Thoughts on crowdfunding in aerospace
By Michael Mealling
Kickstarter success was completely unexpected, never dreamed of reaching $110k. Both harder and easier to do Kickstarter than you may think.
Original goal was an extended rant. Didn't think a video was needed but made one anyway. Grew into an essay, then a monogram, and finally a book. Did another kickstarter to publish the book. Third attempt crowdfund publicizing the book but no response yet from Kickstarter.
Doug Griffith: Certain sentiments and themes are successful. Charitable causes and David vs Goliath both go well. Uwingu worked well. Golden Spike campaign has not.
Q&A: Will too many campaigns saturate the market? Rand - Not sure. Delayed a campaign to avoid competing with NSS video. Laine - Disagree. More the better. Talked with the founder of Kickstarter about a new “research” category rather than just “technology. About 40% of NSS video contributors were new to Kickstarter
Several companies in Hypepotamus are pursuing crowdfunding projects and/or help others with building a successful crowdfunding campaign. Just outside our doors is a company called Techject that has the 2nd highest grossing project on IndieGoGo. They've raised $1.14 million of their original $110,000 goal. Its interesting to see what works and what doesn't. The best way to describe it is a train wreck between raising angel level financing and a B2C marketing campaign.
There are two themes that continue to resonate: credibility and momentum. People who donate to a project are just as concerned about not wasting their money as any investor. They want to see trusted and credible third party endorsements of the idea, a track record of success from the team, some initial progress prior to raising the money to prove the first two are correct, whether the funds needed can be raised, and finally, does the project grab the imagination and vision of the target audience. I've previously discussed the role of trust and vetting which goes to the credibility requirement but these other considerations are just as important.
Momentum matters. There are several demonstrated techniques that help build and maintain that momentum:
Your social networks matter. Prior to launching the campaign make sure your team, their extended networks, and the networks of your endorsers are understood and maximized so that your social strategy can make best use of your existing network. Find and use social analytics to understand when and how to post to maintain a steady hum of interest. Don't waste posts if the hum is being maintained for you.
Pre-stage donations from big donors. Nothing kills a campaign faster than raising only a few hundred dollars halfway through the campaign. Campaigns that reach at least 30% of their goal usually go on to reach their final goal. Called The 30% Rule is goes to the credibility argument. To quote others, people donate because "It’s working, which means its working.” One way to get that 30% is pre-stage large donors so they donate early and get you there.
Size matters. Angel investors use funds to 'buy' milestones. In that world they are called tranches. Another way to ensure your 30% goal is to size the tranche to fit what your major donors can provide. Don't ask for it all up front. People hate the idea of donating only to find out the team fails to meet a critical milestone. But don't create to many tranches, either. Investor fatigue will set in quickly. I think that's what Rand suffered from in his publicity campaing for his book.
Non-social exposure matters as well. This is where it looks more like a marketing campaign than a fund raising campaign. You need exposure beyond your network. When you see media covering a successful crowdfunding project don't assume that coverage is all organic. Someone somewhere worked to make that coverage happen. But this isn't traditional Public Relations. It has to be that special kind of PR person that can be genuine. It has to be someone that truly cares about the project.
And finally, the reward REALLY matters. Techject got to $1.14 million because that personal UAV just looks incredibly fun to play with. And this is where space projects have a real challenge. In many cases the goal of the project is something in space that's doing something interesting. What physical reward can you give someone based on that? I think some of the smallsat projects can easily provide a model of the spacecraft as a reward. But projects like Golden Spike are going to be hard.
Crowdfunding for space projects (and basic research in general) is going to continue to be challenging due to the reward problem. One method might be the National Geographic model where a magazine is the base reward but higher levels of funding get access to things most people never get a chance to do. Funders start out funding projects but eventually turn into members. Equity is also another potential reward but that is going to have to wait until JOBS Act regulations are published. What other rewards might make donating to a multi-million dollar project worthwhile to a small donor?
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