Here’s a fun fact to know and tell about the average crowdfunding contribution: “The average amount crowdfunded over the past five years was $80.” That’s according to the blog at CrowdfundCapitalAdvisors.com, a group that provides strategy and technology expertise to investors and entrepreneurs. Crowdfund Capital Advisors’s Jason Best and Sherwood Neiss are also the co-authors of the forthcoming book, Crowdfunding For Dummies, due out in March of 2013.
Pair the $80 average contribution to another factoid from the Somolend blog, that the average donation-based crowdfunding project in May 2012 was $4,076. Somolend made a distinction between the four kinds of crowdfunding (donation-based, reward-based, equity-based and lending-based) crowdfunding, and also noted that the average equity-based crowdfunding project raised $84,597 as of May 2012.
If you do the math with those figures, you need about 51 contributors putting in $80 each to fully fund the average $4,076 donation-based project. You’d need 1,057 contributors for the average equity crowdfunding project. Alas, it rarely works out so neatly.
The average Kickstarter contribution is $31. Kickstarter is a donation-based crowdfunding platform, which means that $31 is a little at odds with the Crowdfund Capital Advisors figure, but with over 700 crowdfunding platforms now operating or in development, even something as big as Kickstarter is not the last word.
So what does all this mean to you, the soon-to-be-owner of a crowdfunding platform?
For starters, it’s a way to predict your income. If you are charging 5% off of each successful project, that average $4,067 project is going to gross you $203.35. In order to have even yourself as a paid employee at $50,000 a year (including payroll taxes and all the other expenses tied to salaries means you’ll earn about $35,000), your crowdfunding platform will need to see 246 projects successfully funded every year.
If your site is like Kickstarter, and has about 40% of all listed projects becoming successful (ie, fully-funded), that means your crowdfunding site will need to have 615 projects listed in order for you to get even a modest salary. And that’s before you have an office, or hosting costs, or promotion costs, or even have the budget for a coffee maker, much less a Christmas party.
This is not an insurmountable problem. Not at all. 615 projects works out to 1.7 projects listed a day. Let’s triple that to cover enough money for a very modest office space, website hosting, budget promotion, fees for your site’s payment gateway, and taxes. So you’ll need 5.1 projects listed a day. Let’s say 5 projects listed a day, just because it’s easier. (Whoops… you just got a tiny paycut).
Getting five projects listed a day means you’ll need quite a lot of traffic. With a 1% conversion rate, you’ll need 500 visitors a day. With a .5% conversion rate, you’ll need 1,000 visitors a day.
You do not have the budget to buy traffic (that would be about $2.50 per click according to Google’s Keyword Tool), so you will need to take the path of organic search traffic (unpaid search traffic) and social media. Hopefully, you followed our suggestion about specializing your crowdfunding platform, so maybe you can hook up with an industry group to get some low-cost advertising and attention. And you’ve got your own time, so if you set up a blog and write a post a day, and start writing guest posts, you’ll be seeing some natural search traffic within a few months (maybe a month if you do a really, really good job of it).
It’s a bit of a reach to get started, but definitely doable.
Of course, if you have some savings set aside, you’d get off on better footing. But if you don’t you could raise some money.
Gee… if only you had some way to raise start up money…