Crowdfunding: Figure Out What Success Looks Like And Plan Backwards From There

TechCrunch | Sam Beck | December 19, 2013

Blueshift 300x149 - Crowdfunding: Figure Out What Success Looks Like And Plan Backwards From ThereThis is a guest post by Sam Beck, creator of Helium, a super capacitor-powered speaker, as part of our ongoing coverage of crowdfunding in real-world situations.

This is what happened during my first crowdfunding project, which is currently sitting at 97% of its goal with two days left on the clock. Our campaign’s goal was to cover the launch cost of our first product, a supercapacitor-powered portable speaker which would cost about $8,000 in compliance & overhead costs. The next time I do something like this, I’m going to make a giant poster of that baseline number – $8,000 or whatever it is – and hang it right in front of my face. The biggest mistake I made during this campaign was forgetting that number.

Here’s how I messed up.

About 90% of my planning was very realistic. I built a simple, conservative model, and set the variables so that if things went according to plan, we would make a bit of money on top of covering those costs. And then, I started imagining what it would be like to make two times the goal, or ten times. We almost failed because while there was a definite goal, I was thinking about a different number. That is my biggest takeaway from the whole project. There is only one goal; your objective is to meet it. Everything else is gravy.

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So that’s the first half of success in crowdfunding: know what success looks like. So this is how to plan once you know what you’re planning for.

The first thing is to see what your market looks like. 4 First Names has built an awesome set of open source tools to see the shape of your potential market – a very pretty Unity 3D visualization of the data from Kickstarter. They also scraped all the data from every Kickstarter project to make it work. Each dot is a project – the bright diagonal is the fact that projects that get close tend to meet their goal.

kdp - Crowdfunding: Figure Out What Success Looks Like And Plan Backwards From There

The visualization is cool, but having the data from every project is awesome. For our working data set, we took the whole list and filtered it down to only Product Design and Technology projects that had raised over $2000, of which there were 2085. We were pretty sure we’d get over $2000 in pledges from friends and family on day one – if you can’t hit 5% of your goal within your private network, you are probably in a bad spot.

Now, with this list of similar projects, we used simple statistics to think about our funding goal. 45% of these projects with goals $25-$35k were successful vs. only 35% of projects with goals $36k-50k. Getting even more specific, within audio projects, only 21% of projects aiming for over $30k have been successful.

We settled on $30k as a goal, believing that our idea was in the top quartile of audio projects in terms of how much interest, media coverage, and organic traffic it would generate.

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With an idea of the goal in mind, it was time to set prices. We started out our price planning with a simple survey, run through Facebook & SurveyMonkey. It cost about $20 – but if I were going to do it again, I’d probably use SurveyMonkey’s paid audience feature instead of Facebook ads to (hopefully) get a better sample.

Our survey used the Van Westendorp method: show potential customers the product, explain it, and then ask for four prices from each respondent, in order:

1. Too expensive to consider
2. Too cheap to believe in
3. Getting expensive
4. Great value

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