Crowdfunding is a way to raise money for a project or an idea. Let’s say you want to record and release an album , but you don’t have the money to do so and you’re not signed to a label. If you have a committed fanbase, these money can easily be raised with the help of your fans. In this blog post I will write a bit about the different ways crowdfunding works and then look at some of the pros and cons that there might be.
There are three different types of crowdfunding. The first one is donation based, meaning that your fans make donations and expect nothing in return. The second one is equity based, meaning that someone can invest in you and your band. The third one is ‘money for goods‘, which probably is the one most people think of when they think of crowdfunding. This means that fans can buy something exclusive that they can’t find anywhere else. This could be the guitarist’s guitar pick, a private show or a book with handwritten lyrics. There is no limit as to what a fan would be willing to pay for.
When using the ‘money for goods’ type of crowdfunding there are two different ways as to how the money is cashed out when the campaign is finished. ‘All or nothing’ means that if you don’t reach your target amount then you don’t get any money at all. Let’s suppose you need £1000 to record an EP. But you only raise £750. Since you claimed to need £1000 then it could be assumed that with only £750 you can’t record that EP which is what the fans paid for and wanted from you. With the ‘money for goods’ type of crowdfunding then the fans would not lose any money, which is good for them since they might not get what they paid for. You as an artist on the other hand, might’ve been able to get those remaining £250 from somewhere else. But now you won’t get anything at all and all your efforts to raise the money will be for nothing. In this case then the ‘keep it all’ type would’ve been better for you as an artist. Then you would get the £750 you raised. However, you might not be able to get the last £250 that you need and you will never record an EP. Then you will have a bunch of angry fans chasing after you.
So is it worth it to raise money for a project through crowdfunding? Below you can see a table of some of the pros and cons with crowdfunding:
To sum it up I would say: go for it! You don’t have much to lose really. You don’t have to invest a lot of money to put up a site and you can ‘earn’ a lot of money. Read into it and do what you think is the best for you. If your fanbase isn’t very big then you could set your goal to a lower amount and then try to minimise the costs of the project as much as possible. This way you don’t risk to lose it all if you don’t raise the whole amount. Crowdfunding could also be a way to in the future prove to for example a label that you have a dedicated fanbase and thereby maybe get a better deal. I’d say that the pros outweighs the cons.