Lessons learned on how to use crowd-funding for a travel startup

I’ve spent many months crowd-funding an Indiegogo campaign, a process which was ultimately successful. Yet, I have mixed feelings about the concept, especially for travel.

NB: This is an analysis from Chandra Jacobs, who crowd-funded airport application TripChi.

I’ve shared many of my observations, as well as tips and trips for those thinking of a crowd-funding campaign, in my blog. But how do you know whether you even should get started?

To crowd-fund (or not)

Contrary to the name, crowd-funding is decidedly not for the crowd. It is not for everyone, nor is it for every type of product/project.

Non-gaming software is tough to crowd-fund on Indiegogo and Kickstarter – the toughest of which are mobile apps, the ultimate in vaporware. That’s because donation-based crowd-funding is best suited for consumer products (where a donor can receive an actual “something” in return for the donation, as opposed to just a token item).

Causes/fund my life projects (on Indiegogo) can also be successful if done in a way that has emotional appeal or extreme cleverness.

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In the travel industry, I have seen successful cause-based campaigns on Indiegogo – for example, my friend raised money to fund his trip to Stanford and received Lean Launchpad Instructor training and certification from an expert.

His ultimate goal was to get trained and bring startup education back to Cologne, Germany. The reason it worked was because it was a combination of a “fund my life” and a cause campaign that leveraged a cause that emotionally resonated with people (building startup instruction in Cologne), a personal touch and cleverness in raising the money. Check out his campaign here.

Unfortunately, there are too many epic fails to count. In fact, most travel-based crowd-funding campaigns fail.

Take a look at the current list of Indiegogo travel campaigns and unfortunately you will not find one that’s anywhere near reaching its goal.

In fact, according to a PC World article, of about 60,000 unsuccessful projects, nearly 40,000 did not even reach 20% of their goal. This includes many ‘fund my travel’ or ‘fund my study abroad’ campaigns, as well as ‘fund my travel startup’ – the category that my startup, tripchi, also fell under.

Face the realities 

While we were lucky to eventually get funded, I think crowd-funding travel technology, especially mobile apps, is tough. When I use the word crowd-funding here, I use it in the sense of “donation-based” crowd-funding.

There’s also the other type of crowd-funding, which is ‘equity-based.’

Some caused-based travel organizations would be great candidates for crowd-funding via donations. For other travel companies, especially on the software side, I would suggest checking out equity-based crowd-funding as an avenue to raise a larger amount of capital, perhaps for the same amount of effort.

Sometimes, even if you’re a travel startup mobile app, it can still make sense to crowd-fund – but have no delusions that it will necessarily take more work than it is probably worth.

For tripchi, we came to a point in our product development where we hit a resource wall. We needed to augment our internal development team with outside resources to simply speed up the pace that we were building at (most of our team is part-time).

We’re too early-stage still to raise a seed (we don’t have a public release yet), and we’ve already burned through our internal investment money to get where we are today.

At the same time, we wanted to validate the concept with a larger customer base, generate interest, brand awareness and create early product evangelists and adopters. Moreover, we wanted to test out the mechanisms of our marketing strategy, product message and how to execute a massive PR campaign.

Indiegogo was therefore a good fit, and we had no delusions about how much work was in front of us to hit our nominal target.

We didn’t raise enough money to actually fund our entire development (we knew this going in) – and needless to say we’ve already put a lot of our own money in. But for us, the #1 benefit of crowd-funding was not actually the funding – it was the exposure and validation we gained throughout the process.

If you’re in a similar situation, it may also be a good fit for you. Just be clear about what your goals are and try not to make them unrealistic – achievability and clarity of purpose and necessity are key.

Kickstarter vs. Indiegogo

Each has a different fit. Kickstarter is typically for ‘serious’ projects not necessarily the charity, ’cause’ or ‘fund my life’ campaigns that often clutter the Indiegogo pages.

That said, Kickstarter also seems to have a physical product focus (less so on software) and it is much harder to design perks to fit with Kickstarter’s more stringent rules (for example, all perks have to be made by the team – so if you want to use a third party vendor, tough luck).

Finally, Startup America offered a discount through Indiegogo so that clinched it for us. That said, I would recommend doing Kickstarter if you can, because the exposure and reach is magnified and businesses are often taken more seriously through that platform (lends more credibility).

Of all the platforms out there, Kickstarter fares the best in terms of success rate.

Success rate

This is most likely because it disallows charities, causes and fund my life campaigns, and generally has stricter guidelines on what can be funded. One of the main reasons people choose Indiegogo is because they can’t, or it’s too hard to, do Kickstarter.

That was certainly true for us.

Campaign timing

We decided to initially make our campaign last for 35 days. The most successful campaigns are right around the 30 day point, and everyone I spoke with that had run campaigns before said 40-day efforts ended up doing about the same as 30-day efforts, the only difference was 10 extra days of work for the campaign managers (since you end up putting in 5-10 hours a day in your outreach).

We launched the campaign on a Monday night and didn’t quite get the initial pop we had hoped for until Tuesday and Wednesday.

In retrospect, we wish we would have launched it on a Thursday – this is one of the days of the week that people aren’t buried in email and are actually a little bored, and are catching up on their emails. It is also good timing for all those newsletters that go out Monday morning.

However, we were running into the holiday season if we waited much longer, so really needed to get the campaign started (hence we bit the bullet for Monday night, Nov 11).

In the end, we worked with Indiegogo to extend the campaign by 1 week (it was very flexible). We did this, not because we weren’t going to reach our goal (actually we were on track), but because we wanted to ride the long-tail of articles and blogs that were still dribbling out.

Ultimately they didn’t drive many additional donations so the aggravation probably wasn’t worth it.

Also, kicking out your end-date will just delay the last minute donations. Human behavior is to procrastinate. Your friends will donate. Just not when you want them to (right out of the gate).

Most likely they will donate the night before your campaign ends, best case in the final few days. This distribution proves it – with spikes of activity that came after intensive e-mail marketing efforts.

Results

Here’s an interesting thing – look at the spike of activity the weekend before Thanksgiving and then the total drop in activity the weekend of Thanksgiving. Lesson – anytime you launch around a holiday it will be lost time.

Results

In summary:

  • Launch on a Thursday, never around a holiday.
  • Run for 30 days
  • Stay calm and crowd-fund on after your initial pop with the expectation that you’ll get another burst at the end.

Perks

They are a pain. Dealing with suppliers is tedious. And thinking through what to offer is just and mind-boggling. But 90% of successful campaigns offer perks, so it’s just something you have to do. It’s a coordination headache between lining up vendors, negotiating prices, defining your margin, an ultimately setting the price you will offer the perk at.

Then, how many perks should you offer? My advice is that you want to have 1-2 perks under $50 (which is the average donation size and should also be the size of your “core” perk – for us, access to the Beta) and several above.

Here’s what the distribution looked like for our perk redemption:

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Lessons learned:

  • People like donating at the low-end ($15 and $30), and somewhere in the middle, around $60, and another small peak at $100. In retrospect I might have priced the entry-perk a little higher than $15. One of the biggest things I wish I did differently is make it clearer to donors that they can actually donate any amount of money they want (as much or as little) and can basically disregard the structure of the perks if they want to. I would also reduce the number of perks – chop out the $45 and $75 which just got lost in the noise.
  • Make sure your perks all have something to do with your brand and your message/vision. For us, it’s all about traveling, and improving the airport experience, so we offer perks like: our “Keep Calm and Fly On” keychain and iPhone Case, Tripchi branded leather luggage tag and passport holder, a “Travel Saved My Life” t-shirt, and an airport code necklace and airplane earrings.

Also, make your perks relevant to your brand!

Gogofactor: Get on your friends and family

It’s extremely important to seed the campaign with donations from friends and family so that you can move fast up the ranking in the Indiegogo campaign pages through an elevated “Gogofactor.” This is an algorithm that Indiegogo uses to calculate which campaigns it will feature and your ranking in the Indiegogo pages.

You want to be as close to the front of the Indiegogo page as possible (similar to Google).

A lot of factors go in to it: # of donations, amount of donations, where donations are coming from, velocity of donations, number of hits that are incoming to your Indiegogo campaign page, social media shares, how many comments you have on your campaign, how many team members are part of your campaign, how many items you have in your campaign gallery, and how many updates you send out. Advice – start early!

Marketing: Start early

The earlier you can reach out to people the better so you can prep them for what’s coming and ensure an initial “pop” of donations in the first week.

I started off with two emails. One to all of my personal contacts informing them that an Indiegogo campaign was coming, and to watch out for it and engage on social media in advance of the campaign. Then I wrote a second email, once the campaign was live informing them about how the donation process worked and also including a single-click tweet to retweet.

Also, be prepared to reach out to press via email and Twitter in the first week, and keep up a steady stream of pitches flowing until about the fourth week in the campaign, when they won’t have time to turn-around an article before your campaign ends. For me, this included reaching out to travel, startup, and tech writers and bloggers (and travel tech newsletters, analyst groups etc.).

Expect the turnaround time to be much longer than you anticipate. SO again, start BEFORE your campaign.

You can also pay for gigs on Fiver – both for social media promotion (we bought one on Twitter) and for site visits, which are both variables contributing to the GogoFactor. I found limited utility in these Fiver gigs, so buyer beware – but it’s always an interesting experiment. Also, these are generally looked down upon in startup circles as a fake way to buy inorganic page views and publicity, so it’s important to understand that reality.

Finally, don’t underestimate getting the word out in person. We are attending two-three events per week, many of which we are pitching in and explaining our entire concept from beginning to end, and demo-ing what we’ve built so far. Only good things can come from this high-touch marketing.

Still thinking of running a crowd-funding campaign?

The main purpose of this article was to actually dissuade you from running one if you’re in the travel industry, so if I’ve scared you into thinking it’s too much work, then I’ve done my job.

Generally, the cost-benefit just isn’t there, especially for mobile apps (that aren’t games). However, there are other reasons to crowd-fund, such as PR, which could make it worth it – just carefully weigh the pros and cones and be clear about your outcome. If you goal is only to raise money, proceed with caution. Your better option would be to focus on other avenues, selling, or client-work.

NB: This is an analysis from Chandra Jacobs, who crowd-funded airport application TripChi.

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Viewpoints

About the Writer :: Viewpoints

A founding principle of tnooz was a diversity of viewpoints from across the spectrum. Viewpoints are articles by guest contributors from around the travel and hospitality industries. The views expressed are the views and opinions of the author and do not reflect or represent the views of his employer, tnooz, its writers, or partners.

 

Comments

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  1. edogabn81@hotmail.com

    Great article thank you very much for sharing.i found many answers of my questions ib it..wish u good luck.

     
  2. James Hayward

    Great analysis really enjoyed it, will forward on the link to some of the team. Thanks for taking the time to break it down and share. I guess the trick comes back to how your plan stands out from the crowd.

     
  3. Robert C Gray

    Thanks for sharing the details of this in public. Very up-front thing to do. Good luck with your next ventures.

     
  4. budi santoso

    Thanks Chandra for sharing this. I am right now thinking on how to get traction to the startup travel that i built. And this becomes one of the alternatives.
    Budi Santoso
    Founder, getourguide.com

     
  5. Matt Zito

    Hi, Chandra, thanks for sharing your Indiegogo fundraising experience. I enjoyed reading it.
    Matt Zito
    Founder, TravelStartups.co

     
 
 

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