Pierre-Olivier MAZOYER

I’ve funded quite a few (image related) projects on the main crowdfunding websites over the 2 past years and I am pretty disappointed with what I experienced.

Actually, I also spent a few month preparing my own crowdfunding website, dedicated to image based projects… but I just dropped it. Hey, we all face the issue of fincancing our projects (banks rules for accepting credits are great project killers), of making a living (real life bullshit!), and I started having some doubts on the crowdfunding model…

This is the first of a few blog posts in which I will share this experience as one in the crowd, putting my money on crowdfunded projects, but also as a person who has taken a deeper look into the crowdfunding model. I hope that this will be useful both to the project owners in order to better manage their campaigns and to crowdfunding website owners to improve their models.

Crowdfunding is a quickly growing business. Kickstarter, Ulule, … most are so far on a parabolic growth curve.

Kickstarter is the only site I know that publishes regular detailled and transparent reports on their activity. They just released their latest report, celebrating both their million backers and 100 millions dollars pledged. Here is the document:

One Million Backers

Great. But this business only started from nothing 3-4 years ago with indiegogo and 2 years 1/2 ago with kickstarter. Of course this parabolic growth curve does say there is potential in the crowdfunding business. But what else? A trend approach is not relevant for forecasting the future of a “new” market. So let’s forget the growth and big zeros figures. Let’s focus on the product and on customer satisfaction. From my experience and research, there is a big problem here…

Crowdfunding, as most products, has major youth conception problems. The industry needs to solve them in order to keeps its customers and continue its growth.

The risk faced by the industry is visible in page 3 of the above kickstarter report. Only 16% of the backers are repeat backers. It means the customer retention rate is very low. Backers are not coming back. The parabolic growth curve won’t last for years with such a low retention rate. This is probably because a lot of backers are in the close circles of the project owner (in the first circle of friends and family, or in the second circle of the friend’s friends) and therefore only come and go on this known project without browsing around other projects on the website. This is one issue I’ll develop in a specific post. But this is also probably because many are as disappointed as I have been and don’t want to come back…  This is why the industry needs to improve the crowdfunding product.

By the way, the good news is in page 4 of this report: Repeat backers on kickstarter are good contributors and increasing!

Before going into details in the needed modifications of the crowdfunding product, let’s start with the definitions and the semantic issue of crowdfunding:

The crowdfunding semantic misunderstanding

Wikipedia defines crowdfunding as the

collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the Internet, to support efforts initiated by other people or organizations. Crowd funding occurs for any variety of purposes, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns, to funding a startup company or small business or creating free software.

You get the picture ?

When crowdfunding was about financing NGOs, wikipedia, or open source software development  or … we didn’t expect a return on investment. Pure donation. I support this cause therefore I give. The only reward I get are my satisfaction as a human being, the possibility to live according to certain values like sharing, non profit…

Later came crowdfunding with a financial model. I’m an investor. I want to ear money from the project I fund. I love crowdfunding because I fund something I like. But I do it as an investor. That’s the model primarly used by the music industry. You can even fund companies in this way. It’s the capitalistic approach to crowdfunding. In France we have one website operating in image related projects. I tried it 2 years ago.

crowdfunding on people for cinema

The idea is to fund the distribution of a cinema movie 2-3 month before the premiere. I this case : A great director (Bertrand Blier) and 2 incredible actors (Jean Dujardin & Albert Dupontel) and a wierd pitch. Le bruit des glaçons on People for Cinema. I invested 100 €, could have lost all, would have got my money back at 500.000 cinema entries, and finally got 120 € back 9 month later. 20% return on investment. Not bad ! But that’s not my cup of tea. I just got money. This investment was as boring as any other! I’ve abandonned the capitalistic crowdfunding. It’s not what I want.

So what is there in common in common between supporting NGO’s, making a financial investment and backing a creative project while expecting to recieve a non financial reward ?

It’s all funding made by a crowd. But this being said, we said nothing…

This semantic issue of crowdfunding: It does not define the product. And it is misleading.

Misleading? :

• From the project owner’s point of view, there’s no semantic problem, its not misleading: You’re using crowdfunding to get fund for your project. You get it from a crowd. The deal with the crowd obliges you to fulfill a few actions such as sending rewards… Full stop. (I’m making a caricature on purpose here)
• But for the one in the crowd, for the individual who’s putting his money on a project, what does crowdfunding mean? As the product’s not well defined, there’s a wide range of individual expectations. Is he closer to donation or to making a good deal? Is he here for the reward or for the experience? …

Of course, there is a population of crowd funders who are happy with supporting projects and in phase with the ” projects owners’ ” approach : Crowdfunding is for getting fund for a project. For them, no semantic issue, no misleading message… But this crowd may not be big enough, and may not be “”returning buyers” enough to make a lasting and big enough business fordel for the crowdfunding… So, once this said, the question is to decide if  crowdfunding ‘s customer target is to gather

• People who believe in a specific project
• Groups of persons who support a specific cause
• Lovers of photography who want to support the photographic creation (photography or video or …) and reply to a specific call for supporting a project received through their network

That’s a choice that can be made, but which is not clear. When we look at projects, at the way the crowdfunding websites, it seems to me that the crowd which is the target customer group is a bit wider, in cluding

• Lovers of photography who want to support the photographic creation (photography or video or …) but have a priori no specific link with a specific project
• Amateur photographers who want to share with the authors, get access to the “making of zone” as emphas.is calls it, …
• Amateur photographers
• Amateurs of art in search of original, different, and/or exclusive contents
• Curious crowd willing to experience something, discover new things, make themselves a pleasure…
• …

For this 2nd part of the list (which is not well defined by the way… symptomatic…), the crowdfunding business model is not well defined, misleading…

What do the crowdfunding websites and the project owners propose to the crowd ? What do they propose to their target customer groups ? and, at first, what are their target customer groups ?

The crowdfunding websites should be clarifying this issue. But on the contrary, most of them are increasing this misleading situation, saying crowdfunding is both supporting a project (i.e. donation), sharing (i.e. experience), and getting value for your money (i.e. investment)… the hen that laid golden eggs…

They usually only give general guidelines, support project owners on demand, moderate projects before funding is launched…  and finally let the project owners alone do what they think they should do with their crowd. From a legal point of view, this has a clear consequence : all the responsibility for non fulfillment is on the projects owners.

But from a business point of view, this is killing the hen that laid golden eggs !

No one in the crowd knows what to expect; everyone in the crowd makes up is mind for what he thinks he should get; project owners do whatever they think is they obligation or their moral entitlement… crowdfunding websites hope to get away with this. But I’m not happy. I believe many in the crowd are not happy. The customers are not happy. Remember the 16% retention rate of kickstarter in the document above?

As a conclusion: the crowdfunding websites must clarify & better define their product, and solve the semantic issue that causes the loss of many customers.

The next posts will go step by step through the problems I’ve experienced with the crowdfunding product, while backing projects on websites which propose the non financial rewards.

As I wrote already a bit about this “payback issue” of crowdfunding, I’ll write the 2nd post on the tangible payback of crowd funding:  the rewards.

PS: I still believe in crowdfunding… contact me if you want to build a next generation of crowdfunding website or project … ;-°

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