Crowd-source funded products: The currency involved in its checks and balances
In a nutshell, prior to this project going live in 2013, I spent one month arguing with my spouse everyday about the validity of the project, and then another month working on a strategy before the project went live. It was ‘live’ for two months in early 2013, met its goal in the first 6 hours and steadily continued to gain financial support over the next 8 weeks. I reached a number where a tactile deliverable, in my case, a physical print book was possible. On paper, I had chosen a 2 month long ‘campaign’ to raise money. For backers, the life-cycle of the project lasted about 18 months. I chose to involve backers each step of the way to keep my accounting clear. Versions of ‘A Dozen Ways To Celebrate’ (ebook, print book or abridged book) are currently in six continents and homes across more than ten countries across the world, from Alaska to Southern Australia.
I closed my financial accounts on the project a few weeks ago and we are on to the next phase of the writing adventure, developing proposals for literary agents and publishing houses. I am also wondering if I am in the red or in the black.
As most product creators will attest - there are many pros and cons to the process of raising capital from a crowd-source funded model. For every pro there is a drawback. Many future-creators end up at the same point they started, but with more questions than they originally had and many are needlessly discouraged.
Being on the other side of the process, I am able to reflect on the critiques and advice offered to future product creators who are contemplating this process. I have a different appreciation for the efforts it takes and also the conviction that a good project requires more than just money. In a simplistic form of accounting, depending on the platform, creators can raise money as capital or seed funds for future projects. Strength and support that comes from the creative, physical or scientific community provides essential building blocks to make unique products, from music records, community gardens, a life-enriching piece of technology or just something fun. For future creators, the secret is to find a way look beyond the simplistic strength of numbers (head count or penny count) before they begin. That is where the answer to the success truly lies.
If you want to look at the bottom line, before you begin, there are only two categories of investment to recognize: the currency sumps and currency builders.
In any crowd-source funded project, commonly known tangible currency sump culprits include: overruns in raw materials costs, production costs, human error and packing and delivery costs including local and international deliveries. If the prototype is yet to be constructed before the campaign, all these estimates will be drastically different in real life than the initial estimate. If there is quality control involved, as any good product should, these costs will be even higher, sometimes as time, sometimes money, often both.
Not wanting to cut corners, creative sorts can get ahead of the financial costs. What can be as simple as picking up free boxes and envelopes from the post office, can become a special purchase of a special sized box from a packaging store and the expense involved in bringing it home. What can be a simple thank-you email to backers can become an elaborate thank-you card with its own specially chosen postage. When it can be a simple bubble wrap it can become an elaborate gift-wrap, with personalized special touches, underneath the bubble wrap. When scotch tape will do, a creator may choose sturdier packing tape. When a package can go first class, it may get special delivery with delivery confirmation, aka, the bells and whistles. Yet, on the other hand, when the creator cannot afford the professional price-tags for the services, there is a temptation to invest in comparable technology and hope that one can walk away with nearly professional results, spending the currency of time simply because they are on a financially restricted budget.
An often overlooked currency sump includes overpaying the support staff / team because the creator believes that someone is doing them a favor; but it becomes worse when one first underpays them but then makes up in kind by taking them out to lunch, giving them an appreciation gift, or returning the ‘favor’ by doing something that they cannot actually afford, as an investment of good karma. Another hidden cost of creating a product is product tagging: registering, trade-marking or patenting the product before it is released into the wild, wild world.
But all these sumps have a dollars and cents value, are documented on a receipt and can be tracked, sometimes written off in taxes, with the help of an accountant. The project-specific currency sump includes a large intangible cost: juggling personal expectations with the formidable task of pleasing a large crowd of total, utter, complete strangers. This end of the currency sump also includes the huge loss of time and the extra tasks that one takes on - being a QC, PR / social media manager, negotiator and the pennies and cents accountant, as well as building up the resilience to take the blame for anything and everything that can and will go wrong. The emotional toll on personal life can be complex and immense. It means remaining in the futile pursuit of achieving mastery in the art of staying guilt-free yet responsible to loved ones, who slowly begin to negatively interpret and internalize their relationships and interactions with you rather than place them in perspective. They too pay the price for the project, in currency that is NOT paid by the dollars and cents of the crowd source funded campaign. It sometimes means overcompensating and bribing loved ones to allow you to keep your sanity. The true price is that point in time when you have to say No to your friends and loved ones, when it is not part of your core vocabulary.
This is when the optimist recognizes the light at the end of the tunnel not as a train, but as progress. There are many currency building blocks that help shape the process, and help take the accounting from red into the black. This currency lasts longer than the money raised in the campaign, and will ultimately determine success. Here is what I learned -
Envision something bigger. Being able to envision something that does not exist requires lots of guts and imagination. Fine tune it and make your own. Don’t let anyone tell you that your idea is not good enough. Work on it. It does not have to be perfect but near perfection is ideal. Crowd-source funding is not supposed to fund perfection – it merely allows inherent creativity to flourish.
De-clutter. Always make and keep room for your ideas to grow before you start because once you get the going, those ideas will need the breadth and fresh air to continue to blossom and proliferate.
Be prepared, to be random. Toughen up with yourself: recognize your skills and weakness as an individual. Listen to any TED talks, motivational speakers, industry giants, read magazines for entrepreneurs. Do not focus on a specific subject. You only need one random sentence or phrase to keep your creativity fueled.
Build relationships. Especially with loved ones in your life. Show them how they play a part in the larger picture. Remind them often of it but be firm about boundaries and expectations. Before the glamor there will be lots of elbow grease, sleepless nights, tears and grunt work. Eye-rolls must be banned: before, during and after the project. It will also develop good work ethics.
Forgive. No one is perfect and neither are projects. Recognize this often: you will need to forgive yourself, because no matter how well it is done, Murphy’s’ Laws rule the world and everything in it.
Refund. Keep this card handy. People can get their money’s worth based on the original premise of the project or their money back. They will never be able to take the lessons you’ve learned in the process.
Recognize the currency. The true transactions in your creativity process come from the people you encounter during the crowd-source funded project development and execution. Friends and strangers alike: some may try to steal your idea, ignore your efforts, pull the rug from under you or push you off the cliff and wait at the bottom to take pictures. But, there will be a handful of quiet gems that will provide support, smiles, hugs, ideas, visions, constructive critiques and helping hands that will support you far beyond the process itself. These gems may even provide referrals in various other forms – for psychologists, psychiatrists, wellness clinics, vacation spots or a bottle of wine to drown your sorrows and anxieties. Some may bring even business opportunities or partnerships in the future. Nurture these gems regardless of what material goods they bring you now, their most important contribution is support.
Acknowledge. The business partnerships you make along the way – at the post office, at the office supply store, at the art store or grocery, at the services that directly influence your product and make it a reality are important. Thank them, preferably verbally, for taking time to say a kind word, doing you a favor, checking on a shipment, finding the ladder to take something off the top shelf, being nice or merely doing their job. Someday, tell them of the part they played in your project, they will surely appreciate it. Everyone loves to be part of something bigger.
Own it. Your project / prototype / product may be the result of a life-long dream, an aha-moment in the shower or an idea you came up with while watching television. It remains yours and yours alone, no one else’s’. Do not let anyone involved in the process make you feel otherwise about your idea or the product. At the same time, remain contentious to your process, committed to the results, be responsible for your product, and believe in the positive energy and creativity that resides in yourself. Money cannot buy this kind of drive, guts or determination.
Invest in the future. If you have young people, take their hands in your own and show them how it is done. Let them see your tears and your frustration but make sure you include them in the celebrations. They cannot learn this process any better than seeing it up close and personal, from someone who is close to them. Your idea may not be perfect, but the motivation to pursue a dream cannot be purchased.
Personally, I learned more lessons than I can list or count, of myself and of my family. These keep me in the black. I would repeat it, in a heartbeat, albeit with some modifications.
For those who see projects and product-development as black or white (or red) – crowd-source funded projects are not for you. Really. The true capital and currency involved in creating a crowd-source funded project exceeds the dollars and cents that appear in the creators financial statements at the beginning of the project, the projected expenses outlined and may never add ‘real’ financial value to said project.
In the path of any career, one often finds two forks on the road. Creators choose paths different than the conventional highways because they have the ability to envision something better. The complete journey and roller-coaster of crowd-source funding is for dreamers and thinkers, for those who have the drive and commitment to grow from the grueling experience. The process only brings value to the one closest to it: the complete transformation of those dreamers and thinkers into visionaries and creators. Their crowd-source funded product, however unique, ultimately becomes secondary as these visionaries secure and solidify their own creative currency.
This essay was originally posted on LinkedIn, by Nandita Godbole, on October 17, 2014.