Fixed Funding vs. Flexible Funding for Crowdfunding

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Depending on a platform that you choose to launch your crowdfunding campaign, you might be presented with an alternative of fixed funding or flexible funding for your specific goal. A fixed one needs you to raise full amount of money and refunding backers if your goal is not reached. Flexible allows one to keep funds that are provided to you regardless if you reach your goal or not. While crowdfudning industry leans towards fixed funding in most platforms, flexible one can be a better alternative for some projects. Below is an in depth pros and cons of each funding type.

 

Fixed gives one motivation to hit their goal. Besides the necessity of some money to bring your project to life, natural motivation arises from having a set amount of money that must be met and this can be powerful for you, your team and backers.

 

Nearly all platforms that are available have fixed options. This is a good sign that there are market demand and fulfillment capabilities. Campaigns that have a set goal show they know how much money they need and they can communicate where money will be going.

 

Fixed option has a number of drawbacks including the fact that it is hard to reach your goal. One greatest downfall is that if you do not reach your goal, you will not get any money.

 

You also have to rely on creativity and in demand awards. You will be selling your strategy and mission but supporters will want something concrete in return for their pledges and not a simple thank you.

 

You will need a lot of overhead to deliver. Fixed campaigns are hard to run and bring to fruition. This means you need a lot of time and money to commit to the effort.

 

Flexible funding means you are going to get funds regardless if you are successful or not. The whole idea behind this is that you are guaranteed to get some money for the project to get it started.

 

You will not be stressed out to hit a certain goal. Such campaigns are more casual and will give one a chance to promote their mission or story rather than constantly worrying about returns or physical rewards.

 

Flexible preference is ideal for raising funds and awareness for non physical projects such as performance, charity and cause where set amount of money is not much of a necessity.

 

The disadvantage of this funding is a perception that you might not deliver. When you do not have a set goal, supporters might be reluctant to pledge if you do not tell them how you will be able to fund their rewards without a successful campaign.

 

Platforms such as Indiegogo charge a high transaction fees if you do not hit your goal. You will also have very few platforms to choose from. The market for platforms with flexible alternatives is limited as options are less preferred among crowdfunding campaigns.

 

As the industry grows and evolves, battle of fixed versus flexible crowdfunding will carry on. Although fixed campaigns currently out raise and succeed at a higher rate than flexible ones, both offers a unique experience for founders and backers and it can be equally effective provided founders put in a lot of right effort.

 

Kickstarter is currently the largest reward based platform with a lot of notoriety in the world. It has a wide global audience which visits the site to go through projects that interest them. This platform is for creative projects and it focuses on arts, gaming, design and technology. They are not interested in assisting you to start a business but will help you fund your creative project.

 

Projects need to be clear about their state of development and they cannot be presented as preorders of unfinished products. It needs to have details including videos, photos and sketches of progress with a prototype that demonstrates its current functionality. Projects have to explain how end design will differ from prototype with a production plan and an estimated timeline.

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It is therefore clear that Kickstarter is the most restrictive platform available today and the most exclusive as well. Although it is restrictive, it will lead to social proof and boost of credibility for your project. If your project is accepted on this platform, it is viewed as being of high quality and you are more trustworthy than projects that are on other sites. This perception will lead to a boost in raising money for your project.

 

The site prohibits one from offering affiliate fees or a commission to anyone that drives traffic to your campaign that results in funding. If this platform finds out that you are doing this, they will pull out your project.

 

Kickstarter only offers a fixed funding option. If you reach your goal, you will get funds. If you do not attain your goal, you are not going to get anything. The site takes five percent fee for pledged successful campaigns. This is the highest rate of major platforms for funding. If you are not funded, you are not required to pay anything to kickstarter.

 

Indiegogo was originally launched with a focus on film and then they moved to including giving moeny for nearly all types of projects. Indiegogo accepts new projects without reviewing them. There are very few guidelines for their campaigns too. If your project is safe and legal, you are good to go. Aim of this platform is to be available to anyone anywhere to raise funds for anything.

 

Indiegogo offers both flexible and also fixed funding. If you opt for a fixed option, you will be charged a four percent fee if your reach your goal and you will not be charged anything if you do not reach your goal. By opting for a flexible preference you can get whatever funds that are raised even if your goal is not attained. The site has a wide audience due to the fact that projects available on the site appeals to a lot of audience.