This is a guest post by Irene Malatesta at Fundbox.
There’s no getting around it — events can be expensive affairs to put on. Especially if your main revenue is ticket sales, it can be difficult to get money in time to pay vendor and venue contracts.
If you’re struggling to finance your next conference, party, or concert, you’ve probably considered crowdfunding. Successful businesses have launched from crowdfunding campaigns — and there’s no reason you can’t finance an incredibly successful event the same way.
But before you launch a crowdfunding campaign for your event, it’s worth considering the pros and cons of this popular form of financing.
Pros: The benefits of crowdfunding your event
1. It’s a low-risk way to raise money
Finance an event out of your own pocket and there’s a chance you’ll end up losing money—even if the demand is there. For example, you might underprice tickets without realizing it until it’s too late to break even. And even if you pick the perfect price, you might not sell enough tickets to make back your costs.
Crowdfunding, on the other hand, is a low-risk way to raise money for your event. Sure, there’s a chance you might still end up losing some money if you spend on the campaign itself. But odds are that those potential losses will be smaller because attendees will cover a good chunk of the costs upfront.
2. You can generate buzz before the event kicks off
Crowdfunding can help events go viral due to the nature of the internet. A solid campaign uses enticing photos or video that highlights your past events and promises a great next event.
With the right creative campaign, you can encourage attendees to share the link with their networks en masse — driving demand for your event sky-high.
3. If you succeed, you can build a community
You put together a crowdfunding campaign for your event and raised a respectable amount of money. That audience is now an email list filled with folks who support what you’re doing. You can use those contacts to raise funds for your next event — and to market other products, services, or opportunities too.
4. Meeting or exceeding your goal bodes well for your event
A crowdfunding campaign can be a way to test demand for a new event idea. If your crowdfunding campaign falls flat, you might have second thoughts about whether you should even hold your event in the first place.
Successful campaigns, however, likely indicate that there’s a lot of demand for your event. At the very least, that should help alleviate some of your stress as you get closer to the date.
Cons: Why crowdfunding may be more difficult than you expect
1. Successful campaigns take a lot of time — and money
You can’t just decide to crowdfund your event, launch something on Kickstarter or Indiegogo, and expect your campaign will be successful.
Like anything else, successful crowdfunding campaigns take a lot of time. You’ll need to write killer copy for your crowdfunding campaign page, create rewards at different levels, and include photos and even videos to promote your campaign and grab people’s interest. You will have to invest a decent amount of capital and time just to get your campaign off the ground.
2. The odds may be against you
According to a recent Entrepreneur article, anywhere between 69% and 89% of crowdfunding campaigns fail. That’s a big range, but it gives you an idea of how tough it can be to find crowdfunding success.
You may end up investing a lot of energy putting together what you think is the perfect campaign — and investing some money too — only to find your efforts fall flat. That wouldn’t be the most effective use of time, to say the least.
3. Crowdfunding platforms get their cut — credit card companies do, too
No matter where you decide to launch your campaign, the platform will take a cut of the proceeds. Kickstarter, for example, takes 5% off the top of each campaign on average, as well as a payment processing fee around 3% of each pledge.
Let’s break that down to see how much money that really means if you use Kickstarter to raise $50,000 for your event with 100 people each contributing $500. Kickstarter would receive $2,500 of your funds, and the payment processing fees come out to $1,520.
After all of that, you’ve lost slightly more than 8% of the total funds you’ve raised. That might not be the end of the world — but how would your event turn out if you could spend that extra money on it?
4. Someone with deeper pockets might steal your idea
When you launch a crowdfunding campaign, anyone with an internet connection who stumbles across your content can find out what you’re planning. Imagine one of your competitors sees your campaign and learns about the wildly-creative, game-changing event you’re trying to organize for the first time.
If they have the funds to host a similar event on their own, what’s stopping them from stealing your idea? Every crowdfunding campaign (just like anything you post on the internet) is susceptible to copycats.
Is crowdfunding right for your event?
Crowdfunding an event can be the perfect fit for some events, especially if you’re great at promoting and have a large social media following. But with a high failure rate and the time and money campaigns can take to launch, some events may be better off self-funding or looking at other financing options.
No matter which route you decide, you need to be sure you’re pricing your tickets to fund your event as well. Figure out the right price for your events using this free event pricing workbook.