Overcoming the Risks and Barriers of Crowdfunding
There are many factors that a producer should consider before launching a crowdfunding campaign.
- The target amount, as if it is set too low it may create unreasonable expectations on the part of the donors.
- The level of effort required, particularly in terms of maintaining engagement with the campaign’s community. Not all creators have the skills or comfort level needed to carry out the various activities related to a crowdfunding campaign (e.g. promotion, audience engagement, fulfillment management related to honouring incentives). These individuals would either not be able to successfully manage their campaign or would need to engage additional internal human resources or external service providers to manage the campaign on their behalf – something that could be cost prohibitive.
- The costs involved, in terms of platform costs, processing costs, and the costs associated with fulfilling rewards (e.g., international postage). These can be quite significant. First, there are hard costs such as the cost of creating promotional material (e.g. a promo video) and those associated with providing incentives to contributors. Second, there is the time and effort cost associated with creating and promoting the campaign as well as the ongoing effort needed to engage with the online community of supporters both during and after the campaign. And on the flip side is the ever-present risk that the campaign will be unsuccessful and that any resources invested in the campaign would have little or no return.
- Donor fatigue, or the possibility that donors will not want to be approached repeatedly for funds (particularly if some of those donations did not meet donor expectations), and
- The impact on other potential financiers, especially if reward-based crowdfunding is involved (e.g., grinding against tax credits).
Crowdfunding could also potentially negatively impact a creator’s reputation in a number of ways:
- If a content creator starts a campaign and does not meet his/her funding goal or receives very little support, this is a very public failure and could have an impact on a creator’s reputation.
- If a creator does successfully complete a crowdfunding campaign but is not able to complete the project for some reason, a great deal of supporters will be let down and that creator’s reputation could be negatively impacted.
- If a completed project fails to fully meet its supporters’ expectations, then there is a risk that the creator’s reputation will be negatively impacted by the ensuing disappointment among his/her core audience.