By Ian Panchèvre
Reporter with Silicon Hills News
RocketHub – “the world’s crowdfunding machine” – is one of the fastest growing crowdfunding communities. RocketHub, located in New York, publicly launched in February of 2010. Since then, the platform has supported over 25,000 crowdfunding campaigns and has secured an exciting partnership with A&E called Project Startup.
Meece began by defining crowdfunding as “an event that harnesses networks for funds, awareness, and feedback.” This definition broadens common understanding of crowdfunding beyond simply an alternative form of raising capital.
“The press tends to focus on the funding. But the awareness and feedback can also be really important,” elaborates Meece.
Meece went on to sketch the history of raising money from a crowd. “I like to think of this as a new spin on an old idea,” Meece explained.
By “old idea,” Meece meant, really old idea. Like 16th century old. The funding model for a Renaissance virtuoso – such as Leonardo da Vinci – was pure patronage. “Da Vinci relied on a handful of wealthy patrons to fit the bills so he could make cool stuff.”
Whereas now, through the power of the web, modern entrepreneurs and creatives can “rely on communities to fund their endeavors.”
Fast forward to the 1970s, when NPR and PBS pioneered new fundraising techniques, and we begin to witness a modern conception of crowdfunding take form. The two main takeaways from the grassroots methods of NPR and PBS is that local communities need to be engaged to rally around projects, and the process of requesting funds needs to be personalized to the target audience.
Now, in this era, we are “hyperconnected in ways we’ve never been before in human history.” It is this hyper connectivity that serves as “the foundation on which social funding now plays on top.”
“There is a reason we are seeing this emergence of crowdfunding now,” notes Meece. “And it’s because we are all super connected thanks to social media.”
Nowadays, crowdfunding is so ubiquitous that traditional methods of raising early-stage capital – say, from VCs or Angels – are confronting the real possibility that they will be usurped by the whims of the crowd.
According to GoGetFunding, the number of active crowdfunding projects around the world has exploded from 283 in 2010 to 536 in 2012. Moreover, the estimated volume of funds raised has posted similarly impressive growth: $1.5 Billion in 2011 compared to $5.1 Billion thus far in 2013.
Though exciting, such dramatic growth also has a downside.
Meece observes that “there is a lot of competition just for mindset, just for attention.”
Meece then outlined the three key pillars to successful crowdfunding that the data behind 25,000 campaigns has revealed: Project, Network, and Goods.
First, in order to have a successful crowdfunding campaign, your project has to “grab people’s attention. It has to hook them emotionally.”
Jedi mind trick number one: “The message will travel further if folks really understood not only what you are doing but who you are and why you are doing it.”
Meece supported this claim with a few examples of successful projects that did not blatantly beg for money, but rather, articulated the positive vision motivating their cause (i.e. the “why”) to rally support.
Even though there is an information overload, “emotional scarcity is still out there.”
“If you can change people’s emotional state, you will be rewarded with funding, awareness, and great feedback,” concluded Meece.
The second pillar of successful crowdfunding is the ability to leverage networks. Meece views crowdfunding as an event because “it has event dynamics, it’s driven by social components.” And of course, “people want to go where other people are.”
To successfully leverage a network, it needs width (i.e. the network needs to be large) and it needs depth (i.e. there needs to be influence).
Meece elaborates by explaining that “Crowdfunding takes social capital and converts it into real capital,” when influencers earn the trust of the community. In those cases, support will come not just from your immediate fans (i.e. your first degree of influence) and their friends (i.e. your second degree of influence) but also from complete strangers.
“Nobody wants to be the first one dancing on a dance floor.”
True to form, successful campaigns are authentic and emotionally rich. They earn trust among immediate contacts to build momentum and initial traction. Then they reach a tipping point and the campaign goes viral.
The final pillar of success involves the goods that are offered for financial support.
“The rewards should be good, it should be stuff that people want,” said Meece. After all, people aren’t giving money to a charity. Rather, people are supporting a project in exchange for some sort of reward.
To that extent, Meece encourages prospective crowdfunders to identify different “levels of impact.” Different price points, that correspond with different rewards, enable supporters to commit at a level with which they are comfortable.
A $20 commitment is the most popular price point. Whereas a $75 commitment is the average price point. Rewards that vary by price point need to be creative, interesting, and to a certain extent, tangible.
Meece wrapped up by sharing RocketHub’s new partnership with the television network A&E.
Project Startup is an upcoming A&E series that will feature select crowdfunding partnerships from RocketHub.
Naturally, Meece is delighted with the partnership. Not only does A&E provide great exposure for some of RocketHub’s campaigns, but the network is so committed to RocketHub’s mission that it will also be adding funds to certain projects on top of what is raised from the crowd.
At the end of the talk, Nick Longo, a Geekdom co-founder, shared some promising news. Geekdom is working with RocketHub to explore ways of creating a “Geekdom Hub” to showcase Geekdom startups that pursue crowdfunding through RocketHub.
Disclosure: Geekdom is a sponsor of Silicon Hills News.