[This post was originally posted on Social Media Week blog
A few weeks ago we had the privilege to interview Stuart McLaughlin, CEO of Fund it, Irish-based crowdfunding platform.
The success of Fund it demonstrates some of the principles that should be at the base of every crowdfunding initiative: widespread and well-established networks, strong community engagement, commitment and passion, and of course a good understanding and exploitation of Social Media potential.
The Irish market is particularly favourable to crowdfunding for three main reasons: the natural disposition of Irish people to charitable giving; the relatively small size of the country, which makes it faster and easier to get the word around; the difficult economic situation in Ireland, which was among the first to experience Europe’s crisis.
A distinctive element of Fund it is the moderation process they apply to projects: the “free money syndrome” unfortunately affects many project holders, and a sort of vetting process in place is becoming crucial for a crowdfunding platform. Fund it accepts projects that fulfill its Terms & Conditions, but not before having given some precious feedback to the crowdfunders. And this approach works very well, as demonstrated by the high success rate among projects: an outstanding 75%, compared to 43% of the ‘pioneer’ of crowdfunding, Kickstarter.
And it’s not all about having a project funded: “The ability to have this authentic participation and conversation in your project with your audience or with your consumer is absolutely invaluable” Stuart says. It’s great to raise the money you need for the project, but – as Stuart puts it – “you should be looking at a longer term relationship, and a relationship that pays dividends back over a longer period of time”.
This and much more to learn from the interview below, enjoy the read and thanks again to Stuart and the team at Fund it for the precious insight.
Stuart, thanks for taking the time to speak to us about Fund it. Can you tell me a bit more about the origins of Fund it, how and why did you set it up?
Fund it emerged from a partnership between our organisation Business to Arts – which is an Irish not for profit – and Martin McNicholl, who we work with on technology.
Business to Arts works to develop corporate support and sponsorship of culture, and one of the things we were hearing a lot from arts organisations was about how many ‘likes’ they had on Facebook or followers they had on twitter. When we were having those conversations we would say ‘so what, what does that mean?’ We were concerned that, if anything, arts organisations were giving away value to social media followers: they often have offers online for facebook friends, which traditionally they might have given through membership schemes where they used to get money and exchange it for offers, but now are giving those things away for nothing.
The other thing we recognised about social media is that if you have 5000 likes on Facebook the best case is that 5000 people genuinely like what you do, and the worst case is that 5000 people just clicked the button. My favourite example of this was when Ireland was knocked out of the Football World Cup by Thierry Henry knocking the ball across the goal in his hand. A Facebook group was created immediately in protest that within 2 days had half a million followers. But, when the person who started the group announced a march on the Football Association to ask for a replay, only about 30 people turned up.
We felt instinctively that there was some underlying value within those friends, fans and followers, so we took that principle, and started looking internationally to see how others were leveraging them. We did a few informal campaigns on Facebook, not particularly linked to any platforms, just asking some of the cultural organisations we worked with to ask their friends and fans if they would support their projects in a different way. We looked at some of the models and practice that existed internationally and we linked that to the fact that we knew that the cultural organisations we were working with were quite good on social media and at developing their networks.
Finally, we felt that there was a particular opportunity in the Irish market for crowdfunding for a couple of reasons: one is that the Irish are very good at charitable giving in small value but high volume. We’re not good at large scale philanthropic giving, but very good at small scale philanthropy. If you look at any of the international indexes around charitable giving, the Irish are topping Europe and are the third best in the world.
We knew also that people recognised that traditional funding models in creativity were changing. The music industry doesn’t work the way it used to; theatre won’t be funded the way it used to be; traditional routes to funding were breaking down whether that be from financial institutions or from government. That’s an obvious thing to say, but we thought that the consumers recognised that as well and some of the research we did around it backed that up.
Armed with those pieces of information, we went on to develop the Fundit.ie platform. We got a small grant from the Irish Department of Arts, which was part of a cultural technology grant scheme that the Department runs. Subsequently we matched that with a philanthropic foundation we worked with who also gave some support, and then over time we built a couple of other pieces of foundation funding into the business model as well. Therefore all the start-up costs of the organisation were funded – partly through the government grant but more significantly through philanthropic foundations’ funding. That’s been good for us, since it has given us a great deal of flexibility.
We developed the site and got it up and running. One of the other key things of the Irish market is that it is limited in scale, which presents challenges in terms of business model but at the same time it has got advantages, for example you can get the word around in Ireland very quickly. Because of the scale and because it was funded and created within an existing organisation that had a very strong network of cultural partnerships, it meant that we could communicate what Fund it was to the creative sector very quickly, which I believe put us at an advantage to some other sites internationally.
We identified a number of specific projects with people we had strong relationships with and that we were confident in their product. People and organisations who had strong social networks. We spent a lot of time with them making sure they understood how the crowdfunding model was going to work, we took their feedback on the development of the site and then we got the operation up and running very quickly.
When did you go live?
We went live towards the end of March 2011 with 6 projects.
After 9 months we have learnt a lot obviously. People have been extraordinarily supportive of the initiative here in Ireland. We’ve had 103 projects fully funded, about 440k euros have been pledged by 8000 pledgers, so the volume got significant pretty quickly. The average pledge has been around 50 euros.
A lot of the things that we felt at the start in terms of the conditions that existed in the Irish market have proven to be true. There has been a huge amount of goodwill, and the site has attracted a lot of positive media coverage. It’s very much seen as a good news story here in Ireland, and there are not that many good news stories here at the moment, so the idea of people helping themselves, people supporting other people ideas and initiatives really captured the imagination. We have featured in the national Irish media at least three or 4 times per month, and sometimes more. Projects get a lot of coverage here as well so we provide the platform, project creators work to communicate their own campaigns.
It’s been a great experience and people have been very positive towards it. The volume and the numbers are pretty strong and now I guess we are at the point where we work out what’s next, having proved that the model works in an Irish context in terms of creative projects.
Because of the heritage of the site, coming from within an organisation that works with the arts primarily, projects on the site tend to lean heavily towards arts and culture, so performance is very big for us, and music is becoming increasingly important.
Do you think there is a particular creative sector that is more likely to succeed in a crowdfunding campaign, or what are the success factors of a project?
I don’t think there’s one that is more likely, for me it’s all about how the individuals in question run their campaigns. There are certain pre-conditions that need to be in place for campaigns to be successful. The more you gather your network, the better. The more you communicate what you’re about the better, and do so in advance of going live too. Having an established network both online and offline is critical, and then how you communicate to that. There are great ideas showcased on all the crowdfunding sites but if you know the project creators personally you might view the project and know it’s a good idea, otherwise how would you find them? Ultimately if they don’t have those core elements in place, it doesn’t really matter if it’s the best album you’ve ever heard, it’s not going to happen if people don’t hear about it and support it, if they haven’t done those key steps.
A big thing for us is that we moderate the projects probably more intensively than other sites do. Our success rate on the site is 75%.
Which is very high compared to Kickstarter, around 43%…
Yes, it’s very high. What we’ve learnt from this is that we’re like any online business: your best aim is to anticipate what consumers will do; the next best situation is you’re able to react very fast; and the worst thing you can do is react slowly. Constantly there are assumptions or suppositions which are based on data that flexes a lot because consumers behave in a different way all the time. But ultimately what we see is that we’re spending a lot of time moderating the projects onto the site. We don’t refuse a project as long as it fits our criteria and terms & conditions, but we give a lot of feedback to people and say “based on our experience we think that you need to do A, B and C”. Most people take that advice on board. The success rate is quite high and we feel that is for the level of moderation that we’ve got in place.
Absolutely, what we’re noticing more and more is that many people seem to think that they just have to put up their project on the platform and the money will start rolling in. Instead we think probably platforms should have a kind of vetting process in place for the projects, because sometimes you will find projects where there is no interaction, not even commitment by the people, therefore it’s quite important what you’re saying, that the platform has got this moderation…
We call it the ‘free money syndrome’, people see projects being successful and think if they put theirs up online that’s all they have to do. Some people communicate so little that not even their mum and dad fund them. If your parents won’t fund you, you’ve really got a problem!
What you’re seeing on Fund it, and it’s true for all sites, is that projects either tend to fail badly or to get over the line. There seems to be a sort of tipping point at around a third of their target; most projects that get over a third tend to get to 100%, and anybody under it doesn’t get there.
We had quite an established musician on our site with a project that didn’t make it. He’s established in the old fashioned way, he was in a well-known band, his music is great but he doesn’t have a network he can access. He’s got a band, he had a record deal, he made music and the music got published. They have fans, but they don’t engage their fans in any real way. So at the same time you’ve got a guy who’s been in a big name band for years and can’t raise money, and then you’ve got this band from central Dublin that most people have never heard of who raised 2000 euros in a weekend, because their networks were all activated in the right place.
People often think it’s free money and easy money, and increasingly we work with project creators to make sure they understand how it works and the level of work they need to put in.
The other thing that we do is we look for projects that might grab specific attention. For example, the largest project on our site so far has been a singer called Julie Feeney. Julie raised 23k. Julie’s profile would be quite high in Dublin, and she got a lot of publicity for her project, which helped us and consequently other projects in return. Sometimes we specifically look at some core projects which are going to help us in terms of profile.
Can you confirm that the platform is only for projects in Ireland?
Currently the site is set up for projects and creators from the island of Ireland – both Northern Ireland and Republic of Ireland. We’ve only had 1 successful project in Northern Ireland so far, but we’re physically based in Dublin and we haven’t had much time to build our network in the North as yet. For us the longer term plan is the strategic question whether we move into other sectors and markets. One of the things we’re aware of, something that is important in an Irish context, is that Ireland has got a strong and highly engaged diaspora network. There are 70 million people around the world that call themselves Irish. The ability to engage a much wider network of people away from funders that exist in the island of Ireland is critical to us as well. So, the funding can come from anywhere, the projects come from the island.
The platform uses an ‘all or nothing’ model. Why did you choose this rather than a ‘keep it all’ model?
The reason we chose the ‘all or nothing’ model is because we feel quite strongly that the ability to deliver on the rewards is the critical part of the transactions. I see crowdfunding as having a far broader reach. Point one about crowdfunding is around getting your project funded, point two – which I guess is as important – is about a new way to engage your audience and consumer. When you get away from the all or nothing model then you’re increasing the level of risk that people can’t fulfill their commitment and deliver their reward, and that ultimately is damaging for everybody, it’s damaging for the project creator, a risk for the funder, and for Fund it as well.
We would be very conscious that in such a small market as Ireland relationships are key. When you look at this, the idea of the way that you engage your audience is as important to me as the market.
We’re very lucky that one of our supporters is a philanthropic fund called The Arthur Guinness Fund which is linked to Diageo, producers of Guinness. As part of that fund we get to spend time with their marketing and comms teams. They have a very interesting perspective on this.
When I think about the project creators, I compare them to a consumer brand. So if I’m a mobile phone company I’m constantly working to get into an authentic conversation and participation with my consumer. However, somewhere down the line I’ll have to remind the consumer that the reason we’re having a conversation is because I want them to sign a new contract or upgrade their mobile phone. The difference with Fund it and crowdfunding in general is that the products are created by the project creators themselves, whether that’s an artist or a musician or whatever.
The ability to have this authentic participation and conversation in your project with your audience or with your consumer is absolutely invaluable. If you think about your fan engagement, or about why people get involved, and the idea that they get closer and they become part of the experience of creating the work, the better you do and the more this is going to pay off. It’s great that you raise the money that you need for the project now, but for me you should be looking at developing a far far longer term relationship, and a relationship that pays dividends back over a longer period of time. And the all or nothing model I think is part of all that.
Where do you see crowdfunding going in the next year? For example, there seems to have been an explosion of new crowdfunding platforms offering all sorts of niche offerings, do you see that as something that will go on, or can you identify any other trends?
It will be interesting, I think that crowdfunding will go on to develop and grow. However, in my opinion some platforms work better than others, for example I really love Unbound. I think as a niche that is a great model that absolutely fits in that industry. There are other niche platforms that I don’t think work so well, the idea of just doing a platform for one sector is of course limiting. One of the things I see from Fund it is that the reason for the growth in scale we’ve been able to achieve is because it came from within an organisation that had an established network within the cultural sector and that enabled us to achieve things more quickly than we might otherwise have done.
I’m not sure where we’ll see crowdfunding in a year. Ultimately, over time, I think some consolidation would be good, looking at how things have done, there should always be an element of competition because it’s healthy for everybody and keeps everyone on their toes, but ultimately the business model for crowdfunding organisations is very challenging. I think we’ll see over time a lot of people getting caught up in the wave but actually relatively few survivors in terms of the ability to achieve a workable crowdfunding business model. We will start to see more organisations think a little more about how they tweak that model a bit, what can be done over and above the idea of pledging rewards, commission, etc. There are other ways to start thinking about how these things work, so I guess what I would expect to see is the models that exist will work in many other sectors. It has been prevalent in the creative industries so far, but obviously what you start to see is an increasing number considering the social space and so on.
Then, in terms of small business funding, there’s an opportunity as legislation starts to adapt. At the moment what we’ve got is a lag in terms of regulations, which currently don’t really support crowdfunding as an approach, but it’s becoming clear in a lot of markets that there’s actually an opportunity there. What we’ll start to see is other areas, people becoming specialist, and again, certain niches really will work and others won’t. For me one of the best examples is Unbound because it creates a very publishing-specific model, but when you look at music for example I’m not sure there needs to be a music industry specific platform because the principles are very much the same, so looking at the role of those developments will be interesting.
But I guess the other thing is in a year, who knows, the nature of this world, looking at how consumers behave, moving constantly. Analysing every day how they behave, how they’re changing, looking at how we access new market and potential funders, understanding what the role is of the creative funding platform in building communities versus the projects themselves. That’s a very underdeveloped area at the moment. Probably a year feels a long way. If I look back 9 months, 80% of the stuff we know now we didn’t know before.
In terms of investors or pledgers, are they mainly Ireland-based or international?
Predominantly from Ireland but increasingly international. The international actually have grown over the last 4 months, lots of that project-specific but some of them will be to do with funding developing connections internationally as well.
In your last blog post you talked about super-users…
That’s one of the interesting things actually, we have quite a high proportion of multiple pledgers, people who pledged two or more projects in the first 9 months. What we’re seeing is that they tend to be category-loyal too. But we’re seeing a pretty high proportion of pledgers, right through from people who funded 2 or more to people who funded up to 20 or more projects.
It would be interesting to know what motivates them to pledge again…
Actually, we have just been looking at the data and our next step is to do some work looking in to that. If you speak to a digital marketing agency, they see crowdfunding as a kind of funny blend – it’s not retail but some of the behaviour you’re trying to drive is retail-like. For example, if we consider the people who register on the site: in the first instance they’ve come to Fund it because they have clicked a link, been told by someone in their network, and they want to support a project, that’s usually the motivation. The number of shoppers browsing is growing but it’s limited at the beginning. As that number of shoppers and browsers grows then the ability to convert them from a browser to a registered user to a pledger is going to be critical. Of course that’s very different to a traditional model of online shopping: you know getting into that idea of the Amazon-type model – ‘if you like this you will probably like that’ – starting to look at those technologies is going to be interesting as well.
Thanks again for taking the time to do this interview, Stuart.