INDIEGOGO | Raising Funds by Crowd and Getting Customer Feedback
Indiegogo is one of the biggest crowdfunding platforms online. In this article, we will look at 1) what is Indiegogo?, 2) why and when to use Indiegogo, 3) benefits of using Indiegogo, 4) options to raise funds and fees on Indiegogo, 5) how to be successful on Indiegogo, 6) Indiegogo success stories.
WHAT IS INDIEGOGO?
Indiegogo is a well known international crowdfunding platform based in San Francisco, California. It was created in 2008 by Danae Ringelmann, Eric Schell, and Slava Rubin. Indiegogo is one of the pioneers in the crowdfunding arena.
Unlike some of its major competitors, the website allows people to request funds for an idea, a charitable venture or a start-up business. The company aims to empower and enable anyone with a good idea to raise funds and attempt to reach their goals. Approximately 9 million site visitors are recorded from around the world every month.
Much like other crowdfunding models, the website runs a rewards based system. This means that donors and investors receive a gift in return for their investment rather than an equity stake in the product or business. The company has expressed an interest in the equity based system as soon as the laws governing these transactions are made clearer by the United States government.
The idea for the website was generated by Danae Ringelmann, who was working as an analyst on Wall Street in 2002. During this time, she worked on co-producing an Arthur Miller play. Despite its popularity with the audience, there was very little financial incentive to continue work on the project. Given this situation, Ringelmann began considering alternate ways to generate revenue for the endeavor. Her inspiration was a senior filmmaker who approached her for funds for his film. A few years later, she went on to the Haas School of Business to begin a company focused on a democratic way to raise funds.
At the school, she met her future partners, Eric Schell and Slava Rubin. Both had experienced issues with fundraising similar to Ringelmann’s, with the House Theatre Company in Chicago and a charity fundraiser for cancer research. The three began developing their idea in 2007. The project was titled Keiyaku and the official site launched in 2008 at the Sundance Film Festival with a focus on films. By 2010, the company partnered with MTV New Media to develop content for site projects and in 2011 the website managed to raise $1.5 million in a seed financing round. In 2012, the company partnered with President Obama’s Startup America to offer crowdfunding services to US based entrepreneurs. The same year, the company raised a further $15 million dollars in funding from Insight Ventures and in 2014, added $40 million to the financing amount.
Unlike Kickstarter, Indiegogo does not provide publicly accessible data and information regarding its performance. According to independent research, in 2013 the company had 44,000 crowdfunding campaigns with a success rate of about 34 percent. These successful campaigns raised about $99 million collectively, and 40 percent of this amount was from campaigns that managed to raise more than $100,000.
The website puts very little restrictions on the kind of project that can be put up for funding requests. There is a special discount in fees for nonprofit campaigns.
WHY & WHEN TO USE INDIEGOGO
The projects that are put forward for funding on Indiegogo feature a variety of categories from the arts to technology, business, and charity or cause-based projects. It is a good option for when a more passive monetary stream is required, or there is a danger of not meeting target fundraising amounts. It also requires less planning and detail than a kickstarter campaign since those have to go through a vigorous approval process. A project can be put on Indiegogo if it fulfills the website’s terms of service which are not overly complicated. A person needs to be over eighteen or if over 13, needs the approval of a guardian. Projects listed need to be legal and not for the purpose of a scam or intended to cause any harm. As of now, no share in the business can be offered as a reward.
Because of these easier rules, the projects listed on the website include ideas, charities, business startups, products and cause based crowdfunding. Often people may use this platform to test the viability of an idea as a successful project or a money making endeavor. If there is not much response than it may be a good way to take the learning and rethink the idea or its application.
BENEFITS OF USING INDIEGOGO
Some of the benefits of using Indiegogo over other similar crowdfunding platforms are:
- The website allows both partial campaigns as well as all-or-nothing.
- There are more than one payment options including both PayPal and ordinary bank accounts.
- The website allows international projects along with US based ones.
- There are very few restrictions on the type of campaign. There are some terms of service, and the proposed project has to be legal.
- There is no screening process or wait time for projects to get approved.
- There is no limit on the dollar worth of the rewards offered.
Some negatives of the website include:
- The biggest negative may be that the lack of regulation may let some unnecessary projects through, and these may never materialize.
- The community of backers or investors is much smaller than market leader Kickstarter.
- There is less buzz around Indiegogo campaigns and there is not enough parity in credibility with the market leader in crowdfunding, Kickstarter.
- The option to keep whatever is collected may make it less urgent for some backers to donate. There may be less investment in the potential success or failure of the campaign owner and their product offering.
OPTIONS TO RAISE FUNDS & FEES ON INDIEGOGO
Setting up and launching the campaign are free for everyone. Before the campaign is launched, however, a choice needs to be made between flexible funding and fixed funding. This choice is not so concerning if the product goals are met. In this situation, the funds raised are kept whether flexible funding was selected or fixed funding. A fee equal to 4% of the total funds raised is charged by the website, and this fee is reduced to 3% for nonprofits.
However, if the goal is not reached, then a flexible funding campaign means that the campaign owner is allowed to keep whatever they have raised, but a higher percentage is charged. This percentage is 9% of the raised funds. When a fixed funding campaign is selected and the goal not reached, then all the money is returned to the investor, and no fees are charged either.
Once funds are about to be received, there is an additional charge for the payment solution. This fee is between 3 and 5 percent depending on the payment option selected.
HOW TO BE SUCCESSFUL ON INDIEGOGO
One service that Indiegogo offers is the gogofactor. Gogofactor is a strong algorithm that helps campaigns gain visibility on the website and be able to reach the right people. Several factors may affect the gogofactor. These include the scope of social engagement such as a presence across social media and response there as well as the reach of the campaign globally. Campaigners can raise their gogofactor by:
- Updating campaign information on social media outlets and spreading the word through the campaigner’s community to share the information further.
- Offering interesting and exciting rewards to engage the audience and move them to action through donations.
According to the Indiegogo blog, some other actions can help raise 8 times as much money for people who use them as those who do not. These actions show a commitment to the campaign through an investment of time and effort.
- A Pitch Video – A video can make an incredible amount of difference to a campaign. A good video will show the people behind the campaign and their journey based around their campaign idea. There should also be an aspect of the mechanics of the business by showing where the money will go and a clear call to action. It is important to keep this short and crisp, preferably under 3 minutes.
- A Good Amount of Perks – A good number is three or more creative and generous rewards. A good idea is to reward based on specific contribution amounts such as $25 and $100.
- Offer Regular Updates – Updates can show progress, thank contributors, offer new rewards and showcase any press or attention that the campaign has been getting. These updates can help keep backers engaged and bring in others.
- A Good Media Gallery – It is a good idea to keep at least 5 or more items in the media gallery. These can be videos, images or artwork. This media can help build a context for the motivation behind the campaign and bring the backers close to the campaign. The same media should be shared across social media as well.
- Link to Other Pages – Any personal websites, blogs, Facebook pages, Twitter accounts or other social media outlets should be linked back to the campaign. This link across channels will help build credibility and allow a strong story line to be created over the course of the campaign and beyond.
- Keep the Campaign Short – Though Indiegogo does not put any time restrictions on campaigns, it is a good idea to have a short campaign. Short means less than 60 days. This allows more buzz and fewer chances of people putting off contributing to a later time. Before deciding timeframe, factors such as time needed to run an effective campaign and the amount of money required and other aspects of strategy should be considered carefully.
Mistakes to Avoid
Some common crowdfunding mistakes to avoid include:
- Don’t make the video a short film. An endless video will lose an audience no matter how much effort went into making it. The video should be short and crisp but still manage to portray all the right information to the audience in a compelling manner.
- Don’t wait for the backers to show up. A campaign needs to be pushed for it to be effective. It is important to reach out to family, friends, coworkers, acquaintances as well as other influential people who may be relevant to or interested in the campaign. A strong social media will also help the campaign raise its gogofactor and be more visible.
- Don’t write too much text in the description. No one is interested in a long essay on how the project came to be here. Instead, use visual aids to push the message across.
- Don’t create unreasonably high rewards. Rewards should cover all levels of donations from small ones to large contributions, and the reward should reflect these levels as well.
- Don’t ignore past successes and failures. Once a campaign ends, its page stays on the website. This can provide valuable information about what works and what does not and can help improve a campaign.
INDIEGOGO SUCCESS STORIES
Most Funded Projects
Some of the most funded projects on Indiegogo are not necessarily successful ones given how the website allows both fixed and flexible funding.
- Technology: Ubuntu Edge: This project raised over $12 million of its $32 million goal, about 40 percent. This was a fixed funding project which means that it was not a successful campaign despite being the highest funded project on the website. The proposed smart phone was to be released as 40,000 units only via Indiegogo to show the evolution of technology.
- Education: An Hour of Code for Every Student: This was a nonprofit flexibly funded project that managed to raise 80 percent of its target. Over $4 million have been raised, and the project remains open. The aim of the project is to allow every student to be able to learn computer science.
- Technology: Accent Wear Cat Ear Headphones: These are a fashion and technology project, a pair of headphones shaped like cat ears with LED lights built in that is a forever funding program. The campaign has managed to raise well over its $250,000 budget and was continuing to raise funds Rewards allow contributors to pre-order.
- Community: Stone Groundbreaking Collaborations: This was a flexibly funded program that is now closed. The campaign managed to reach well over its target if $1 million by raising over $2.5 million in about six weeks’ time. The product on offer is a rare beer from a highly rated brewery.
- Film: Lazer Team by Rooster Teeth: This flexibly funded campaign managed to raise 382 percent of its target goal of $650,000 by raising a substantial sum of over $2.4 million dollars in one month. This science fiction film offered rewards starting from a $5 contribution to a $10,000 one.
Successful Product Launches
Though there are many interesting projects and products on Indiegogo, a few that made it to commercial success in 2013 include:
- iSmartAlarm – Apple Store: An amazing home security device that gained backing from over 1500 supporters is now being sold in Apple stores for $250 each.
- StickNFind – Brookstone: Created by Jimmy Buchheim, the product helps people find lost items such as glasses, keys and almost anything else by touching a button. A crowdfunding campaign that raised $931,870 on Indiegogo led to Brookstone taking on the product.
- Spuni – Amazon: A specially crafted spoon for babies, this ergonomic invention raised $37,000 and manufacturing began in Brooklyn, New York. These can now be purchased on Amazon.com.
- Misfit Shine – Best Buy, Target, Apple Store: This activity tracker had already raised funding required to bring it to market, but the founder ran an Indiegogo campaign to see what the customers wanted from this product. The campaign met with resounding success by raising $850,000 and is now sold at three major stores.
Celebrities on Indiegogo
In 2013, the following celebrities turned to Indiegogo to fund their campaigns:
- James Franco launched a campaign to turn his book of short stories into three feature length films. He has promised to donate profits from these films to a non-profit organization encouraging actors and artists to dedicate time to terminally sick children.
- Nick Carter launched a campaign to raise money for his little known passion of horror films. He aims to use the Indiegogo funds to produce, write and costar in a horror film, Evil Blessings.
- William Shatner is collaborating with Egard to create a masterpiece wristwatch that is affordable yet limited edition
- Lil Wayne is partnering with nonprofit The Motivational Edge to empower inner city children to have access to culturally relevant programs after school.