A question I am often asked by management about to crowdfund their project is “Where do we start?” The answer is always the same – audit both your competition and the platforms available to you.
Once you have completed an audit management can start planning the campaign in much more elaborate detail. But the audit should, no, MUST come first for the planning to have any credibility. An audit can be focused on almost any area and which areas management focus on first is entirely optional.
An audit does not have to be a lengthy opaque exercise it can be a simple matrix that records the bare essentials. There are, however, key basic areas I would expect campaign management to consider in an external audit, these are:
- Similar campaigns
- Similar products
- Success/failure ratios
Analysing each of these areas will provide management with the confidence that they understand the crowdfunding environment they are about to enter. Each variable has its own set of unique characteristics to consider and below we take each in turn.
Costs include the payment to the platform, the payment provider (i.e. WorldPay or PayPal) and any other costs incurred by the campaign. Remember these may not be obvious at first and you may need to dig a little to get the information you require.
Similar campaigns are those that are similar in some way. The similarities to be used can be set before the auditing starts – these can include the raise, product, demographic appeal, credit rating or any other similarity management consider important to look at.
Promises are the promises being made by the campaign and these can include the quality of the product, delivery timescale, tiers (in the reward model) or interest tolerance (in the crowdlending model) or even equity share and class (in the crowdinvesting model).
Similar products are different from similar campaigns in that it is looking specifically at the category. It may be that the product appears listed in many different categories (a game for instance could be in technology, arts or design). Being thorough will mean investigating all the categories offered by the platform.
Success/failure ratios are really important as management can now start to identify where the campaigns (with the above criteria) are starting to fail or succeed. Fails are good as they often provide real value for others in what not to do!
Platforms need to be considered carefully. Each serves a different crowdfunding model and each has a unique characteristic that often tends to attract a unique type of funder. Look at the platforms, look at the campaigns, look at the questions being asked in each campaign – all this information will help management build a picture of the platform and the funders they attract.
Alternatives may surprise you because this is not referring to alternative platforms but to alternatives to crowdfunding. Banks, Angels, factoring, friends and family are all still viable alternatives and nothing should be written off completely. Keep an open mind of what alternatives are available and the pros and cons of using these. After all is said and done it may be that crowdfunding is the least attractive route to fund your vision.
This is a very short overview, but I hope it provides you with some idea of how to approach an external audit and get started with a crowdfunding campaign. If you have any questions or comments please lets us know through this blog.
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