’s supporting Kickstarter campaign, classic adventure game maker and author Jane Jensen is also efore you jump into the deep waters of crowdfunding, it’s important to learn how to trying a unique approach with her new studio Pinkerton Road’s “community supported” gam- swim. Take a tip from the Boy Scouts and always be prepared: Or, to continue with the ing model. (Based on community supported agriculture, instead of a basket of freshly-picked Bmetaphors, first discover how to crawl before you run – and, as experienced crowd - produce each month, those who pledge 50 or more receive all games the developer produces funders might warn, also be ready, willing and able to pick yourself back up when you acciden- for one year.) Going forward, these and other creative funding solutions, such as Slightly Mad’s tally sprint headr fi st into a waiting pitfall. World of Mass Development funding platform (developers submit ideas and projects to the com- munity for backing, advice and feedback) or Gambitious (a European service that lets investors Two Ways to Crowdfund buy shares in game projects that pay potential dividends), will undoubtedly proliferate. However, unless your project or team has a large existing built-in audience of fans, or the ability to self- Before you can even begin your crowdfunding venture, you have some important decisions motivate large crowds, for most people, using one of the crowdfunding services found detailed to make. Chief among them is deciding exactly how you will fund your project through public under Option 1 will likely prove more productive. support. When it comes to raising capital through outreach to public donors, you essentially have two choices: BUILDING YOUR OWN CROWDFUNDING PLATFORM “Why did we choose to create our own crowdfunding platform instead of using Option 1: Use an existing crowdfunding service, such as: another service? Kickstarter a) Our project has already had millions of dollars spent on it, rather than IndieGogo being an idea that we could do if we had the money. Spacehive b) We want to be able to give people the access to the game that they’re RocketHub buying immediately, rather than making them wait a month. Ulule c) We already have an established fan base, so we don’t have to rely on 33Needs outside traffic. In our case we already had a product and fan base. They were just using it to pre- Community Funded order microtransaction credit that they’d be buying eventually.” Crowdcube -Chris Wilson, Path of Exile Peerbackers Grow VC 8-Bit Funding Option 2: Utilize your own website, software platform and existing network of connections TAKING A HYBRID APPROACH to provide unique campaigns built around special oe ff rs, incentives and community efforts that “We had the idea for a consumer-supported gaming model where we wanted convince backers to help fund your project. fans and players directly involved with the studio – a direct line of communica- tion, if you will. Kickstarter looked to be a great vehicle for that and the mecha- Option 2 requires that you possess a user-friendly, accessible and stable solution for promot- nism for our first CSG (Community Supported Game) campaign.” ing and processing pledge efforts, as well as the capability to engage, motivate and retain the Jane Jensen, Pinkerton Road: A Year of Adventure attention of a sizable fan base that believes in your brand, your company or your project. For THE crowdfunding biblE THE crowdfunding biblE 12 13Research • How much personal vs. project information was presented? • Were “goodwill” programs oe ff red, i.e. the “Kicking it Forward” program on Kickstarter? Whatever your approach to crowdfunding, your first order of business is to take a hard, • How many updates were made during the course of the campaign? analytical look at projects that have succeeded, as well as ventures that have failed. Your goal: • What was the nature of these updates? Were they simple notes and thank you messages; To observe and learn how successful projects work, and to understand the subtle nuances and did they add new rewards and goals; or did they answer common questions presented by tactics that determine why some triumph while others don’t. fans? What to look for: The Video • Was it interesting or boring? The Product, Service or Event • Natural or sti/ ff forced? • Is it something that the casual observer would find interesting? • Well-produced or amateurish (in a bad way)? • Is the venture compelling enough that people would pay to support it? • Funny? Paced well? Engaging? Drawn out? Repetitive? • What makes the product, service or oe ff ring unique or die ff rent? • Did you watch the entire performance? • What value does the venture oe ff r end consumers? • Were all your questions answered? • What audience do you think this project was intended for? • How quickly were key selling points presented? • How big a target market do you think exists for it? • How many (and which specic fi ) project details were discussed? • What three key characteristics define the project? • Did creators use words or pictures to tell the tale? • If you had to summarize the project in 20 seconds, how would you do so? • How much of the project did you really see? • How much actual footage of the project itself vs. individuals was included? The Pitch • What did you empathize most with: The individual or the venture itself? • How did those making the pitch introduce their project? • How long was the video? • Did the creators clearly explain what the venture does, or the purpose it serves? In the • Did the clip end with a direct request? case of creative ventures, apps or interactive products, were hands-on functionality, • Did the video contain contact information? gameplay and/or key story elements well-explained? Did they paint an accurate picture in • What, if anything, made you want to watch more? your mind of the project or product? • Who does the pitch speak to? The Rewards • If you feel that you are amongst the target audience this campaign is supposed to appeal • Do the rewards make sense, and are they logical, based on the type of project? to, would YOU pay? Why or why not? Does this product solve a problem you have or pro- • Are there enough rewards at die ff rent payment tiers? vide a service you’d use? • Do rewards oe ff r enough value for the money? Why so/not? • What made it compelling or not? • Is there a smooth transition from low value rewards to very high-value/high-donation • What approach did the creators take to convey their message (humorous, serious, quirky, rewards? imaginative, straightforward, etc.)? • Was more actual merchandise oe ff red or personal/professional rewards? How much • How long did it take you to fully understand the project being described? physical merchandise was used vs. virtual rewards? • Did you have to have any prior knowledge of the type of product, service or event to • How many rewards allowed users to actually be a part of, or appear within, the actual comprehend the material presented? project? • How easy was it to skim and read the pitch? • How many rewards were limited in number? What was their distribution across funding • How many key details and features were described? tiers? • How quickly did it take for the creators to cut to the chase and speak directly about proj- • What kinds of personal payouts – thank you calls from the lead singer, contributors’ names ect specic fi s and funding needs? included in the album liner notes, dinner with the band, etc. – were oe ff red? • At what point was a call to action (donate now) included? • You can see in a project that has been running a while, or that has completed, exactly THE crowdfunding biblE THE crowdfunding biblE 14 15how many people picked specic r fi ewards. Which rewards were most successful? Why? • Which tactics were most effective? Least? Which payment tiers and rewards were most popular based on number of backers? • What kind of media attention did they attract, from whom, and what types of publica- • Were any unique rewards – i.e. dinner with a famous artist or software developer – of- tions responded best and/or most frequently? fered? How popular were they in drumming up financial support or media attention? • How did fans and journalists react to various promotions? • Were rewards fixed at the time of announcement, or more introduced later? At what point • Which seemed to resonate best with the press and public? Why? during the project’s duration did they debut? • Which activities generated the least response? Why? • Did fans contribute new rewards themselves? • How often were new promotional campaigns introduced? When? What did they consist • Did fans contribute new “stretch goals,” and if so, were new rewards created to support of? these goals? • What kinds of assets were promoted? How many were provided with each new step in • Were any rewards exclusive or specic t fi o the promotion itself? the campaign? • How did creators engage with and motivate the fan community? How often did they The Funding Goal make outreach, and through which channels? • Was it a reasonable goal from the beginning? • What tone of voice and types of materials did creators use when engaging with others? • For those projects that failed, why did they fail? Did these die ff r between audiences? How so? How would you have done it die ff rently? • Was their funding goal too high? • What type of fans seemed to most rally behind the project? Why so? • Did they not get attention from press/fans or social media channels? • What level of time, resources, money and manpower did creators invest in their cam- • Was the product not well presented or explained? paigns? • Did the project’s creators fail to engage fans while the project was running through regu- • How did the project leverage the presence of key individuals (if the team behind it con- lar updates and social media outreach? tains well-known “brand-name” members) throughout its duration? • Were rewards not compelling? • Did the team, before the campaign even launched, conduct press interviews and float the • Some other factor? idea of a crowdfunding campaign to gauge fan response? • What funding ranges seem to be most successful? Why? • For those projects that succeed wildly, what are the main factors that you think contrib- Notable Game Projects uted to their success? Do any of them apply to you and your project? For instance: • The past success or notoriety of the people behind the project. • The existing fan base for the project. Although crowdfunding has been around a while, and there are several sites that support • The uniqueness and audience appeal of the project. the model, a few high-prolfi e video game projects in particular have recently helped catapult • The exclusivity or uniqueness of rewards being oe ff red. the concept into the public eye. Following are several of note which are well worth researching, • The size of target audience vs. funding goal set. as they may help to inspire new ideas and serve as useful reference points when plotting out • The presentation of the project – both written and visual. pitches, rewards and funding levels. • Other factors – what are they? High-Profile Game Projects • What multiple of the original funding goal did the project finally reach? • For successful products, did they oe ff r stretch goals? What types of stretch goals were Double Fine Adventure. Noted designer Tim Schafer’s adventure game project on Kickstarter most successful? How was the community involved and how did fans respond? turned heads and may have single-handedly launched the virtual gold rush of crowdfund- ing projects when it received over 1 million in its first 24 hours. With a starting goal of a mere The Marketing and PR Campaign 400,000, Double Fine Adventure ultimately received more than 3.3 million in pledges. To date, • What advertising, marketing and public relations activities were utilized to promote the this is the largest amount pledged for a crowdfunded game, though it’s dwarfed by the over project? 8.5 million that’s been pledged for the Pebble E-Paper Watch as of press time – the largest • Where did creators focus their efforts – online/print/social media, or some combination amount for any product of any kind on Kickstarter or any other crowdfunding site. thereof? THE crowdfunding biblE THE crowdfunding biblE 16 17Wasteland 2: Interplay founder Brian Fargo’s development studio InXile made 700,000 in its r fi st 24 hours of pitching a sequel to highly-popular, but long out of print RPG Wasteland , ulti- Republique. An iOS-exclusive game from team members behind Halo and Metal Gear Solid mately raising nearly 3 million for the project. that’s collected over 82,000 with 18 days remaining in its campaign as we go to press. Shadowrun Returns. From Harebrained Schemes and original designer Jordan Weisman, this Notable Consumer Products and Projects modern sequel to the popular classic sci-fi meets fantasy role-playing title Shadowrun exceeded its 400,000 goal easily and at the time of this writing had generated 1.4 million in pledges with 5 days still to go. While PC and video games have thus far proven most popular as crowdfunded projects, so too are other creative ventures such as books, movies, consumer electronics and public events Leisure Suit Larry in the Land of the Lounge Lizards: 25th Anniversary Edition. In- increasing in popularity with backers. From unique and eye-catching gadgets to gripping ad- famous adventure game designer Al Lowe reappears as a driving force behind this sequel to the venture novels and documentary films that commemorate unique sub-cultures or periods in hilarious, long-running (but recently overlooked) libidinous adventure game series. Over 14,081 history, the list of successful ventures continues to grow. There are far too many to cover here, backers came together to donate 655,182 and make the dream a reality, despite creator Replay but below are a number of recent projects which caught the public eye – we suggest referenc- Games asking for only 500,000. ing all as a starting point when deciding how to best plot and execute your own venture. The Banner Saga. Pitched by Stoic Studios (which includes former Star Wars: The Old Republic Pebble E-Paper Watch. Billed as “the first watch built for the 21st century,” this customizable team members), this is the company’s first game as a new independent outt fi . It has collected timepiece interfaces with downloadable apps, the Internet and iPhone or Android smartphones over 500,000 (5x its initial funding goal) thanks largely in part due to a compelling video piece to create a surprisingly fashionable, yet also highly personalized and connected experience. The that illustrates the art direction for the game. most successful crowdfunding project seen to date, it’s raised over 8.5 million dollars as we go to press, and continues to draw widespread attention from the media and general public. 100 Yen: The Japanese Arcade Experience. A full-length (75-minute) documentary film that chronicles the rise and evolution of both arcades and arcade culture in Japan, 100 Yen far exceeded expectations on IndieGogo, raising 14,848 – much more than its 9000 goal. An ex- tensive trailer and interviews with notables from the world of fandom were effectively utilized to mobilize backers to fund production of the movie. Glif – iPhone 4 Tripod. A tripod mount for the iPhone that can also act as a kickstand for the Smaller Game Projects handset – thereby enabling hands-free videoconferencing, filmmaking abilities, alarm clock Cognition: An Erica Reed Thriller. A smaller project from budding adventure game devel- features and other functions – this project proved an early success for crowdfunding in the con- oper Phoenix Online Studios, which asked for just 25K and ended up raising 34,000. sumer electronics space. Hoping to raise just 10,000, its creators instead brought in a whopping 137,417, and attracted considerable attention from enthusiast and mainstream media. Random Dungeon Generator as a Dungeon Map. A role-playing game aid that was fund- ed to the tune of nearly 28K – 1389% of its goal. Indie Game: The Movie. Among the earliest film-based efforts on Kickstarter, this campaign – featuring a documentary about the independent video games movement – kicked off in May of TAKEDOWN. A squad-based shooter from veteran developers behind titles like Halo Reach and 2010 and raised over 23,000 in pledges. A second campaign followed roughly a year later that Ghost Recon, this original game raised nearly 222K – 110% of its goal. increased the project’s total take to nearly 100,000. Thanks in part to the attention it helped bring, the film was then optioned by HBO for development as a TV series, making it among the FTL: Faster Than Light. A “spaceship simulation Roguelike-like” that exceeded its goal by r fi st crowdfunded movies to cross over into the mainstream video distribution world. 2005% and earned 200K in pledges. THE crowdfunding biblE THE crowdfunding biblE 18 19TikTok+ LunaTik Multi-Touch Watch Kits. Launched roughly a month after the Glif, will probably be turning to one of the following solutions. Keep in mind that platforms are not this campaign – which promoted novel solutions for turning the iPod Nano into a personal all the same in terms of feature set, audience size, credibility with consumers, and ultimate reach. wristwatch – was a pioneering record-setter on Kickstarter. Despite asking for only 15,000, its Some may focus on specic t fi ypes of projects, such as local or humanitarian efforts, while others creators eventually raised over 1 million dollars through contributions on the service, and the are better suited to high-tech ventures or non-prot fi s. For example: is about collabora - product’s own dedicated website. tive journalism, not products. So while you have several choices here when picking a funding source, it’s advisable that you take time to check each out and decide which fits your needs best. Designing Obama. This 360-page book featuring art and design work from the Obama presi- dential campaign proved an initial example of how successful crowdfunding could prove when To get you started, here are a few insights into some of the major crowdfunding sites. You tapped to fund artistic works and cultural endeavors. Launched in 2009, it was assembled by can be sure that many new sites will appear now that several high-prolfi e campaigns have Scott Thomas, the Design Director for the campaign which helped propel Obama into oc ffi e. caught people’s attention, but the following solutions are already up and running: Kickstarter The Order of the Stick. Many comic book creators turn to crowdfunding for support. But webcomic The Order of the Stick’s creator Rich Burlew can boast about being one of the scant The biggest of the crowdfunding sites, Kickstarter raised approximately 100 million in funding few to have raised in excess of a million dollars. Built around bringing a popular out-of-print in 2011, and is on-track to raise upwards of 250 million or more in 2012. Kickstarter is open to any series back to shelves, it yielded over 1.25M in backing – and earned those contributions from kind of project, anywhere in the world – but although anyone can be a funder, to create a cam- nearly 15,000 backers. paign, you must have a U.S. presence and, theoretically, tax ID. Approval is required to launch a campaign. Kickstarter provides many levels of support from the time you begin developing your campaign until after it is completed. The site oe ff rs smooth integration into social media and Before You Start… individual websites, great online help, an analytics dashboard that helps you track your project Crowdfunding sounds easy (just put up a page on Kickstarter and watch the bucks roll in), progress and see where your pledges are coming from, and a post-campaign survey tool. and on the surface, it may very well be so – at least in principle. But successful crowdfunding generally doesn’t happen by accident. If you look at triumphant projects across the Web, you’ll Fees: 5% if you meet goal. None if you don’t. Processing fees from 3-5% via Amazon. n fi d that many share several attributes in common, including one or more of the following Goals: Meet goal or get nothing. You can keep anything over your goal, though fees still apply. building blocks: IndieGogo • A solid idea and sellable vision for the product or service Open to any kind of project, anywhere in the world, IndieGogo oe ff rs a lot of tools and support • Careful pre-planning and preparation to track your project. It’s also helpful in that it oe ff rs the opportunity to keep money raised from • A strong presentation, ideally coupled with high production values campaigns that do not reach their goal. Smooth integration into social media and individual • A reward structure that appeals to the project’s audience websites and a robust set of analytics tools to track your progress round out its benefits. • Ongoing outreach to backers • Ee ff ctive social media, marketing and PR strategies Fees: IndieGogo features two funding plans: • The presence of a popular pre-existing brand or personality that’s attached to the project, • Flexible. 4% if you meet goal, 9% if you don’t, but you keep your money in either case. or an existing audience for the property. • Fixed. 4% if you meet goal, no fees if you don’t and you get nothing in the latter case – donations are returned to contributors. To launch a successful crowdfunding campaign, you’ll need several of the above founda- Goals: Flexible or fixed plan. In flexible, you get whatever you earn. Fixed, meet goal or nothing, tions in place, plus a very clear idea of the costs involved and how you are going to keep your but you can keep anything you earn past the goal. project fresh, top of mind, and growing in public awareness during the time it is active. RocketHub Another critical decision involves which of the many crowdfunding sites and services you Open to any kind of project. Includes more social concepts beyond funding (fueling) projects, will use. Assuming that you are not going to try to raise crowdsourced funds on your own, you including options to vote for projects and also to earn badges on the site. Creators can apply for THE crowdfunding biblE THE crowdfunding biblE 20 21RocketHub’s “LaunchPad Opportunities” separately from their projects. LaunchPad Opportun- Spacehive ties are awarded to certain project builders based on their creations’ popularity and the evalua- tion of expert judges, and can be quite valuable. Examples include the services of a publicist to Spacehive’s founder describes it as “an online funding platform for neighborhood improvement help promote your project, or the opportunity for five winning photographers to exhibit their projects” – and primarily for those based in England at that. Approval is required to launch a work in a prestigious New York gallery. campaign. Fees: There appear to be no fees for projects. LaunchPad Opportunities are free to people who Fees: Scale with size of project. Money is in English Pounds. have run a successful project, 5 for anyone else who wants to enter. Goals: Meet goal or get nothing. You can’t earn more than the goal you set. Goals: You keep any money raised. Crowdcube Ulule Based in the United Kingdom, serves as a platform for small investments in UK businesses and European/international focus, default funding in Euros, but supports other currency options. startups. Each project runs for 90 days. Equity in the company is given in exchange for dona- Also focused on projects that are “for the betterment of society.” People can additionally “like” tions. Incentive rewards are also recommended. Must be 18 or older and be legally able to create projects and the number of likes is displayed with the project listing. Approval required to a UK based limited company to utilize. launch a project. Fees: £250 (currently waived) plus 5% of realized goal. Also £1750 in legal fees. No charges if the Fees: 5% on funded projects plus 3.4% commission to PayPal and 0.25 per transaction. No project fails to meet its goal. charges for projects that are not fully funded. Goals: Minimum £10,000 goal. No maximum. All or nothing. Goals: Meet goal or get nothing. You can earn an unlimited amount past the initial goal. Note: Donations in exchange for equity are legal in the UK, but not, at the time of 33Needs this writing, in the U.S. That may soon change as President Obama recently passed the This crowdfunding service die ff rs in several ways from other crowdfunding sites. Its primary Jumpstart Our Business Startups (a.k.a. JOBS) Act (sometimes referred to in part as the strength comes in the form of prot s fi haring: In exchange for donations, backers are promised a CROWDFUND Act), which will allow entrepreneurs on sites like Kickstarter to oe ff r equity in percentage of prot fi s for a set amount of time. This is especially relevant to entrepreneurs start - exchange for investment. However, as of press time, laws and regulations governing these ing new ventures who are willing to share prot fi s with backers, who are betting on the project’s investments have yet to be put into effect. success and end up with a strong stake in the outcome. The focus is on business startups as opposed to other sites, which tend to be more project-oriented. Normally, when a company seeks financing from the public it must register as a security with the Secu- Fees: 5% plus transaction fees. rities and Exchange Commission, providing detailed disclosures. The CROWDFUND Act would provide Goals: All or nothing. Can earn more than goal. an alternative to this process, allowing companies to raise up to 1,000,000 annually through crowd- funding on registered Internet websites. – Senator Jeff Merkeley (D-OR) 8-Bit Funding A “community powered reporting” project that lets people present a “story” for which they seek funding, bringing together citizens, journalists and news organizations. Focus is on “local” Dedicated exclusively to crowdfunding game projects. The model is similar to that of other reporting. Stories begin as “tips,” short descriptions of the issue. A journalist can then take the crowdfunding sites and supports any kind of game, including video games, but also card and tip and write a pitch, including the funding needed. All stories are available under the Creative board games as well. Commons license, although news organizations can donate 50% or more to the project to gain Fees: 5% of successful project for 8-Bit Funding and 2.9% + 0.30 per transaction. a temporary copyright. Topics include Government + Politics, Local Science & Business, Race Goals: All or nothing. You can keep whatever you generate, and you can restart a project if it & Demographics, Consumer Protection and many more. Under current plans, 90% of money doesn’t succeed. earned goes to the journalist and 10% to another journalist who serves as the editor. The upshot Peerbackers is that it gives journalists work and helps citizens identify stories that need to be covered. Fees: None Founded in 2011, Peerbackers facilitates project fundraising for “entrepreneurs, innovators and Goals: All or nothing trailblazers” and their ideas (rather than serving as a platform specic fi ally to promote creative THE crowdfunding biblE THE crowdfunding biblE 22 23projects). Peerbackers reviews submissions for legitimacy and the applicants’ understanding of • Backers feel as though they hold a personal stake in your project, making them automati- how to be successful in crowdfunding. Like other sites, rewards are provided to backers in return cally part of your social media and marketing teams. for their participation. However, these rewards may not include the actual products under devel- • It’s a handy way to raise awareness for projects – even before they technically exist. opment (if the venture even has a consumer product associated it). • You may create some buzz around your project that will help you when it launches. Fees: 5% plus Paypal charge (2.9%). • It’s exciting, and it’s also a great way to expand your social connections. Goals: Three possible outcomes – 1) Project is fully or over-funded, and you keep what you • Whether successful or not, it provides an inexpensive learning experience – what you take make; 2) Project fails but you can still fullfi l rewards – you keep what you’ve made; 3) Project fails away from the process will be subjective, but there’s no question that such knowledge and you cannot fullfi l rewards – you make nothing and backers are refunded. will apply to future projects and campaigns. Microryza In a well-planned and -executed crowdfunding project, there aren’t a lot of downsides, but A project crowdfunding site based in Seattle that targets commercial (though largely geeky) there are always some risks you should be aware of too, however: science- and tech-related projects. Bills itself as “a new way to fund innovative research,” helping pair backers with researchers looking to fund scientic s fi tudies, insights into global warming and • You may fail to reach your goal (and be on the hook for any costs that your campaign has other unique ventures. Features a strong emphasis on academic works and projects that expand accrued). In almost all cases, however, you won’t owe anything to the crowdfunding site the scientic a fi nd professional world’s collective knowledge base and general frame of reference. or to backers in terms of rewards, as they will not be charged for their pledges. Fees: 10% of raised capital only on successful projects (includes a 3% transaction fee) • Your image may be tarnished by a project’s failure to perform. Goals: All or nothing • Unsuccessful ventures may be seen as less viable when presented to potential future investors. You are unlikely to meet with success selling a project to prospective investors Grow VC that has previously failed when presented through a crowdfunding campaign. The value Based in Hong Kong, with oc ffi es in the UK, US and Finland, Grow VC is a more complex site that of such ventures will be assumed to be greatly reduced. allows startups to receive equity investments up to 1M per year. In addition to monetary invest- • Supporting crowdfunding projects may consume more time, money and effort than you ment, the site includes an “Experts” system in which someone with special abilities or knowl- initially anticipated, or are prepared to invest. edge can oe ff r their “work investment” to a startup on the site. There are a lot more tools on • A fine line must be walked when promoting projects and asking for pledges – if you’re this site for assessing the value and reputation of a startup. Also present is a “micro investment” not careful, you may annoy or distance potential allies. model where investors can dedicate a monthly budget as low as 20 and Grow VC helps them • Your costs may be higher than anticipated, meaning that your goals may have been set by providing tools and prolfi es of startups, including their history. too low or you didn’t forecast expenses related to rewards, operations and overhead care- Fees: 2.5% of raised capital only on successful projects fully. Goals: No information about how goals are handled. • In a worst-case scenario, your project may get funded, but fail for other reasons. Under- stand that the legal issues surrounding failure to complete a project that has been crowd- funded, or one that arrives late or fails to meet expectations, are yet to be defined as well. Benefits and Risks Your liability in such situation may be hard to quantify, to say nothing of the personal sense of responsibility and obligation that you will feel to backers. Regardless of whatever The benefits of crowdsourcing should be obvious: legal complications may or may not occur, you will have to live with the knowledge that you let your community and backers down. • If you’re the sensitive type, realize that crowdfunding is the ultimate “putting yourself out • You get money to help complete your project. • You keep control of your equity as well as your creative independence. there” experience. It’s like being picked for the team in grade school. If you are chosen, • You get to gauge people’s enthusiasm and interest in your project. you’re happy and validated. If you aren’t, or you’re picked last, you feel rejected. Crowd- • You create empathy with fans and greater emotional investment in your product, brand funding can trigger strong emotions, so be prepared. and associated ventures. • As with any form of solicitation, some friends, family and members of the general public • You can kick-start your marketing campaign and turn fans into brand evangelists. may resent being asked for funds. However, while this is an inherent risk you will take THE crowdfunding biblE THE crowdfunding biblE 24 25when crowdfunding, some negative response may be mitigated by your enthusiasm and Getting Your Crowdfunding Project positivity, and the perceived value and validity of your project. Off of the Ground UNFORESEEN RISKS AND DRAWBACKS eople refer to crowdfunding projects as “campaigns,” and they do so for a good reason. They require careful planning, clever resource allocation, consistent execution… and the Budgeting carefully and conservatively when planning crowdfunding projects is vital, as Precognition that even the best-laid plans may not survive initial contact with customers. even the best-laid plans can go awry if funds are not accurately projected or mismanaged. Con- You’ll quickly discover that you are embarking upon a singularly time-consuming and challeng- sider the case of software developer Warballoon Studios, who raised nearly 37,000 for its down- ing endeavor. Advance preparation is vital. loadable Android and iOS game, Star Command, for which it hoped to raise 20,000. “Don’t underestimate the amount of work crowdfunding campaigns require, both prior to and post launch,” says Jordan Weisman (the driving force behind Shadowrun Returns on While the venture may appear to be successful, the company says far fewer funds than ex- Kickstarter). “Just preparing a good video, taking time to make your message clear and editing pected went into actual development, via a public post on its development blog to investors. the clip… to get the message across as intended takes a great deal of time. And then there’s the Among the details revealed: written version of the story. The words are important. Look at which techniques have been suc- cessful for others and see how their methods apply to your project.” Needless to say, his recom- • Roughly 2000 of expected donations never materialized due to failed, reversed or reject- mendations are just the tip of the iceberg. ed transactions – all of which added to the total featured on the game’s project funding counter, but never actually hit the company’s bank account. • Fees from Kickstarter and Amazon totaled another 3000, siphoned from the project’s Pre-Launch Planning overall tally before proceeds were received. • Reward fullfi lment cost the studio 10,000 alone, thanks to the expensive prizes used, As with campaigns of any kind, preparation is critical. Decisions made here can make or with items oe ff red in exchange for donations including printed posters, t-shirts, maps, break your project, so don’t rush into them. Take your time to do your research and get things MP3 samplers, and more. Warballoon says that had it budgeted again, it also would have right. Plan your campaign with care and forethought. included the costs to enlist help from a traditional product fullfi lment house to handle the time and overhead associated with packaging and processing reward shipments. Points to keep in mind when planning a crowdfunding project include: • Around 6000 went to the composers who wrote the title’s music. • Poster design artwork cost the team 2000. • Do your homework – Make sure that you have done your research on competitive prod- • Another 3000 was spent on buying a presence at trade show PAX East. ucts and campaigns, and understand precisely who and what you’re going up against • Over 4000 was spent on lawyers, accountants and professional services, an expense the – as well as how your project can be positioned to die ff rentiate itself and maximize its team says it wouldn’t undertake again (“keep the attorneys out of it,” they counsel). chances of success. • About 1000 was spent on iPad units required to test the game. • Define and share a common goal – Everyone on the team should share a common vision • As the tax year ended during the development cycle, another 30% of funds raised went to of the project, be able to communicate a succinct description of its vision, understand pay tax bills. who the venture’s target audience is, and comprehend how to speak to this audience. • As for the remaining 4000, it disappeared on daily costs and incidentals. • Understand the stakes – If you are developing a new concept, product or IP, understand where the bar has been set by competing products and campaigns in terms of consumer As you can see, even “success” is not without its perils – so be smart about your budgeting, expectation and production values. If you are leveraging an existing IP, fan base or market, operations and overhead. “All that said though,” claims the team, “the experience has been research how many fans or customers exist for your venture, where to connect with them, great and the game would not be where it is if it wasn’t for Kickstarter. We’re extremely and how they might consume information about it. cond fi ent were going to hit our summer release date and that never would have happened without our public backers.” THE crowdfunding biblE THE crowdfunding biblE 26 27assets, do you have something to show potential backers? Do you have representative im- ages or video to share that illustrate your project and supporting assets? What other audio- HOW MUCH PLANNING TIME IS ENOUGH? visual and copywritten elements (concept art, prototypes, sketches, in-development scenes, “I spent three weeks preparing for our Kickstarter campaign. I stopped the com- songs, etc) have you arranged to leverage? Perhaps you have notable individuals’ testimoni- pany and that’s all we focused on during this time. I also did a thorough analysis als to share or other kinds of support. Line up everything you can and plan how and when of our budgets and reward tiers.” to use these materials. Be sure to plan a running promotional campaign that incorporates -Brian Fargo, Wasteland 2 all elements – these materials will serve not only to define your project to the world, but as ammunition in the ongoing battle to promote it. Now that you’re in the right frame of mind in terms of project definition and focus, let’s take 4. Plan your Rewards. Know what goods and services you have to oe ff r, what they will cost a look at what it takes to successfully build and execute a crowdfunding campaign around your you and how you will manufacture and distribute each. Be certain that you’ve created op- concepts. tions that suit all pricing tiers, speak to a variety of backers, and have built in at least a hand- ful or unique or eye-catching items and opportunities, if only for purposes of generating Preparing and Assessing Your Project discussion. 5. Project Budgeting and Completion. Estimate how long it will take you to complete a Your crowdfunding campaign is going to consist of several phases: Pre-launch preparation, project, allowing room for slippage – a 20-30% bue ff r is reasonable. Generate your budget launch programs, post-launch management (and campaign evolution), and post-completion and determine minimum funding levels (including any cushions) required to complete the follow-up. Each of these phases may require a considerable amount of work, especially if you are project, and use a spreadsheet if necessary to calculate any costs that you may incur. Be sure successful. In fact, the more successful you are, the more work you can expect to do. to estimate service costs, expenses associated with reward fullfi lment and even taxes (take time to speak with an accountant or other certie fi d professional so that you fully understand The pre-launch phase is critical. Planning is when you can make or break your project, so potential financial and legal implications here) into your projected budget. Note that delays don’t rush into it. Take your time to do your homework and get things right. can have a signic fi ant effect on project overhead, shipping dates and funding goals. 6. Funding Targets. Don’t make financial goals too high. Instead, ask for what you need at 1. Study Other Projects. This is critical. Look at campaigns that have worked and ones that bare minimum to make a project work – and, in your project’s description, describe added have failed alike. What similarities and die ff rences do they have with your project? What in - content, features, services or events that will be oe ff red only if specic h fi igher target goals sights can you glean from them – and how can you avoid falling prey to the pitfalls on which are met. If you’re successful, you may reach them. (Note that it’s important to check funding they stumbled? Use this study time to also assess whether your project is really the kind of rules for each individual site or service you are using before beginning as policies die ff r, i.e. venture that works well in a crowdfunding environment, and what funding levels, rewards most allow you to keep everything you make, even past your goal, but some do not.) Ulti- and marketing/social media campaigns are most appropriate. mately though, the less you’re asking for, the likelier you are to incentivize potential backers 2. Prepare Assets in Advance. Do you have enough product/project samples and sup- into taking the plunge, as they’ll be more willing to commit to goals that they believe are porting materials to quickly illustrate to potential backers what your idea is all about? Do achievable. you have visuals or videos that can clearly, quickly and concisely convey key message points, 7. Campaign Duration. Determine the optimum length of time to keep projects running. and demonstrate your project’s upsides? If not, invest some time to develop correspond- Some sites recommend that you keep the funding period down to as little as a few weeks, ing images and/or videos that provide a clear impression of what your project is all about. while others suggest that programs run for no more than 30 days at maximum. However, A picture is worth a thousand words: Doubly so when you only have seconds to capture a actual timeframes should be discussed and determined based on individual project need, viewer’s attention. including how much time it will take to raise awareness, how long you can sustain support- 3. Perfect Your Pitch. Ren fi e your overarching vision and corresponding pitch, including all ing promotional programs, and how important it is to create a sense of urgency (act now audiovisual and copywritten elements. Can you clearly and succinctly explain your project before funding closes). and its value in terms that your audience will understand and appreciate? Have you tried it 8. Run a Systems Check. Besides preparing campaign assets and tactics, ask yourself: Have out on friends and strangers to gauge their reaction and readjusted accordingly? Regardless you identie fi d your target audience, and do you know where they consume news and of whether your project is ongoing or just beginning, or you’ve compiled pre-production media? Have you planned your reward strategies, and run them by friends and associates THE crowdfunding biblE THE crowdfunding biblE 28 29

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