Crowdfunding: The Happy Dilemma of Overfunding and the Headache of Stretch Goals
If the key factors of a campaign’s success or contributors’ motivations are dominant themes when it comes to research on crowdfunding, the overfunding phenomenon remains largely under-documented. Yet, although it may be desirable, hoped for or even planned, surpassing the initial goal comes with certain responsibilities that, in certain cases, may cause headaches. For example, think of the need—or not—to set stretch goals.
A stretch goal is a financial objective that a creator adds to his initial goal in order to complete his project. For example, the additional level enables him to optimize his product, such as adding levels to a video game, and can also serve to inject energy into the remainder of a campaign.
Is this strategy appropriate for all crowdfunding projects? The short answer is no…
We will develop on this further in a brief analysis of three case studies involving Pastel Fluo, SmartHalo 2 and Hill Agency. All three of these campaigns unfolded in Canada, but they used very distinct strategies to reach their initial targets.
Managing abundance: a phenomenon that is almost foreign to crowdfunding
There are very few studies dealing with overfunding as a crowdfunding phenomenon. Yet, Kickstarter had issued a warning in 2013 about monetary surpluses (which project proponents must imperatively be able to justify) as well as the misunderstanding surrounding stretch goals.
This certainly explaining that, statistical data on overfunded campaigns are not easy to come by. The Crowdfunding Center, a research firm that analyzes data originating from the world’s major platforms, ranks campaigns according to their field of activity as well as based on whether they are funded or not. That corresponds to the logic of platform classification. There is no such thing as a “overfunded project” category. Projects are instead categorized as being “popular” or “trendy.”
It always comes back to knowing what motivates contributors
By digging a little deeper, we found two studies that dealt with the most common factors at play in the overfunding phenomenon.
Sophie Renault, of IAE d’Orléans, École Universitaire de Management, is the author of an exploratory qualitative study on the hyperfunding (i.e., when the total amount raised by the end of a campaign is at least five times higher than the amount initially announced) of the Comme convenu comic strip. She dissects the strategies behind the implementation of this campaign’s stretch goals and puts forward a few explanations for the tremendous success experienced by French cartoonist Laureline Duermael.
The second study is that of Frankfurt University’s Jascha-Alexander Koch. The researcher conducted a quantitative empirical analysis of Kickstarter data on some 41,000 or so projects. In his analysis, he aims to determine the conditions that propel certain campaigns toward overfunding.
The following key success factors are mentioned in both studies: a moderate financial objective, a relatively short campaign period, a variety of rewards, clear and structured information (videos, photos, figures, texts, etc.), intense and interactive communications, an engaged community, the platform’s promotional support (for example, Kickstarter’s “Favorites”) and, in the case of the Comme convenu comic strip, the introduction of stretch goals as soon as the first level has been reached. Timing seems to be a determining factor because it “[...] anchors the collection process in a gamification process,” explains Renault.
Koch’s study, however, reveals an important principle that dictates how crowdfunding campaigns end: selfless and egotistical motivations can influence the contributor’s decision-making process.
Thus, an egotistical behaviour is motivated by the personal satisfaction of receiving an extraordinary reward, regardless of whether the campaign reaches its objective or not. Product presale campaigns are therefore more likely to attract participants who are motivated by rewards and end up being overfunded.
By contrast, a person with selfless motivations wishes only one thing: that his or her gift will contribute to the project’s completion. Selfless people give from the heart. So, once the goal set for a social economy initiative has been reached, it will be more difficult to continue raising money beyond that point even if the project’s proponent convincingly justifies the need for additional funding.
Pastel Fluo, SmartHalo and Hill Agency: egotistical motivations > selfless motivations ?
Pastel Fluo: a campaign on two levels
Pastel Fluo is the exception to the rule according to which entrepreneurs do not post on their pages the amount they need to raise in order to bring their project to fruition. Joanie Lacroix, founder of the Pastel Fluo platform and of Pastel Fluo Productions, which produces inspiring documentaries on the transition to a better world, instead chose to clearly post her needs: $25,000 to fund half of her second season of documentaries and $50,000 to fund the complete season.
Seeing as she does not pay herself a salary and the series is produced almost entirely by volunteers, the ultimate goal of the campaign was to collect as much money possible to be able to pay the series’ artisans and bring down her own debts. She especially did not want to lose the money collected seeing as she had opted for an ‘all-or-nothing’ model.
Why not have asked for $50,000 from the onset if the ultimate goal was to fund an entire season? “I had been told by La Ruche that it was way too much,” claims Ms. Lacroix, who consequently cut her goal in half. Indeed, according to Renault, a moderate and achievable objective is more likely to lead to a positive outcome. “Seeing as the audience will be confident in the campaign’s success, it will be more inclined to contribute to the project,” specifies the researcher.
The entrepreneur and producer managed to collect the amount she had initially announced, yet did not reach the second level that would have allowed her to fund her entire season. Of note, she could count on a large community, generous rewards and exceptional communications skills (Joanie Lacroix is an advertising and television producer). What explains this incomplete success?
First, the contributors had little influence on the project’s outcome. Whether they gave or not to the campaign, Ms. Lacroix’s documentaries would be produced. Indeed, in her presentation video, the entrepreneur informs us that she has almost completed filming the second season and is already looking forward to the third. From then on, one can presume that there will be a third season, no matter what, even if it takes a herculean effort. Remember that it is crucial to awaken in contributors a feeling of personal responsibility, or even urgency, by making them believe that they have the power to change a project’s trajectory.
Next comes the selflessness of the contributor in the case of Pastel Fluo. Joanie Lacroix realized it herself: for people to be motivated to financially participate in a project like hers, “it has to touch them [...] so that they see value in it.” Despite the impressive considerations offered, donors seemed motivated foremost in the campaign’s success. For them, their primary motivation was to help out the entrepreneur.
However, the $29,775 collected—including a $7,500 loan from the 375 Ideas Fund—were enough to allow Ms. Lacroix to pay for the editing of both documentaries.
SmartHalo 2: millionaire despite the absence of stretch goals
Given the hyperfunding of SmartHalo 2—a device designed to transform a bike into a smart bike—on Kickstarter, the following question becomes relevant: By reducing the goal to $75,000, was it a tactic to generate a buzz? “In part, yes, it was a tactic. It was an objective that we were sure we could attain,” confirms cofounder and CEO Xavier Peich, whose recent campaign collected more than $1.7 million.
Indeed, in the hour that followed the launch of the campaign, the first level had already been reached. Seeing as there still remained a month to this campaign, setting stretch goals would have been totally justified. But Peich’s team decided otherwise and carefully pointed out on its Kickstarter page that stretch goals were simply not appropriate for SmartHalo.
The company had already tested stretch goals as part of the SmartHalo 1 campaign in 2015. It had gone all out, but, by Peich’s own admission, the new commitments had been poorly planned and could not be delivered. It concluded that the setting of new goals adds a level of complexity to managing the project because the financial impact of what was promised on the project as well as the feasibility of the promises made must be determined. The entrepreneur therefore expresses doubts regarding the strategy’s true impact.
“I do not believe that stretch goals lead to more pledges. [...] There is not enough evidence supporting the claim that they pay off and justify the additional efforts they require,” he claims, whereas the visibility available through Kickstarter, including a mention in its newsletter, resulted in several thousands of dollars.
There’s an interesting avenue to explore… To which extent do the stretch goals set during an overfunded campaign result in higher contributions?
Hill Agency: anticipating contributors’ main motivations
Hill Agency is an investigation game imagined by two Aboriginal creators, Meagan Byrne (designer) and Tara Miller (host). All of the characters are from First Nations. Developed by Achimostawinan Games, their small company of about six people, the “cyberblack” videogame (a futurist universe that borrows film noir codes) made its way up to the imagineNATIVE Film + Media Arts Festival and among the finalists at the Ubisoft Indie Series 2019.
In the case of Hill Agency, the crowdfunding campaign had two objectives: to fund the polishing of the prototype before presenting it to editors and to take the pulse of the community. A target of $10,000 had been set for this campaign.
With unfortunately nothing concrete to propose as a consideration, the team at Achimostawinan Games asked itself the following question: “What could we offer people to make them feel that they had helped us?”
“Recognition, of course, by adding contributors’ names to the acknowledgements,” adds Ms. Byrne. “But, also, exclusive access to the alpha version and then to the final version to allow them to experience the game’s evolution. We incorporated all that in a consideration.”
The consideration, titled I Want to Make This Game Happen!, thus corresponded to the contributors’ main motivations: to acquire the game (egotistical behaviour) and to support the campaign to allow the game to become a reality (selfless behaviour) in exchange for a $25 donation.
Hill Agency reached the $10,000 mark eight days into the campaign. Initially, Ms. Byrne did not want to set a stretch goal, but she let herself be convinced to give it a try: $20,000 to further polish the prototype and produce a prequel.
However, the strategy had practically no effect on the campaign other than to convince a few contributors here and there to fork out a little more money to meet the $25 requirement.
In fact, Kickstarter’s “Favorite” mention is probably one of the main factors explaining the success of Hill Agency and its 120% funding level. That is exactly in keeping with one of Koch’s conclusions: “[…] the platform can impact a project’s results by its actions,” whether through its showcasing on a homepage or through the attribution of a seal of quality and originality.
Hill Agency obtained this recognition in as little as 15 minutes after the campaign had launched.
Hence the importance of making efforts in the right places
By presenting the cases of Pastel Fluo, SmartHalo 2 and Hill Agency, we hope to have demonstrated that crowdfunding campaigns, including the most meticulously crafted ones, are not all equal when it comes to the issue of overfunding. If certain ingredients for success stand out in the literature (attractive rewards, appropriate communication strategies, engaged community, timely stretch goals, etc.), it’s anticipating the consumer’s behaviour that gives us a clear indication of the projects that are likely to make it past the first level.
In our opinion, these observations are essential for artists and entrepreneurs who have already thought up a list of stretch goals even before launching their campaign. Although stretch goals seem desirable in certain fields, including the field of technology where contributions take on the form of purchases (for as long as there are still gadgets to sell !), these do not appear to be very useful when it comes to artistic, cultural or community projects that call upon people’s generosity.
In all cases, setting stretch goals is not something to be taken lightly. It is something that needs to be prepared upstream, it requires calculations to keep the project on budget and it does not systematically translate into new inflows of money. Indeed, it appears that that remains to be proven.