Crowdfunding is the process of funding projects for both individuals and organizations through online platforms by launching campaigns with the objective of obtaining financial support by a crowd of donors/investors.
Crowdfunding starts to represent an opportunity for the cultural and creative industries (CCI –Architecture, Video Games, Music, Heritage, Music, Literature, Books & Press, Visual Arts, Performing Arts, Design, TV, Film & Radio) funding and also for building a ‘community’ and communicate new artistic and cultural projects, improving visibility and awareness among the public.
At the recent Crowdfunding for Culture Conference held in Brussels on 20th June, Tibor Navracsics, European Commissioner for Culture, Education and Youth, highlighted that crowdfunding campaigns help develop new financial, entrepreneurial and communication skills among creative and cultural entrepreneurs, artists and professionals.
Also in Brussels, I have had recently the pleasure to deliver a workshop with crowdfunding for culture as one of the key topics (on 17 May): ‘Tools for creative entrepreneurs: crowdfunding, branding and storytelling / Focus UE – Latin America’ organized by Spanish Embassy, delivered by Economía Creativa Consultancy, in Cooperation with Iberoamerican Embassies and the collaboration of Finnova, Spanish Chamber of Commerce in Belgium and Open Earth Foundation.
During the workshop I have presented crowdfunding key aspects for CCI, essential factors for successful campaigns and examples of cultural and creative projects that have been funded through crowdfunding from both the UE and Latin America.
In Europe and Latin America there are hundreds of crowdfunding platforms, so one of the first tasks for entrepreneurs is to choose which one best adjust to their project. Essentially there are two types of platforms: ‘All or nothing’ vs. ‘Take it all’: the principal difference is that on ‘all or nothing’ platforms projects can only receive the funding if they reach the target they have established for their project initially whereas ‘take it all’ means that even if they do not reach their target amount, they can still keep the funds raised through the campaign. Some platforms charge a fee for uploading the project; however normally they just charge a commission for the funding obtained that can varies from 3% to 12%, depending of the platform.
There are four types of crowdfunding: donation, reward, peer to peer and equity. However I have focused during the workshop on the reward crowdfunding because it is, by far, the most used within cultural and creative industries.
The reward crowdfunding is especially appropriate for artistic, cultural and social projects; it offers a reward to the donors that it is normally merchandising or experiences (for example a personalized postcard, a performance, etc.)
The following points are essential for successful crowdfunding for CCI:
- It is essential not to underestimate the necessary investment on time, resources and compromise for the success of the campaign (including enough time before the launching for the design of the project, communication strategy and network evaluation)
- Combining in a team the skills of a project manager, a marketer and accountant will be ideal
- The quality of the project, its description, including details and the background of the team/artist (portfolio, how has been developed the idea/project, etc.)
- The size of the ‘network’ initially and the ‘audience development’ strategy to enlarge it
- Keeping your ‘community’ informed during the whole campaign
- Pitching video (max. 2’) engaging and original, showing passion and professionalism
- Stimulating reward for the donors, offering ‘value for money’ and feasible (for example geographically: if the reward it is a concert, the musician has to consider the cost of performing it for a donor in other city/region/country)
- Reasonable ratio community-target to be funded. Research proves that each donor on average contribute with 1-2% of the total amount to be funded for the project. This means that, for example, to fund a new exhibition for a gallery that needs 5000 euros, if each donor contributes with 2%, the community of donors should be at least of 100 people.
In conclusion, crowdfunding is a funding alternative for cultural and creative projects both in the EU and Latin America and also a ‘marketing tool’ for building the community and increase visibility. However artists, entrepreneurs and professionals have to be aware of the importance of: choosing the right platform, model of crowdfunding, project design and communication strategy; and not underestimate the investment of time and resources for the campaign success.