Crowdfunding to Fund the Farm
Could crowdfunding help you fund your next farm purchase or enterprise? Possibly. But, it’s good to know the facts before you get too far “in the weeds.”
There are 5 types of crowdfunding: financial return equity, debt, royalty, non-financial reward, and donation. If you’re using a crowdfunding website like gofundme.com or kickstarter.com for your campaign, a non-financial reward donation system will work well. It’s almost the most common type of crowdfunding, with about half of the $10 billion expected to be fundraised in 2014 being non-financial reward based. All crowdfunding campaigns should involve a reward of some kind – be creative!
What is the success rate of reward based crowdfunding? Well, about 40%. How can you ensure the odds are in your favor? Follow these simple tips.
YOU CAN CROWDFUND WITHOUT A CROWD.
People don’t sit at a computer in real life each day and say, “Hmm. Where will I donate today?” If you’re not driving them to your campaign, they aren’t getting there. It takes months to build a crowd – sometimes up to a year or more. Expect about 5% of your crowd will donate to the cause at an average donation of $10. If you’re trying to raise $100,000, you need about 10,000 DONORS to reach your goal, which you can expect to get from having 200,000 contacts.
How on EARTH does one get 200,000 contacts? This is why it takes so long to build your audience and contacts. Donors will not give unless they know you, like you, or trust you. Use emotional-pull through your campaign video (required by many crowdfunding sites) to build your fans.
BUILD YOUR BUDGET
You will need to share your project budget with your potential donors. Within that budget, be sure to include the costs of rewards because the rewards are NOT free. There are fees involved with using crowdfunding platform sites. They can be anywhere from 2% to 9% of funds raised. Using PayPal also will result in a 3% fee. Educate yourself on the fees and build them into the budget accordingly.
BUILD YOUR VIDEO
This is how you will use emotional pull to lure in your audience and make them know, like or trust you. Videos don’t have to be professional, they just need to tell the story and be impactful. New contacts will use this tool to get a sense of who you are.
HOW DO I KNOW IF MY CAMPAIGN IS GOING TO BE SUCCESSFUL?
You’ve done your homework. You’ve built your crowd. You’ve made your awesome video. You’ve launched your campaign. Odds are that if you aren’t at 1/3 of your target goal within 2 weeks of kicking off your campaign, the campaign will not be successful.
HOW ARE PEOPLE USING CROWDFUNDING TO FUND THE FARM?
The possibilities are endless. Here are some links to campaigns for farms or farm-related campaigns. You be the judge. Would you give to these campaigns, and why?
KNOW YOUR RISKS AND RESPONSIBILITIES
Obviously, crowdfunding has its advantages and disadvantages when it comes to financing and your farm. You are responsible for ensuring that your donors receive their rewards. Otherwise, do your homework and speak with your accountant about how donations could or could not have tax implications, and/or your lawyer to determine your needs to protect yourself against unforeseen circumstances.
Most of all, good luck on your crowdfunding campaigns! Have a success story to share? Email firstname.lastname@example.org!