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Crowdfunding: What to Know | A Facebook Live Q&A

Crowdfunding: What to Know | A Facebook Live Q&A


– Hi, everybody. I’m Katie Moritz. I work for Rewire.org And we are here with Ethan
Mollick of the Wharton School at the University of Pennsylvania. He is a crowdfunding expert. And we’re here to talk about today non traditional ways to
fund a business startup. Thank you for being here, Ethan. – Happy to be here. Thanks for having me. – So, can you talk about how common… Can you give a little bit of
an introduction on your work and why you research what you research, and also how common crowdfunding
is today for entrepreneurs? – Sure. So I was an entrepreneur myself, ran a software company for a while and teach entrepreneurship and
innovation here at Wharton. And so I’ve been interested
in crowdfunding for a while, both because I’m interesting
in how crowds do things and also ’cause I’m interested
in how startups get funded. So a lot of my research is on Kickstarter. Then I’ve done stuff
on equity crowdfunding and things like Patreon, a
little about GoFundMe and so on. But with Kickstarter, I’ve
really partnered with them for access to lots of cool data. So I have things like surveyed every Kickstarter
person who made money, and I’ve got all kinds
of interesting papers and results on that set,
and who makes money and how. I can tell you that crowdfunding, especially for consumer facing hardware, is pretty required among venture
capitalists at this point, so it’s a very common
way of raising funds. And the success in crowdfunding ranges anywhere from small
companies to large ones, from artistic ventures to smartwatches. So lot of diversity and variety. – Awesome. Well, I’ll kick it off
with some questions, and we definitely want, for
all our viewers out there, we want you guys to be
submitting questions, too. Ask your questions, and I
will ask Ethan to answer them. But I’ll start it off. So can you describe the anatomy of a successful Kickstarter campaign? You’ve studied thousands and thousands and thousands
of these campaigns, and you have it broken down at least to a little bit of a formula. Can you talk about that? – So, the important thing to
remember about crowdfunding is the crowd piece and not
just the funding piece. So I can’t give you an
exact formula for success, but I can tell you what
successful people have done. So you should realize, this is for both interviews
and other types of stuff, and by the way, I should
say, if anyone is interested, there should be if not now very soon a free course available on Coursera where I put together all the
crowdfunding information, so you can feel free to go
there and take the course. And I have videos with the
founders of crowdfunding such as Indiegogo and
Kickstarter and other places. But generally, it involves a
lot of preparation in advance. So the average person who
launches their project has spent weeks in advance spending as much as 20 hours
a week preparing for this, and not just making a nice video, but also making sure that you have a community who’s
interested in what you do. So crowdfunding starts with the crowd. It starts with the community. So it starts with the idea
that there’s a group of people who are actually already
excited about what you do and interested in the
kinds of things you do, and hopefully you have
a reputation with them, and those are the people who ultimately will end
up providing funds to you. So then you go into that. You mobilize that group. You go through a phase
where you launch it. Again, 20 to 30 hours a week
is the typical amount of time people spend during the campaign. And delivery is another
complicated set of stuff to do. – [Katie] Okay. Thank you. You wrote about it in one of your studies that there are certain details, though, that really do draw people
to a Kickstarter campaign. You found that making a
video is worth your time. – Yeah. So there’s a bunch of detailed
stuff of various types that we can go into. So quality matters overall. Video is part of quality. And, for example, a single spelling error on
your crowdfunding campaign lowers your chance of success by 13%. So the crowd is actually looking to see what’s good and what isn’t. And so there’s actually, quality matters. So video matters for quality. Showing endorsements matters, so having Wired having written about you is something that helps you succeed. Showing prototypes or
plans helps you succeed. Showing that you have the ability to accomplish your
goals helps you succeed. So there’s a lot of
factors that go into this. – [Katie] Sure. So we’re starting to get some questions. I’ll take a look and shoot one your way. In your research, have you found that certain types of business
ventures do the best when it comes to crowdfunding? – So what’s interesting, I’m sorry I can’t put a chart up here, but you can look it up. I’ll try and give you the link. So crowdfunding works really
well for lots of ventures. So different industries
matter in different ways. What I find is, on average, every dollar you raise in crowdfunding makes about $2.40 in outside revenue outside of crowdfunding. And those numbers vary hugely. The people who actually make the most revenue per
dollar in crowdfunding is actually food startups, and then technology and design and games. Technology, design, and games categories are the ones that tend
to raise the most money. The games segment, both
video games and board games, have been completely
transformed as an industry by crowdfunding. So there’s a lot of variation. Every industry has its own little thing. We could talk about music. We could talk about film. There’s a lot of industry areas. So it’s almost like a lot of little parallel
things happening at once. In the startup world, it’s much more about consumer facing hardware
is a really good way to go. – And you found that Kickstarter campaigns are very linked to where they are based. So based on whatever industry is popular in the
community where you live, you might have a better
chance of succeeding. Is that true? – So, it’s less about the
chance of success as we thought. So geography is a big problem
in entrepreneurship overall. It turns out that the average distance between a venture capitalist and the company they
invest in is 70 miles. So if you’re not living
in The Valley, Austin, Denver, Boston, New York,
Chicago, a couple other places, you’re gonna have trouble getting money. But crowdfunding does seem to eliminate a lot of those distance concerns. So there are geographic effects,
but they’re much smaller than the geographic effects
of any other avenue. Your community matters
more than your geography. So if you have a close
connection to a group of people and you have a reputation,
that will help you. So one example of this. There’s a famous exit that
came out of crowdfunding was for Oculus Rift, a
guy named Palmer Luckey. So they got bought out by
Facebook for two billion dollars. When Palmer was launching
his crowdfunding campaign, you can actually see the forum posts, he was already well known inside a small virtual reality community that cared about this stuff. So virtual reality seemed like a really big deal in the late 1990s. Everyone was really excited about it, but it was pretty lame. And then the movie came
out called Lawnmower Man, which was terrible. And that was sort of the
end of virtual reality. VCs didn’t fund it anymore. So anyone who cared about VR ended up being a hobbyist and
playing with it on the side. So when Palmer was gonna do this launch, he didn’t just broadcast,
“I have this great idea,” for everybody else. What he did was he ended up actually going to the
community first, saying, “Hey, I’m thinking about
launching a Kickstarter campaign. “Can you help me come up with ideas “about how I should do this? “Should I use the name
Oculus or something else? “Does anyone have an idea for a logo?” So that community was involved and engaged before he ever got into that launch. So it’s about your micro community. If you play role playing games and are well known for making your own little miniatures, great. Then there’s a group of people who know you’re good at
this and they’ll fund you. If you’re the head of a knitting circle of people who really admire your designs, those people will fund you. If nothing else, friends
and family will fund you. So 60% of the funding often
comes from friends and family. So it’s about your community,
not so much the industry. – Interesting. Thank you so much. So we’re here with Ethan Mollick. He’s with the Wharton School at the University of Pennsylvania, and we’re talking about crowdfunding and non traditional ways
to start your business. Thank you so much for being here. – Happy to be here. – We’re still taking
questions from viewers, so please send them in if you have them. So I have another question from a viewer. Maribel says, “How important
are rewards for donors “when you’re crowdfunding?” So little prizes, incentives to donate. – Very important. So when you ask people why
they’re funding a project, people do that for social good components and other sets of concerns. They fund you because you’re you. But having an actual reward in reward-based crowdfunding matters. Now, again, I’m an academic, so I’m gonna say something
somewhat academic, but it matters, which is there are four
kinds of crowdfunding. There’s equity crowdfunding, which is you’re actually
buying a piece of my company. So I’m investing in you. That just became legal pretty recently. There is reward-based crowdfunding, which is like Kickstarter,
things like that. There’s charitable
crowdfunding, like GoFundMe, where people just give you money. And then there’s loan-based crowdfunding. So the rewards in reward-based
crowdfunding matter a lot. People do expect this to be a preorder, and they expect to get
something as a result. You generally wanna have a reward in the sort of 20 to
50 dollar price range. Average rewards of over 100, though it depends on the industry area. – [Katie] Awesome. Thank you. And Suzy now asks, “How can crowdfunding
work for a non-profit?” – So, I did a whole study looking at crowdfunding in the arts, and it turns out that
it works pretty well. Because again, think about community. That matters. So if you already have
people who like your work, you’re the only Shakespearian theater in Oconomowoc, Wisconsin. Then you already have
people attending your plays, and those people will be great people to go into your crowdfunding campaign. So there’s details about
how non-profits work, and there’s a difference
between going after a GoFundMe or Kickstarter. But as of now, Kickstarter
gives more money to the arts than National Endowment of the Arts. So it’s obviously a big deal in funding non-profits in a lot of ways. – Awesome. So we have another question. Marguerite asks, “How important
is marketing and promotion,” in a Kickstarter campaign
or a crowdfunding campaign? – So, hi Marguerite. I like the dog picture. So it’s important, it’s very important. I will tell you some
good news and bad news. So quite a few people spend a lot of money hiring consultants,
putting in Facebook ads, and other things. And I’ve heard generally,
anecdotally, good things about it. I don’t have the math
to show whether or not the promotion dollars directly pay off, but I can tell you that promotion dollars have no statistical
effect on whether or not your campaign goes viral and raises a lot more money
than you were expecting. So you don’t need to
put a lot of money in, but promotion is important. But it can’t be broadcast. You will know your communities better than any consultant will, and you’ll know the group of people to activate and make things happen. But it’s really important to realize, you are not gonna be a viral hit. It’s just, you have to plan not to be. The biggest mistake I see
people make in crowdfunding is that they set their goal too low and they expect to get many
times that goal as a result and make a lot of money. So they’ll set a $10,000 goal
and expect to make $100,000. That doesn’t happen very often. Less than 10% of projects raise
25% or more over their goal. Very few of them become viral hits. – [Katie] That’s really interesting, and I know you did some research on, when companies don’t reach their goal– – Oops. – Oh. – Started to fade out on me
for a second, but I’m back. – Sorry. Okay, good. We’re live, folks, so
bear with us. (laughs) When companies don’t reach their goal, a lot of times it’s either, at least from what I
understood from your research, it can either be a landslide
or they failed big time. Can you talk a little bit about what percentage of companies do make it? How common is it for a
company to fail or succeed? – Remember, we’re not just
talking about companies. We’re talking about people, as well. And so generally, the success
rate is somewhere between, depending on what time, what you’re doing, sort of 30 to 50 percent
of projects succeed, depending, again, on situations. But I think what you’re referring to is, you tend to either win by
a little or lose by a lot. So there are very few projects that raise 80% of their
goal and don’t succeed. Most project that fail only raise a very small amount of money and fail by a large amount. Most projects that succeed
succeed by very small margins. So again, I can’t find
anything statistically that will help you become a viral hit, so you should expect to
raise exactly your goal, because that is likely what
you’re gonna be stuck with. – Thank you very much. That’s helpful. So what advantages does crowdfunding have over other types of raising
money to start a business? So, when I ask people what
they got out of crowdfunding and why they did it, “I need the money,” is not often the first answer. The first answer tends to be that, “Crowdfunding helps me test an idea “to see if there’s an audience for it, “build a community of fans or appreciators “who like what I do, “get interest from the press, “and raise additional outside money.” So crowdfunding is a piece of a strategy, and it has a lot of advantages. If you’re looking at it
just for fundraising, there may be easier ways to get funds. So you need to think
about how to handle it, but there’s a huge amount of advantages of having a public success, but also disadvantages
of a public failure. – So when you’re building
your crowdfunding page, I know it’s important to
have a very clear picture of what you’re trying to pitch to the people who might fund you. What are some very important
things to go into that pitch? – So, there’s a bunch of research showing that positive language is helpful, unless you’re trying to raise
money for disaster relief, in which case tragic language
is helpful, statistically. There seems to be a sort
of sweet spot of words. So things that are too long or too short tend to do much worse. So you wanna aim somewhere in the middle. Again, authenticity matters, so making sure that this doesn’t seem like a corporate glossed over thing but is related to you and what you do. And again, you’re speaking to a community. So if you don’t know who your audience is, you’re in trouble. Number one thing I hear
from people, though, is the most useful to do is to look at other successful crowdfunding
campaigns in your area, see what they do, and generally
follow those guidelines with some twist. – [Katie] Thank you. That’s incredibly helpful. What suggestions do you
have for entrepreneurs, for people on Kickstarter
doing a crowdfunding campaign who get stuck at a certain dollar amount and can’t get past that threshold
to get to their end goal? – So there tends to be a
sort of well known phenomenon where you raise a lot of money
and then the money dips off and then you raise a lot more at the end. Remember, it’s all about prep work. So once the campaign has begun, it’s hard to move the needle a lot from a promotional standpoint, ’cause you’ve hopefully
done all your work already and you’re all in. So it’s hard on day 25
of your 30 day campaign for you to do anything that’s gonna shift
things around very much, ’cause hopefully you’ve
already contacted the press, you’ve already emailed your supporters, you already have a list of
people that you’ve contacted. You’ve put out updates. You’ve put out stretch goals
and rewards if those matter. So once you’re at day 25, there isn’t much I can tell you other than execute your plan. So come into this. This is not designed to be improvised. It’s designed to be done on a plan. – So how often should you be updating your funders, your followers, on the progress of your project? – Well, in the campaign, I find a relationship between people who update in the
first three days and success. It’s hard to separate
out how much of that is projects that aren’t
successful or tried to do that. And universally, if you update your people in your campaign frequently, they will be happier with what you do and they’re less likely to be upset and they’re more likely
to give you forgiveness if you end up hitting
problems with your campaign. So updates are really important. Don’t wait for mega updates. Keep people in the loop. – Thanks so much. So we’re here with Ethan Mollick. He is with the Wharton School at the University of Pennsylvania. I’m Katie Moritz. I work for Rewire.org You’re watching our Facebook Live Q and A. We’re talking about crowdfunding and the best practices for crowdfunding. And we’re taking your questions, so if you have a project that
you’re trying to get funded that you’re trying to
get up off the ground, please send in your questions,
’cause I’m asking Ethan. So we have another one that came in. Dylan asked, “When should you use “an investment crowdfunding
site like StartEngine “versus Kickstarter or Indiegogo?” – So Dylan, that’s a really good question. So investment crowdfunding or equity crowdfunding is the idea that you’re auctioning off
a piece of your company instead of giving a reward. So the nice thing about
reward crowdfunding is you don’t owe anyone anything other than the product at the end. So you don’t have to worry
about having investors. So I would generally say at
this stage that you want to, especially in the US, because
equity crowdfunding is so new, I would avoid it for right now. And the reason I’d avoid
it for right now is, crowdfunding will give you some money but not enough to make
your company go public. Nobody is quite sure how
to work with crowdfunding from a venture capital perspective. No one is quite sure of the
risks or returns at this point. So there’s some uncertainty there. Now, that being said, people like Wefunder have
been very successful, Crowdcube in the UK. So if you have an investment opportunity, it can be worth pursuing,
but you do have to realize that it’s a relatively
new phenomenon in the US, and all of the glitches
haven’t been worked out about when it works, when it doesn’t, yet. So just to give you a sense, last year, Kickstarter alone
raised a billion dollars. Last month, all equity crowdfunding sites in the US under Title III,
which is common crowdfunding, raised four million dollars. So the scale is just not
there yet to support it. It doesn’t mean you should consider it, but right now, it’s less clear about when you should versus when you shouldn’t. – Awesome. Thank you so much. So Susie asked, “Is
crowdfunding only for startups, “or can it be a tool used by companies “that already have funds through
angels or venture capital?” – Yeah. So a fairly decent percentage
of startups that have VC go ahead and try and raise money this way. It’s pretty common for
people to have angel money and then try to launch a product. So if you see someone
doing a 3D laser cutter, it’s unlikely that they’re
gonna be able to raise all the money through
Kickstarter they need to make that happen. So it’s fairly common to
see people with angel funds go to Kickstarter after
they’ve created a prototype. And again, I wanna stress, Kickstarter is not just for companies. Lots of people launch
things as one off projects. We find big impacts on people’s lives, on future earnings, on career path, so it doesn’t just have to
be about launching a company. But it can be a useful way for people to jumpstart their business, as well. Or Indiegogo or any of these other sites. – So Justin says, “Kickstarter terms won’t let you fund “a general business idea. “You have to set a defined
project or product. “Do you know and crowdfunding sources “more for kicking off
the entire business?” – So that would be what
equity crowdfunding is for. So AngelList being another
example of what happens here. The problem is that, again,
it tends to be somewhere where you have to be pretty
far along on your business, and once you’re doing that, you’re hopefully weighing crowdfunding versus angel investing
versus other things. So he’s exactly right. Kickstarter is built around products, so I’m actually producing
something and selling it, and not for, “I have
an idea or a service.” It’s less useful for software. It’s certainly less useful for business to business ventures. So you could use equity
crowdfunding for those things. In most cases, there’s initial angel money to kick off your business. It’s better from friends and family, SBA loans, other sets of techniques. – Thank you very much. I wanted to give a shout
out to Susie Wuollett. She was the one who
asked the question about if crowdfunding is only for startups. And she started Protege Biomedical, and we profiled her business as part of Rewire.org’s larger
series on entrepreneurship, which this Facebook Live
Q and A is also a part of. So I just wanted to give a
little story arc shout out. Thanks, Susie. So we have more questions. Again, this is Ethan Mollick
with the Wharton School at the University of Pennsylvania. We’re talking about crowdfunding, so please send in your questions. Is it better to set a
shorter or a longer timeline for reaching a crowdfunding goal? – 30 days. Set it for 30 days. – Okay. – We find penalties for violation of that. If you have a really good
reason for doing 60, do 60, but success rates don’t go up,
and that urgency drops down. So statistically, 30 days is best. – If you were just going
to list off for someone, giving an elevator pitch, what are the top three
things someone should know before launching into a
crowdfunding campaign? – Set your goal appropriately. So do your budgets. Figure out how much
money you need to spend. But leave a margin, because
things will go wrong, and you can get trapped in a situation where you haven’t raised enough money. So do as much pre-work as you can. Figure out, if it’s a thing, how you’re gonna manufacture it. The areas that people
have the most issues with I think is fulfillment, being
able to ship products out. So make sure you understand how you’re gonna do all
these things in advance. Second thing you do in advance is you reach out to your
community of backers. You wanna have a bunch
of people you can email. A company I helped advise
recently for my students, they raised $100,000. They said they had a mailing list of 5,000
interested people first, and they did Facebook ads
and other targeted stuff. So you learn your customers, just like you would if you were doing a lean startup or any
other kind of approach. Take it seriously that way. And then the third is, keep in contact with these sets of people. These are people who promote what you do. They’ll be excited about what you do. They’re your fans. You gotta keep that
stuff, keep them engaged. – Awesome. Thank you so much. So speaking of having a budget, a clear budget for what you need, what’s the best way to determine the amount that you will ask
for on a crowdfunding campaign? – So you’re gonna have
to do as best you can, get an Excel spreadsheet,
and get the cost down. So there is a method. So again, this is complicated stuff. So again, there’s a Coursera course that we offer free from Wharton. You have to pay for a certificate, but if you want to get
the course, it’s free. It’s on startup basics. And if you don’t know how to do a budget, there’s a approach
called (mumbles) planning that’s pretty good for startups. But you need to think through that. So you could take that course if you want and look at that information, ’cause we have classes on how to do this. But you wanna make sure
you go through the budget, have at least two other people
who are not in the business look at the budget so they can see if you’re spotting anything
that they’re missing, and leave yourself a margin for
error on this sort of stuff. So ideally, you’ve made a prototype, you’ve built the thing in advance, so this is not gonna be a surprise to you. – Okay. Thank you. Sorry. I just lost you at the end,
but thank you very much, and hopefully all of you
out there caught that. So Justin was the one who asked
the question earlier about setting out a full business idea and how to do that with Kickstarter. And he asks, “Can you
talk a little more about “taking a business idea a little farther? “For best investor excitement, “describe what a new
business idea should have “started, prototyped, created, “before launching a crowdfunding project.” – Okay. So I’m a little confused
by the word investor here. So there’s two kinds of investors you might wanna worry about. So the backers of a project, and we usually call them backers ’cause they’re not
investors in reward-based, investors in an equity-based platform, but also I’ve found that in the areas like technology and design projects, a decent amount, over 10% of projects, end up raising VC afterwards. So those are real investors. Those investors are more
likely to invest in you if your project is a
viral hit, raises a lot. The more money you raise, the more likely you’ll be successful. The more you raise of your goal, the more likely you are
to get that VC money. So having a big hit does actually help in those kind of ways. And in terms of getting
backers interested, again, showing prototypes, having
a high quality result, having a community on board
that’s jumping on board, all of that matters a lot. – Thank you so much. And we have another question. “From your research, are
there any standout campaigns “that stuck with you as great examples “for aspiring entrepreneurs
to take a look at “for inspiration before
they start their own?” – Yeah. There’s both positive and negative. So you wanna look in your
industry area definitely. If you’re launching something
that’s an arts project and you’re making something that, again, is sort of model
train related or whatever, make sure you look at all the
other model train projects. There’s gotta have been some. It’s insane how deep it is. So the models tend to be within each area, and there’s a lot of campaigns that have been very impressive
in some of these zones. So on the positive and negative side, if you could look at
things like Coolest Cooler, which ended up having
all kinds of problems, as an example of a campaign that actually achieved too much success. That’s the thing about
limiting the upside in that way and being realistic about it but looking at what’s appealing about it. There have been a bunch of companies that have done some
really interesting stuff. So I have here my, I
happen to love this thing. So this is a mini museum. This is a guy who I guess was
a toy designer for ThinkGeek, and his father was a Smithsonian person, and he always wanted to
make museum exhibits. So what he does is buy up rare things. In this case, it’s a piece
of the Golden Gate Bridge and a tiny piece of a Neanderthal hand ax and a piece of mammoth meat and puts them in Lucite,
like little samples. He raises a million dollars
every time he does it. He’s gone back to Kickstarter three times. Somebody who knows their audience and has built a business
at the right scale to deliver on their dream. So make sure it’s a passion for you, ’cause you’re gonna be
living this for a long time. So again, it’s tough with the examples, because I have examples
from each industry area rather than overall. – Thank you so much. That’s really cool. I wanna see. I’ll have to google that later. That’s really neat. (laughs) – I don’t know him. I’m not paid. (mumbles) (Katie laughs) – Okay, good. No free endorsements on here. (laughs) Well, thank you so much. And I guess I’m gonna ask everybody who’s out there watching, send in your questions before we wrap up just in case there’s any
lingering questions out there. Ethan, is there anything while we’re waiting to see if there’s another influx of questions, is there anything you’d
like to say to wrap up, just things maybe we didn’t touch on that you think are important
for people to know? – Yeah. So one of the things that our
research has shown is that crowdfunding will work really well for people that are unfairly overlooked. So it turns out, women
outperform men in crowdfunding. And in every other area of fundraising, women actually underperform
relative to men. In crowdfunding, women outperform men. We find geographically that
people who live in areas that don’t have much
access to venture capital, when crowdfunding starts to
succeed in new geographic areas, VC actually moves to that area and starts funding things there. So you can actually start
new things that way. I would say that the other to know is about one third of crowdfunding
projects on Kickstarter are created by teams, so
it’s not just individuals. And then my last thing I would say is, based on all of the observables
we have, you can’t predict, failure rates at Kickstarter are very low, about nine percent of projects fail, and you can’t predict failure based on any demographic characteristic. So women versus men,
education level, age level, gender, race, all of that,
having children at home, none of that has an impact. So crowdfunding really can be
for lots of different people. – Okay. Well, thank you so much. I think that those are all the questions that we’ve had come in. I am interested in, I did watch a video about you talking on the women on Kickstarter phenomenon and how women were more
successful reaching their goal. Can you talk about, just
because I’m interested in it, can you talk a little bit
more about why that is? – Yeah. So it actually turned out to
be a really interesting puzzle. So women are about
between 13 and 18 percent more likely to succeed with
the same project as a man. And we thought this might be because, so there are more men than
women who fund startups. So there’s more male VCs, there’s
more male angel investors. They tend to prefer other men for reasons that involve homophily, like we like people
who are like ourselves, our networks tend to
be of a similar gender, and also things like misogyny. So all of that comes into play. So when we saw women
were outperforming men, we thought the reason might
be that in areas like fashion, there are more women
funding projects than men, so maybe women were disproportionately
funding other women. It turned out women were
succeeding more than men not where they most advantaged, but where they were most disadvantaged. So women outperformed men in things like technology and video games where there are the least
women backing projects. And it turns out, we found out it was due to something we
call activist choice homophily. That is, you are supporting people when you felt they were
disadvantaged over your same group. So actually, it was women supporting other women in those areas that made the difference. Men didn’t seem to have a
bias for or against women. But for a proportion of women, there was an interest in trying to support other people where they
felt disadvantaged. So that explained a lot of the
variation that we saw there. – All right. Thank you so much. Actually while you were talking, we got another question
from Susie Wuollett, again, from Protege Biomedical. And she asks, “What are the
biggest risks for crowdfunding?” – So, you’ve got a bunch of risks, right? Your first stage risk is this
is distracting and takes time. And when I teach startups, I tell people you’ve got three kinds of debt that you’re managing. You’ve got a financial debt
that you’re worrying about. You have your time,
which is also critical. And then you have a
budget for organizational, team building, building for
the future versus for today. So crowdfunding can be really expensive not in terms of money, but really expensive in
terms of time consuming and making you change direction to maybe build yourself around
the crowdfunding campaign. So that’s an early risk of
even choosing crowdfunding. The second risk is that
people tend to under budget, and they still manage to deliver, but it ends up being a difficult process and they end up being delayed, so this can go longer than you think. That can also be a risk. And you can be pulled in the direction that your backers want but that may not meet the audience. So the early customer
problem is also a real one. – Thanks so much. We have another question. Amanda asks, “How important
is it for the donor gifts “to be related to the
crowdfunding cause or project?” – So generally, you would
want the donor gifts, again, to be tightly related. So ideally, it’s for people to get access in some way to the project. So for a movie, they might get an early DVD or a walk on roll. T-shirts and things like that
work, although the problem is they’re not nearly as
motivating as you think if it’s not a fashion project. And it’s annoying to
get T-shirts sent out. It’s something I’ve heard
from lots of startups. So the closer you can make
it and the more related, the better off you generally are. – Okay. Great. Thank you so much. I think that’s it for today. Thank you so much. Ethan Mollick with the Wharton School at the University of Pennsylvania. I’m Katie Moritz with Rewire.org We were here talking about crowdfunding. Thank you so much for
sending in your questions. Yeah. This video is part of our
series on entrepreneurship with the Schulze School
of Entrepreneurship. So thank you so much, and
have great day, everybody. Thanks, Ethan. – Thank you. Bye-bye. – Bye.

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