The Secret of Crowdfunding Campaign Funding Goals
Switching roles from crowdfunding backer into campaign creator has really opened my eyes to a lot of things I never thought about before.
Take something as basic as your Indiegogo & Kickstarter campaign funding goals, for instance.
It seems so innocent on the face of it.
Dope idea needs money.
Funding goal equals the amount needed to create said dope idea.
Simple formula.
As a backer, my thoughts on the subject never went far past that basic understanding. If I put any thought into it at all, only 2 questions came to mind:
- How close is the campaign to reaching its ‘100% Funded’ target
& - How much did it surpass the funding goal
What these questions basically boil down to is a quick risk assessment. Number 1 tells me how likely it is that the campaign can fulfill its promises. Number 2 tells me how much extra money the campaign has to work with – and therefore the likelihood that everything will run smoothly when the campaign is over.
And that’s exactly what the campaign creator wants you to think! The sneaky devils.
The truth is, the funding goals that you see on almost every campaign page are completely arbitrary. They have nothing to do with the reality of what a campaign actually needs to succeed. In actuality, it’s all about influencing consumer psychology.
Don’t believe me? Take another look at those two points above – percent funded and percent overfunded.
Now think about how a campaign creator might try to manipulate those numbers by adjusting their goal. Would a higher goal be more helpful? Or would an artificially low goal get the job done better?
Manipulating Backer Psychology
Here’s an example to help illustrate my point: If a Kickstarter project needs $5,000 to start production, how long do you figure it might take to reach that “100% Funded” status?
The correct answer is: longer than if the goal were only $1,000.
Right?
Let’s assume it takes the entire run of the campaign – all 30 days – to raise the amount of money a project creator really needs to make their idea into a physical product. They finally reach their goal at the last minute of the last day.
That’s an entire month where the campaign is under 100% funded.
Now, if other backers think like me and wait until a project is fully funded (or somewhere near it), then this hypothetical project has missed out. Potential backers were left sitting on the sidelines, waiting for a moment that never came – what’s known in the biz as “The Green Bar Effect.”
If a Kickstarter project needs $5,000 to start production, how long do you figure it might take to reach that “100% Funded” status?
The correct answer is: longer than if the goal were only $1,000.
The Green Bar Effect
There’s power in numbers. And we like to go where the crowds are.
John Vaskis, Senior Director of Hardware, Technology and Design at Indiegogo, said it so well:
“Who eats in empty restaurants?”
This is known by crowdfunding project creators and promoters as “The Green Bar Effect.” The name comes from the green ‘Fully Funded’ bar at the top of every campaign page. Once a project has reached its funding goals, the bar is totally green, instantly letting backers know that those sweet rewards are ready to go.
(Because that’s what They want you to think! The sneaky devils.)
I know what you’re thinking: Nah, I don’t pay attention to the green bar. I just back the projects that I like!
And maybe you’re right.
But I can tell you one thing for sure – the Kickstarter & Indiegogo guys are completely convinced that it’s true. And they’re setting their funding goals with the Green Bar Effect in mind.
And that means setting lower goals that are easier to surpass.
Internal & External Goals
Out in public, the official message is wholesome enough: Set your campaign goal as low as possible; only focus on the essentials. Don’t ask for more than you absolutely need.
(Because that’s the message They want you to read! The sneaky devils.)
But in private, the message gets modified a little: Figure out how much your project actually needs to get off the ground. Keep that number private. Then set your campaign goal no higher than $10,000.
This is what advertisers and crowdfunding promoters conveyed to me on multiple occasions.
They call them “Internal” and “External” funding goals.
The terms are self-explanatory. The External Goal is what everyone sees when they click on your campaign page. On the flip side, the Internal Goal is the amount of money you’re actually trying to raise.
Obviously, having a “secret” Internal Goal, one that’s different from what your backers believe you really need, complicates the funding process a little. The biggest concern is what to do if you surpass the External Goal but fail to reach your Internal Goal.
From a backer’s perspective, when the External Goal is reached, the campaign is a success. In reality, that goal might only represent a fraction of what the creator really needs to fulfill their promises.
But don’t worry. The professionals have a solution for that.
Ready for it?
It’s easy: Just cancel the campaign.
That’s right, Dude. The beauty of this is its simplicity. Once a plan gets too complex, everything can go wrong.
– Walter Sobchak
Can you imagine? Pledging to support a campaign that looks like it has already passed its goal, maybe even by a factor of 2 or 3, only to watch the creator pull the plug.
But could you blame them? If the campaign didn’t raise the necessary means – the Internal Goal – it’d be unethical to accept the funds. They know for a fact that it’s not enough money to ship out the promised rewards.
Still, I wonder how you’re expected to explain it without admitting that your External Goal was a complete farce. 🤔
Greedy people have fewer friends.
Here’s something else I’ve learned on this incredible journey of recreating my father’s beautiful design:
Starting up production? Yeah, it’s often expensive as hell.
Obviously, this is going to vary by project category. I have no clue how much it costs to record an indie album or put on a stage play. But I can tell you right now that creating a gadget without any off-the-shelf parts… it’s not cheap.
I’m lucky that my dad spent literal decades simplifying and refining both his design and the production process. Without his experience and know-how, I’d be more lost than the Robinson family.
Like… in space…. Or something.
Huh?
Listen! The point here is this: the kind of money you have to raise in order to reach your real goal, your “internal” goal, is higher than most people feel comfortable giving away.
Think about it. In a world where everyone else says they can be fully funded with just $1,000 (or less!), do you really want to be the jackass asking for $50,000? Or $100,000?
Of course not. You’ll look like a greedy SOB.
And nobody wants to give money to a greedy SOB.
So, now what? Are all crowdfunding creators liars?
That’s a great question and I’m glad you asked it. But first, a recap:
- Fully-funded projects get more support because it gives backers a sense of security. Crowdfunding gurus call it the ‘Green Bar Effect.’
- Funding is split into two goals:
- a low External Goal (the funding target that the backers see on the campaign page)
- a higher Internal Goal (the amount the campaign actually needs to succeed)
- Creators usually set their External goals artificially low to achieve the ‘100’% Funded’ excitement earlier. The thinking is that a fully-funded campaign will raise more in total than a campaign with a high goal from the get-go by manipulating the backer’s psychological state.
- As a result, backers have become accustomed to very low funding goals. Campaigns that ask for more need to work harder to justify what they’re asking for – if they’re able to justify it at all.
I’m sure that there are plenty of campaigns that don’t manipulate their External Goals, campaigns that are totally honest about what they need to fulfill their promises.
I’m also sure that plenty of campaigns (especially those that are for physical products) are created by small- to mid-sized companies that already have all the funding they need on their own. These creators can afford to fulfill their promises even if they “only” reach their External Goal, since they weren’t in need of cash anyway. A campaign like Shenmue 3 comes to mind. And, if I’m honest, Visonic Dome is in a similar boat. Campaigns like these need backers more than they’re in want of start-up capital.
But when promoters and advertisers are telling you that fully-funded campaigns convert more viewers into backers…
And when magazines and blogs are telling you that they only want to write about campaigns that have surpassed their goal…
It’s easy to see why a campaign creator might keep their Internal Goals quiet.
So the next time you’re thinking about backing a project on Kickstarter or Indiegogo, ask yourself this: is their goal realistic? How much money might this campaign really need?
The sneaky devils!
