(http://www.grabsent.com/blog/2014/2/4/crowdfunding-drawbacks) - Crowdfunding campaigns or as we at Grabsent like to call them, another in a long line of marketing strategies that “experts” encourage you to do. Let’s be honest worrying about online marketing is the last thing you want to do when designing and building your product. Should I focus more on gathering emails or conversion rates?

1. Crowdfunding Drawbacks
Marketing Strategies
Crowdfunding campaigns or as we at Grabsent like to call them, another in a long
line of marketing strategies that ―experts‖ encourage you to do. Let’s be honest
worrying about online marketing is the last thing you want to do when designing
and building your product. Should I focus more on gathering emails or conversion
rates? How do I optimize my landing page? WTF is actionable content? How much
does AdWords cost... These are just a few of the things one has to be concerned
with before ever even considering a social media campaign. Maybe you can skip all
these steps and just get a quick prototype out and launch something on Kickstarter
or Indiegogo? There’s an idea but here’s some drawbacks one should keep in mind
before committing to a startup crowdfunding campaign (the below points come from
an article written by Philip Nuestrom for PBS’s Idea Lab ):
Grabsent
Crowdfunding

2. Crowdfunding Drawbacks
Drawbacks and Costs
It’s not all milk and honey, though. There are some hidden drawbacks and costs to
using Kickstarter.
Fees
Kickstarter takes a 5 percent cut of your pledges and Amazon will take an additional
amount (around 2 percent) on top of that. If your margins are slim, this could be
significant.
You should think about it like this: I’m paying Kickstarter 5 percent of my pledge
goal if we make it. Is the Kickstarter service worth the 5 percent? In particular, you
should think about 1) The pre-built platform you get with Kickstarter; 2) the publicity
of being on Kickstarter; 3) the ―mold‖ that Kickstarter forces you into and the value
of that.
Grabsent
Crowdfunding

3. Crowdfunding Drawbacks
Using Kickstarter
#1 is worth it if you don’t have a lot of time or resources to build something
yourself. We certainly didn’t.
In some cases, #2 is really valuable. Obscure, quirky projects can get amazing press
just by being a part of Kickstarter. But if you’re doing something more like a
traditional community-based fundraiser you probably won’t get much from #2. For
us, the publicity of being on Kickstarter didn’t drive a lot of pledges, but it did give
us some valuable exposure.
I think everyone can benefit from #3 unless you’re a large organization with a track
record of successful fundraisers. In that case you’ve already got
methodology, fundraising materials, and probably a big existing donor base.
Grabsent
Crowdfunding

4. Crowdfunding Drawbacks
It’s hard to take Kickstarter fundraising offline
We held a couple of offline events during our pledge drive (a bar night and a silent
auction). Unfortunately, it’s pretty difficult to move offline funds back onto
Kickstarter. You’re not permitted to ―pledge‖ toward your own project, which means
you need to find a trustworthy third party to agree to pledge any offline funds. This
also means the offline donors won’t be noted on Kickstarter.
For local community-based fundraising efforts this can be problematic.
Grabsent
Crowdfunding

5. Crowdfunding Drawbacks
The all-or-nothing system is a bit confusing
Unfortunately, the all-or-nothing pledge system can be a bit confusing. Many folks
we talked to thought they had already given us money before we hit our funding
deadline.
Our fundraising period was 90 days — the longest allowed by Kickstarter — and so
there were lots of people who’d simply forgotten they’d pledged by the time their
cards were charged. Thankfully, Kickstarter is astonishingly good at collecting funds
(they pester pledgers with an email every day for a week if their card is declined),
and we only saw a few pledges that never came through.
Grabsent
Crowdfunding

6. Crowdfunding Drawbacks
Many successful projects are basically product sales
Despite the perception of Kickstarter as a fundraising site, a large number of high
profile Kickstarter projects are, at their core, product sales. What do I mean by
product sales?
Well, all Kickstarter projects have rewards. And unless you get remarkably
lucky, you’re going to have some cost associated with acquiring, shipping, and
dealing with that reward. For folks in the non-profit world, we’re all very familiar
with the standard tax-deductability formula that’s on donation receipts:
(Amount contributed) – (Value of goods or services given to donor) = Deductible
amount
Grabsent
Crowdfunding

7. Crowdfunding Drawbacks
Donation Amount and Profit Amount
This isn’t just some tax mumbo-jumbo — it tells that the donor intended to give at
least the deductible amount to the organization or project itself. But this formula
doesn’t tell us everything. After all, oftentimes we get goods or services donated to
us and then, in turn, give them away. We’re still bringing in money, either way. So
the important missing part here is the cost to us of those goods or services, right?
(Amount contributed) – (Cost to us of goods or services given to donor) = Our profit
The first formula is still useful for differentiating these ―I’m basically selling
something‖ Kickstarter projects from ―I’m doing something amazing, help us!‖
projects. So let’s call the first formula the ―Donation amount‖ and the second
formula the ―Profit amount.‖
Grabsent
Crowdfunding

8. Crowdfunding Drawbacks
Affiliate Marketing
There it is. If these are problems you DON’T feel like dealing with reach out to us
at Grabsent and get started today! It’s free to start and unlike Kickstarter or
Indiegogo at Grabsent you don’t pay anything until you sell something and your
custom ―Product Page‖ allows you to start marketing, driving traffic, and selling
products instantly! Why wait, get started at Grabsent today!
Grabsent
Crowdfunding