Dos and Don’ts of crowdfunding for development projects Lessons learned from UNDP in Croatia project on crowdfunding for renewable energy sources on Indiegogo platform INTRODUCTION The project “Renewable energy crowdfunding in Croatia“ was selected as one of the six winning ideas under the Innovation Fund that seeks to support UNDP Country Offices in Europe and Central Asia in developing rapid prototyping capabilities and testing of new approaches and methods for solving development problems. This idea was supported from the perspective of testing out a new method (crowdfunding) of generating funding for small scale, local level renewable energy projects and from the perspective of being well positioned within the ongoing portfolio and work of UNDP in Croatia in the area of renewable energy. The idea addressed a problem of small scale outfits and entrepreneurs not being able to access favorable loans to kick start and take ownership of the energy-‐related ideas. Based on a variety of reviewed cases globally, crowdfunding was identified as a potential vehicle that can address this issue through tapping into the global pool of potential funders. Also, important role of energy cooperatives was included in pilot as addressing Not-‐In-‐My–Back-‐Yard (NIMBY) syndrome that renewable energy faces today, which is recognized as an important barrier to wider investments in renewable energy. Verification of using crowdfunding for development projects was performed for energy independent school in Croatia. After 15 different crowdfunding platforms were tested, Indiegogo was chosen as the most appropriate to use (please read more about this here:). Campaign site that was used for Indiegogo can be found here. PURPOSE Crowdfunding campaign was a huge learning experience, and there is a need from UNDP point of view to use gained experience to:
-‐ Share the knowledge acquired in crowdfunding campaign for energy independent school in Croatia;
-‐ To foster a discussion on how crowdfunding can be used for financing development projects, especially renewable energy development projects?
These recommendations are based on a Croatian community project on Indiegogo crowdfunding platform. Although our recommendations could apply to any other context, there are some specifics that might differ from your projects. PRACTICAL TIPS So here are some of the tips we would like to share with the world:
Getting started International development organizations like UNDP should be very cautious about financing issues, in order to minimize reputation risks that might occur due to not delivering promises or finances from crowdfunding to the announced project. Before you start, ask yourself some honest questions: Who would receive collected money and how would this be organized? How would the money be paid out to recipients? Such questions need to be considered but they can be avoided altogether in one simple way. Can UNDP be the one, or is UNDP just a backing partner to the project beneficiary who receives finances from crowdfunding? Our advice is -‐ have a local organization you are trying to help (like a medical center in Lebanon to support host Syrian refugees or vocational training center in Jordan) be the official lead of the crowdfunding campaign and UNDP as a shadow lead. What does this mean? UNDP provides the man-‐hours and expertise, the locals are involved in the planning stage and process (this bottom up approach can hugely help you understand their needs and structure your campaign message) but the campaign is registered in the name of the local organization. The money is collected through the beneficiaries’ bank account. This means that before you start the campaign it’s important to have a reliable local partner that understands crowdfunding and is ready to experiment with it. When we were selecting our local partner – in our case the Energy cooperative Kaštela – we made sure they understood what crowdfunding is and how this can help them. Although they were skeptical at first, their doubts disappeared swiftly after we raised 1000 USD in the first day. Start preparing at least two months before the campaign starts Make sure you invest at least two months of preparations before the actual campaign starts. Some people have a conception that crowdfunding is just about putting your project on line and waiting for the money to come in. This is however far from reality. A crowdfunding campaign is a very intense process that requires full commitment for the duration of the campaign (at least 8 man hours per day). But the more work you put in upfront preparations, the better! So what do you need to prepare?
Identify the groups you want to target. If you are crowdfunding for a community project in your country, think of people that can identify with its cause. In our case these were Croatian diaspora, local community and renewable energy enthusiasts. Identify the multipliers of your story. These are usually the media. So if you are doing a renewable energy project, you should aim at Three Hugger and Renewable Energy World. Media outlets like the Huffington Post also like to publish such stories. Identify and contact people through LinkedIn, who work for the media you want to get coverage from.
Engage your audience before the campaign starts Although we knew how much this is important, we didn’t do it. And it made our way to successful campaign even harder. Engage your friends and family a few months before the campaign starts. If they are not enthusiastic and not willing to support it, think again about
your project! Reach out the friends of friends. It is all about having a crowd who is ready to pledge at the moment the campaign is out. Their donations should create a momentum of 20-‐30% of your goal. It will give credibility to the whole campaign, and encourage people to donate. No one wants to be the first to donate, but if donations are constantly increasing, people don’t want to miss the chance to be a part of something successful. Everyone likes to be a part of something big, something that brings multiple benefits. PayPal preparations Some estimates show that campaigns with PayPal receive around 20% more donations than those without. Therefore it’s important to have your PayPal ready before the campaign starts, it increases your chances. There is a series of steps you have to take to create an account. Indiegogo has provided its users with very helpful instructions on setting up an account. However, these do not contain some information that might cost you a month worth of time. First of all, the account should preferably be linked to a credit card owned by someone from the local organization you are partnering with. The money will therefore be automatically transferred to that account. If you are an international organization, this helps you avoid red tape. In the case of Croatia – and potentially other countries – you can only use a business Visa card because only this accepts payments (donations to your campaign). If you have a Master Card for example – and are based in Croatia and potentially other countries – you will not be able to set up your PayPal account. If you are targeting the US, where most people use PayPal, this might be a serious setback for your campaign.
Why does it take between one and two months? If you are starting from scratch and have to issue a business Visa card, this will take you between one and two weeks. In our case it took around 15 business days. After this you register with PayPal, which then notifies you to send supporting documents. These are banks statements, evidence of registration with a regulatory body, etc. Collecting these will take you another three to five working days. After you have done this, you still have to wait for PayPal to verify your account and this might take another five working days. Why does PayPal require such strict controls? According to PayPal, crowdfunding is a potential source for “fraudulent activities, including money laundering and other scams and trickery”. Following a series of incidents, where PayPal actually seriously harmed some campaigns, they issued new rules crowdfunding campaigners have to follow. We will not write in depth about this, because it might take one single blog. Did we use PayPay? We really wanted to, but PayPal rejected us. We got a notice from them saying that due to rules and regulations that apply to non-‐profits we are not eligible to have an account with them. This alone might have reduced our donations amount by 20%.
Create content surrounding your campaign In other words give the media something to publish. For instance, we organized a concert of support for the campaign, where we hosted among others The Beat Fleet, which is one of the most popular Croatian bands. This created huge media hype and placed us in all Croatian media. We were on the radio, Internet and TV for five days before the concert. You can also
make additional web content. For instance the Scanadu Scout1 campaign for a tricoder that tracks your health signs (temperature, heart rate etc.) created a Global Body Map where they featured what people in different countries like to measure the most. This obviously created fun content, where for instance you learn that Russians supporting the project measure their heart rate the most, while the Americans focus on their blood pressure. Video coverage The most important element of your campaign page is the video. Campaigns that have videos on average raise 114% more than those that don't. Investing your energy into this part of the campaign is a good idea. But there obviously are differences between good and bad videos. How to make a good video?
Your story has to be personalized. In any case you need to show your face, so people know who is the person or team behind the fundraiser. Personal and sincere messages get to peoples hearths and then they donate regardless of the perks. A good sense of humor will also help, as in the example of the Good Spread Peanut Butter campaign. Stress the greater benefits of your project. People like to identify with something greater then themselves, because when they do they feel like they are part of the solution. For example, our campaign stressed that building an energy independent school would create an educational environment for children that one-‐day might come up with a solution for climate change. Make sure you include the “who, what, when and where” of the campaign. Here is a compilation of great Indiegogo video pitches. All of these are both very personal but also include the above named essentials. Here is however a pitch that does not contain any of these.
The dynamics of crowdfunding is short term and clear goal! The “GoGo factor” It is another thing we didn’t know about in the beginning, but soon we realized it is something that makes our campaign visible and better positioned in the sea of other projects on Indiegogo. The "GoGo factor" is an algorithm that measures the activity in a campaign and drives the placements of projects on the site, according to a number of variables, and makes the campaigns ongoing success or lack of is immediately clear2. For more info please read here. The higher the “GoGo factor” is, the better chances your campaign will be successful. The following factors will increase it:
- A great and personalized video that will lead more people to your campaign; - Unique perks at different levels (ideally 3-‐8 different ones); - Make updates 1-‐2 times per week (inform your audience about the campaign’s
progress). More updates you have, the bigger the GoGo factor is! - Engage your audience to comment on your campaign (the more comments you
have, the better!)
1 The Scanadu Scout is a tricoder that monitors your blood pressure, heart rate, oximetry, ECG, temperature and emotional stress and connects this data with your smartphone. Pretty cool. Yes!
- Have a constant donations flow; - Have a lot of team members (when we increased the team members, we got very
high in our “Community” category) - Share the Indiegogo link a lot (it is the best if you’re signed in before sharing it).
Respecting all this should ensure you appear on the main Indiegogo page. The perks (prizes for crowdfunders) Perks should be unique, well thought out, and logical for the project you want to crowdfund. It is a bit harder to set the perks for renewable energy, than for a video game project for example. In a video game campaign, your freebies would probably be a hard copy of the same game, or gadgets connected to it. Supporting a renewable energy project means supporting higher ideals and beliefs, concern about the future, and giveaways are most probably not the main reason for pledging, but they round out the whole story. The main idea for our gifts was to offer something that is local, fun and created by the school kids. For the small amount of money we offered drawings and personalized “thank you” notes produced by the school kids. The Elementary school “Ostrog” has a school’s student cooperative that produces eco jute bags, bookmarks, magnets and lavender bags, so the major number of our perks was created around these products. For the high amounts we had to offer something greater like “Kastela experience” or “Dalmatian for a week” that includes a week of staying in local family in Kastela, olive picking in the school’s olive garden, diving and learning how to prepare traditional Dalmatian food. Post campaign activities Even if the campaign has finished, and money is collected -‐ your job is not done here! First of all – open a bottle of champagne! And then thank people who made it happen. Make a picture of the team working on your campaign and create some funny “thank you” notes. Thank them personally, or make another update on the campaign page. Be creative; show your gratitude and happiness to the world! And don’t forget to say “thank you” on social media as well! When showing gratitude is done, it is time to make a list of your contributors and matching perks, and organize the shipping. Don’t leave this for the last moment; make sure that freebies come on time! Authors: Mak Đukan, Medić Tanja and Robert Pašičko Contact: [email protected]