What Happens When Crowdfunding Leads to Overfunding ?

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When Crowdfunding Leads to Overfunding

Not all portals allow projects to surpass their goals, but those that do benefit from runaway campaigns. Projects that exceed their goals serve as good publicity, just as the portal’s portion of the funding grows with every dollar above target. Instances where crowdfunding leads to overfunding are not found everywhere, but more and more projects internalize these examples and aim for such success. The consequences of doing so, however, may be fatal to a project’s longevity.

A study conducted at the Wharton School of the University of Pennsylvania found that nearly 30% of runaway projects sprout from hardware, software, game development, and design industries. Considering two of the most successful projects fall under this category, this comes not as a surprise. Pebble, for example, the e-paper customizable watch, generated 10,266% of their goal. Similarly, the OUYA video game console blew past their $950,000 goal and reached $8,596,474 within weeks. Since not all campaigns are of this caliber, it’s important not to be swept away by these numbers and to consider the tipping point in which a project receives too much funding.

For rewards-based campaigns, overfunding means more incentives. Studies reveal that in most cases, projects fail to deliver their perks on time when met with too much capital. As well, with extra money, backers begin to expect more, so the chances of disappointment improve. This is especially true for projects still in beta, where they never intended their product or service to achieve such exposure. Even with a solid rewards-system in place, many campaigns fail to communicate with every additional backer, which can disconnect the project socially. For small project teams, there becomes too many emails and comments to respond to, so social media grows to be uncontrollable and overwhelming.

Equity campaigns face similar risks. When crowdfunding leads to overfunding, campaigns are in danger of spreading their shares too thinly. In Germany this year, E-volo raised 1.2-million (EU) during the course of their campaign, averaging a 1,600 (EU) investment from 749 investors. AoTerra HmbH, the Germancloud provider, attracted 886 investors and raised 1000% of their goal. Although these are success stories, not every campaign can handle a couple hundred investors nor the money they bring to the table. Only experience helps in a situation like this and not all start-ups have the necessary track-record to manage.

Thankfully, there are ways to turn a negative into a positive. Stretch goals, for one, are a great way to raise additional funds safely, so long as they have been well-planned and initiated. Never leave a variable undetermined as overfunding amplifies such uncertainties. Know exactly how much you need so that you can identify when your campaign reaches full-capacity. As a safety precaution, consider setting a limit on perks like add-ons or extensions. As well, implement a forum type environment to ease the pressure of too many backer responses. By moving conversations onto large public platforms, the need for engagement decreases. Remember to always plan ahead, anticipating the very best and worst outcomes for your campaign.

When Crowdfunding Leads to Overfunding

Source : http://www.crowdclan.com/when-crowdfunding-leads-to-overfunding/?goback=%2Egde_1985057_member_5823863876835377152#%21

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