Some crowdfunding platforms (such as PledgeMe or Kickstarter) only offer one funding model. It’s called “fixed funding”, or “all-or-nothing”. In this model, you set a closing date and a funding goal to reach within that time. If you raise enough pledges before the end of your project (usually around 30 days), then the project is funded, and you receive the cash.
Other platforms (such as Indiegogo and GiveALittle) offer an alternate funding model. This one is called “flexible funding”. In it, you receive all the money you raise – regardless as to whether or not you make your funding goal.
Now, my opinion is that there is only one valid reason for using flexible funding: that is, you are raising money for a charitable cause and there is no minimum or maximum goal amount.
For every other project, I am always going to recommend fixed funding, and here’s why:
1. Can you fulfill expectations with only some of the money?
Manufacturing projects, especially, that choose flexible funding look dodgy, stupid, and greedy.
There is no way an inventor can complete a manufacturing run of a HoverBot 360 (not a real thing) with only 12 pledges of $100 each. After fees, the inventor will receive around $1,000 of that cash, and will still have to fulfill the reward expectations of the 12 people who pledged for a HoverBot 360.
This is becoming increasingly more important as countries, states and platforms work to clarify that as a project owner, you need to fulfill the promises you made to your backers. Failure to do so opens the doors to legal proceedings against you.
So why would you take that risk for such a relatively low reward? Sometimes it’s better to fail and learn from that failure, than to partially succeed but ultimately end up disappointing the people that did believe in you.
2. Are you doing this out of fear?
By and large, this is the reason most of people choose flexible funding.
Trust me, if you are capable of making your goal, you can make it in 30 days. If you are afraid you’re not going to make your entire goal then simply put, you’re not going to. Crowdfunding requires some risk, and very rarely is a project owner 100% sure they’ll hit 100% of their funding target when they launch.
This is an emotional rollercoaster. Anyone who thinks crowdfunding is free money has never done it successfully. Many of the most successful project owners I have talked to have mentioned a moment where they were afraid they wouldn’t fund. It’s a normal part of the process. Embrace the fear and use it to make you work harder.
Similarly, if you are afraid you won’t make your goal, revisit your budget. You may find a few lines and expenses you’re actually able to go without.
3. Life is a game, so is crowdfunding.
Did you know that 80% of crowdfunding projects that raise 30% or more of their funding goal, ultimately succeed?
There’s a reason for that.
If you have a $50,000 goal, then the 30% mark is $15,000.
$15,000 is a decent sum of cash. And it takes a decent number of backers to get it.
On one hand, as a project creator, that $15,000 will drive you forward. The thought of ‘losing’ $15,000 is good motivation for finding the remaining $35,000!
On the other hand, the backers who gave you that $15,000 hopefully really want your campaign to succeed. The possibility of it all going down the drain can often lead to a rally of sharing support.
The combination of these factors gives a fixed-funding campaign a ‘gamified’ feel. Everyone knows there is something on the line, and that drives the creators and backers alike to drive it towards the funding goal, and success.
Takeaways
Flexible funding is tempting. Most people tell me it “makes sense” to take whatever you can get, but evidence suggests most flexible funding campaigns do not achieve their funding goal.
Fixed funding sounds harder, but in reality you have a much higher chance of achieving the goal you set out to achieve.
You should only ask for what you need. So budget accurately, and start your promotion well in advance of your project going live. Be confident of at least 30% before you launch.
And remember, you can always begin again more intelligently later if it fails!
