01 Dec 2015

Kickstarter vs Crowdcube: Run an Empire’s Crowdfunding Lessons

By Guest

This week BGV alumni Run an Empire smashed through their £70k target on Crowdcube. This isn’t their first time getting funding from the crowd, last year they ran a successful Kickstarter campaign to get their product off the ground. These two different types of crowdfunding – equity based and rewards based – require quite different approaches. Run An Empire co-founder Sam Hill was kind enough to write for us about some of the lessons they have learned along the way. Read on for some great tips!

In the couple of weeks since we’ve launched our second ever crowdfund with Crowdcube we’ve been thrilled with the response, having hit our fundraising target with over three weeks to go in the campaign.

Last year we also raised a successful Kickstarter campaign. It’s been interesting for us to throw ourselves back into the process of community-based funding and discovering that whilst some things never change between the different approaches, a lot certainly can.

I’ll attempt here to make a note of the main similarities and differences we’ve found between Kickstarter’s rewards-based system and Crowdcube’s equity-based system.

Different Audiences – Different Messages

Maybe I’ll start with an obvious one. When pitching to a Kickstarter audience, it’s important to think like a consumer. They don’t particularly care about the business model, manufacturing process, distribution systems or even particularly if it can realistically be done. They care about having the final thing in their hands (or on their desktop). Crowdcube investors on the other hand are looking for more than a neat idea – they want to see traction, a solid team and a sensible plan for the future.

Success Rate

In theory all successfully-funded Kickstarter projects ’should’ get made. In reality things don’t work out that way, but nonetheless the expectation is that if it gets funded, it’ll get built and distributed to its backers.

On the other hand, investors on the Crowdcube platform understand they’re investing in young companies, emerging sectors and new ideas. Growth is fast, but riskier and it isn’t “common” for a successfully funded business to go on and make a successful exit when they predicted.

Ability to Pivot

If someone has bought a ‘thing’, they (quite rightly) should expect to receive that ‘thing’. We found it a real challenge to move our idea in more promising directions post Kickstarter funding, whilst having 1800 supporters to validate each big decision with. However if someone is investing in a business, as long as the business achieves its broader social and financial objectives, they’re less likely to be concerned about changes in the way the product itself functions.

Rewards

Kickstarter is all about pledge rewards. Spend £10 get the product; spend £100 get a T-shirt and poster; spend £1000 get a meal with the designers.

Crowdcube also has rewards – and we’re told they work well to bring people in (we’re offering beta invites for our game for all investors, starting at £10) but at the end of the day people are putting in what they’re willing to risk on a sliding scale, with the hope of making a return. So if £10 gets you a 0.001% share of a business and £1,000 gets you 0.1% then £10,000 gets you a whole 1%. This tends to mean people spend more – though less frequently and as a smaller community…

Due Diligence

When we launched our Kickstarter there were certainly guidelines, but we could generally say whatever we wanted. Crowdcube on the other hand ensured we passed their due diligence before launching – validating every claim, piece of data and professional reference.

Barrier to Entry

Everyone and their mum can sign up for a Kickstarter account with about as much difficulty as signing up with an online shop. Crowdcube on the other hand is a little more difficult. Even though the platform and its ilk are reducing the barrier for “normal” people to invest, there are still some loops to jump through to show a satisfactory degree of financial maturity – even to speculate on £10.

This is also reflected in the promotion of the campaign. We’re not allowed to intentionally direct any messaging towards unaccredited Americans, Canadians or Japanese people who might be interested in investing, because these countries have a more regulated legal system for investment. Also, every time we (and our friends) talk about the campaign, we must mention that “credit is at risk”; and images [see above] also need to include legal disclaimers.

No doubt when we conclude our campaign and go through the legal process of distributing shares we’ll find further contrasts with the reward delivery mechanics of Kickstarter.

For now I would say we’ve been largely satisfied with both routes as alternative means of raising capital and it has made a lot of sense I think to use one after the other. Kickstarter is fantastic for validating market interest in a consumer product, whereas Crowdcube (we hope) is helping us validate our future strategy.