How much is a crowdfunding backer worth?

Posted by Daniel Chen on Friday 01 Apr 16

Value of Crowdfinancing BackerWhen it comes to crowdfunding, supporters or backers are the most powerful asset there are. They are the lifeblood of the success of not only the businesses utilizing crowdfunding but also the crowdfunding industry as a whole. Aside from just supporting businesses projects with their finances, these backers also operate as brand advocates. Unsurprisingly, crowdfunding platforms have helped create easy means for backers to become brand advocates. Sharable posts to social media such as Facebook and Twitter are generated after supporters back crowdfunding offers. Outside of the virtual realm, backers spread the word of projects they love through word of mouth, consistently the most trusted marketing channel. This begs the question, what is the value of a crowdfunding supporter to businesses?

With Kickstarter and Indiegogo both boasting their backer base to consist of millions of users, reward based crowdfunding projects clearly have a large population of supporters. Additionally, with new crowdfunding platforms being created after the passing of Title III of the JOBS Act in October 2015, the floodgates have opened for new backers originally locked out of contributing to companies.  Non accredited investors now have begun to swarm the market. Despite the huge population of crowdfunding supporters, there haven’t been any definitive studies on the true value of crowdfunding backers. Using comparable statistics, we can get an idea of what that number is.

The main statistic that could be comparable is the value of a businesses’ fan on Facebook. Like crowdfunding platforms, Facebook fans actively support the business and are typically brand advocates of the businesses. In 2013, Syncapse, a social media marketing firm, released a report investigating the value of a Facebook fan and found that a Facebook fan was worth $174. They analyzed this number by looking at 6 different factors; product spending, loyalty, propensity to recommend, media value, acquisition cost, and brand affinity.  Looking at those same 6 factors of a crowdfunding supporter in comparison to a Facebook fan, the Crowdfinancing Platform Bakcershypothesis that a crowdfunding supporter is worth significantly greater than a Facebook fan emerges.

  • Product Spending: The moment that an individual backs a crowdfunding offer, they financially support that business whereas on Facebook a fan can just like a page without actually spending any money. For this reasons, it isn’t too farfetched to assume that on average, a backer spends more than a fan. 
  • Loyalty: Defined as the customer’s intention to continue to purchase the brand in the future, backers typically feel closer and have a deeper connection to the small businesses that utilize crowdfunding. On the other hand, the brands featured in the Syncapse study we’re large brands such as Levi and Target meaning strong brand loyalty has already been created.
  • Propensity to Recommend: As mentioned earlier, crowdfunding platforms have been optimized for the ability to turn backers into brand advocates. Not only that, crowdfunding projects are typically innovative and are prime for going viral through social media sharing and word of mouth. Crowdfinancing platforms are no different in our minds. 
  • Media Value: Defined as the earned frequency and reach on the platform, crowdfunding projects have higher likely hood to go viral on social media than typical Facebook business pages. 
  • Acquisition Cost: Due to the higher propensity to recommend and media value of crowdfunding backers, we believe that the acquisition costs or the ability for users to drive organic membership would be greater than a Facebook fan.
  • Brand Affinity: Essentially the emotional connection felt by individuals from businesses, small businesses that use crowdfunding are, as an aggregate, more relatable and have a deeper emotional connection with their backers. The huge brands featured in the Syncapse study are so large that the emotional connection is also lost in their size. It’s for that reason that we believe that crowdfunding backers have a higher brand affinity than fans.

As the crowdfunding industry continues to grow, hopefully more concrete data begins to be released to get a clearer idea of the value of backers. However, based on these six factors, it’s probable that backers have a higher value than the $174 that Facebook fans are valued at. For brands that utilize the Kickfurther platform, this means that each backer that utilizes crowdfinaning and helps crowdfinance the businesses' inventory, represents an additional gain a huge amount of value.

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Topics: Educational, Startups, Community

Posted by Daniel Chen on Friday 01 Apr 16
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