Raising funds with crowdfunding has it's own set of hazards that can be detrimental to your future success. Indeed, if you fail to reach your financial goal of your campaign, it can change the public perception of your project, your business, and even affect your ever-so-important online reputation.
Article Contributed by Dr. Letitia Wright of The Wright Place
Imagine, for instance, someone doing an online search for you and finding a failed crowdfunding project at the top of the search engine?
Ok, so even if it's not the top result. Everything you do online can be found if someone digs hard enough... So, what is your plan for failing to raise your goal amount? Everyone should have a plan in place.
The plans have to be two-fold:
- You have to look at the financial end. How much is the minimum you need to raise in order to complete your project and fulfill any reward system you have in place? If you have less than you need to complete the project, the best tactic is to refund all money (All or nothing sites like Kickstarter do this automatically & it's a requirement on these sites). If you do this, not only will you save yourself a headache, but everyone on the project will be impressed with your business ethics. Browse through a crowdfunding site's projects to see how they explain their financial goals.
- Then there is the psychological impact of a failed project. This is not something you can overlook. People do not like to be associated with a failed project (Not to mention... a failed project can also get you feeling down in the dumps).
I spoke with my friend Dave Lakhani, an author on motivation, about what goes on in someone's mind when they are a part of a failed project. Here's what Lakhani had to say,
People are motivated to do something once. When it comes to giving money, people give once and it is a big emotional decision. There is often a little remorse with doing it because of the lack of surety of the project. When it doesn't go, it triggers a gut reaction that maybe it wasn't a good deal anyway or everyone else would have done it too.
The other challenge is that like any other windfall, getting the money back means it can be earmarked for another shiny object, and, in the case of Kickstarter or Indiegogo, they've likely seen a bunch of other cool things they could have spent the money on.
At the end of the day, everyone likes to back a winner, and it is hard to back a loser a second time unless you have a very strong connection to the person.
Finally, it is the time involvement of getting your refund and going back and re-supporting a project when it comes out again. Time is a limited resource, and to ask for it once is difficult...to ask for it twice, a Herculean task.
If you plan on going forward with crowdfunding. Remember that the dangerous land of failed crowdfunding projects forgives no one. Do your homework, & get it right the first time.
What are your thoughts? Is it dangerous to fail your first crowdfunding project? Let us know in the comments.