Crowdfunding Best Practices

How the COVID-19 Pandemic is Affecting the Crowdfunding Industry

The effects of Covid-19 have certainly trickled down into crowdfunding. See what you can do to ensure your campaign’s success amidst these uncertain times.
How the COVID-19 Pandemic is Affecting the Crowdfunding Industry
Gayatri Bhaumik

By Gayatri Bhaumik

 

March 31, 2020

The COVID-19 pandemic has unleashed all manner of uncertainty across the world. Crowdfunding is no exception. The industry is premised on an abundance of ideas, money, and manufacturing; swift fulfillment is also a critical factor in running a successful crowdfunding campaign. Naturally, if you currently have a crowdfunding campaign (or were preparing to launch one), you may be a little concerned about how the pandemic will affect you.

Never fear. We’ve done the hard work of figuring out exactly what effects we’re currently seeing, what different crowdfunding platforms are doing to help businesses through the coronavirus pandemic, and what you can do to ensure your campaign’s success amidst these uncertain times. The good news? Crowdfunding is still possible!

Illustration of a successful crowdfunding process

What Affects Are We Seeing So Far?

The effects of the pandemic have certainly trickled down into crowdfunding, but it’s taken a little time for us to see exactly what these effects are - and how far they reach.

Of course, supply chains are the biggest issue. With Chinese manufacturing coming to a standstill in the weeks immediately following the virus outbreak, many brands with crowdfunding campaigns were simply unable to get essential supplies, get their products made, or send those products to backers. The result was that hundreds of crowdfunding campaigns were forced to announce delays in launching and shipping products.

eFOLDi, which makes electric scooters, had shipping delays for their Kickstarter campaign; electronic hearing protection device Pro Ears told backers that its manufacturer’s warehouses would be closed until March. Further along the supply chain, Palo Alto Innovation has 2,000 new Alexa-enabled alarm clocks waiting to go to customers but wasn’t able to find a way to get them out because their local port in China has been closed since Chinese New Year.

On the flip-side, the pandemic is also causing a lot of personal economic uncertainty, with people around the world losing their jobs and tightening their belts to avoid spending unnecessarily. For crowdfunding, this has translated to a more considered approach to campaign backing. It doesn’t necessarily mean people aren’t willing to pledge money to campaigns - it just means they may donate less and require a little more convincing to do it.

Homepage of Crowdfunding Platform Indiegogo

What are Crowdfunding Platforms doing to Help?

It’s early days yet, but we’re already seeing some of the world’s leading crowdfunding firms put strategies in place to help campaign owners through this tricky period.

IndieGoGo has launched its Local Business Relief Program. Between March 18 and April 18, IndieGoGo is waiving its platform fee for new campaigns that qualify for the program. To qualify, new campaigns must be owned by a small or local business; direct funds to a business with a business tax ID; and comply with the platforms’ terms of use and community guidelines. When setting up your new campaign, you just have to select “Local Business Category” and designate your fund recipient (with a business tax ID) in the "Funding" tab.

Kickstarter has taken a markedly different approach to supporting campaigns during the pandemic. The platform has offered a seven-day project extension to any campaign that is already live; you just have to email them to activate the extension. Their website also pulls together extensive resources to support artists who use the platform, including information about grants, legal resources, and general advice about coping with the pandemic (both physically and mentally).

Investment crowdfunding platform Wefunder announced a new initiative on Tuesday, March 24, that’s designed to help small businesses secure loans at better terms through its platform. Named the Coronavirus Crisis Loan, the program allows small companies to access loans between $20,000 and $1 million at reduced interest rates. Payments will be deferred until 2021 and can be made using structured repayment plans. Wefunder will still be taking a slice of the funds raised, but only a 3.75% cut instead of its usual 7.5%.

Don’t forget that if you’re struggling to get supplies or send shipments out to your backers, Easyship can help. We’ve had plenty of experience in fulfilling successful crowdfunding campaigns like Tropicfeel, Mate.Bike, and Waverly Labs. Trucking capacity out of China is currently operating as normal, so if your supplies or products are there, you can get them trucked over the border to our warehouses in Hong Kong. Though, it would be smart to pay attention to daily news updates as situations are constantly evolving.

If you have an Easyship account - or sign up for a free account now - you can then access over 250 courier solutions to get your shipments out to where they need to go, whether that’s to your own warehouses or offices or directly to your backers around the world. We can even simplify the process for you with automated shipping labels and customs forms and branded tracking. Plus, we’re the exclusive shipping partner for Indiegogo and our platform integrates directly with Kickstarter.

Tips for Managing Your Campaign During the Pandemic

At this stage, when things seem a little bleak, you may well be thinking about how best to manage your live campaign - or if you should launch the one you’ve been planning for months. The good news is that it’s still absolutely possible to launch a successful campaign. Two recent campaigns - Starlight and Moonshine Empire - reached their funding goal within 17 minutes and 24 hours respectively!

The key is to carefully consider your options and decide whether now is the right time for your campaign. Here are a few things to think about:

  1. Manufacturing issues. If your campaign involves production in another country - especially in China - you may face some challenges. Factories in China are mostly back online again, but some may be experiencing production backlogs that are causing delays. If you haven’t started manufacturing, talk to your suppliers and manufacturers to see what their status is and how you can best work with them.
  2. Supply chains. The global trade network has taken a serious hit amidst the pandemic. Shipping companies are running more blank (canceled) sailings than ever, and thanks to most airlines reducing their passenger routes by over 90%, there’s less air cargo availability. Translation: you may have trouble getting your products where they need to go.
  3. Shipping costs. Ideally, you’ll have planned the fulfillment part of your campaign well ahead of time and set aside a good budget. But with lower capacity, we’re seeing a significant rise in shipping costs for air freight rates (though ocean rates are steady). You may need to tweak your budget to see if you can cope with this.
  4. Campaign category. Certain types of crowdfunding campaigns will be better able to navigate their way through the coronavirus pandemic. Others won’t be so lucky. With all the social distancing measures we’re being advised to adhere to, event-related campaigns will be especially tricky. If you haven’t launched yet, it may be worth pushing back your launch date.
  5. Communication. Whether you’re about to go live or have already launched, the most important thing will be to communicate with your community. Talk to suppliers and shippers about what issues they’re facing, and communicate any problems or delays they (and therefore, you) are facing to your backers or potential investors. Proactively choosing to keep people informed will go a long way in smoothing the way for your campaign.
  6. Social Media. A good social media strategy has always been crucial for a successful crowdfunding campaign. But now, it’ll be even more essential for spreading the word. Plus, some platforms (including Facebook) have cheaper advertising or solutions to help small businesses right now, so you could look into using that for more exposure.

To Crowdfund (or Not) During the Coronavirus Pandemic

As you can see, it is still entirely possible to run a successful crowdfunding campaign during this period. It just requires a little planning and preparation. With crowdfunding, companies have the ability to capture demand and payment upfront from backers, and then communicate effectively to manage delivery expectations in view of the current market outlook and challenges. Plus, plenty of platforms are offering assistance, especially for new campaigns. So, if you were thinking of launching a new crowdfunding campaign, now’s the time!