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part 1: how to make money using crowdsourcing (from someone who made amost $40,000)

$38, 893.00. we made thousands on, an australian crowdsourced funding site (if you’re in the dark, wikipedia re: crowdfunding). to date, it’s the largest amount raised by a single person in the short history of pozible . we’re writing this to let you know that compared of other methods of raising cash, it’s a pretty simple, fast and easy way, if you do it right. it’s also legal, which is rather handy.

Go shove your advertising up yr nuffnang!

so, how the heck did we tell bank managers and the other usual methods of financing to suck it and work without a bank loan?  how did we not sell our soul to nuffnang? where do we get the hookers and cocaine? not so fast, grasshopper.

for starters, there was a reason behind our madness of deciding to go down the route of crowdsourced funding. we’d done our homework on the whole crowdsourcing thing thanks to friends and people that we knew. nickd wrote a book about user interface design. my spinning hero, pluckyfluff aka lexi boeger, made her dream of a pluckyfluff HQ come alive. shannon okey, knitgrrl extraordinaire, kicked the bank manager’s butt and got her business funded for expansion.

we watched, we donated money to causes that we loved, and we got a little wistful. what could we do with websites like kickstarter? there had to be something.

how we came up with our project.

the pieces coming together all happened in a rush. admitedly, we’d laid a hell of a lot of groundwork before starting out on our path to cash. we’ve done the New Enterprise Incentive Scheme (NEIS). twice. we’d written articles for yarn magazine,  done a lot of knitting book reviews, worked for a yarn store, blogged since 1998 (we were part of the beginning of diaryland & blogger, amongst others), and started our own business selling hand dyed yarn in australia, because it seemed kinda weird to be importing the stuff.

we have sheep here in australia. researching things a little further, we have a rare breed of sheep, the cormo, which is pretty popular overseas. it’s the biggest fibre seller at the moment at the spinning loft, a fine purveyor of fleecy goodness based in the USA at howell, near detroit in michigan.

long story short: we fall in love with cormo, and desperately wanted to have it locally manufactured into a form that more crafters can use (ie combed top for spinning & felting, and yarn for knitting & crochet). how? after a few months of research, it turns out that we can get it done, but it’s no small operation.

we do the sums and nearly fall over backward at the cost – how do farmers ever manage to afford the costs of transport, scouring (cleaning the fleece), processing (combing and carding the fleece to get a spinnable fibre), and spinning before selling their own product? there was no way that we’d be able to do it alone. or was there?

there was the option of simply getting the farmer to trust in us, and fund the whole thing. problem was, we wasn’t sure that we had an audience, and that there were enough people willing to pay a premium for a locally made product. we really needed to keep that farmer happy, by making things as simple as possible.

do your homework.

we did the homework with kickstarter. the truth of the matter is, unless you’re in the US or have someone amazing who is going to do all your dirty work in america (set up the account on kickstarter, have a US amazon account, have a US bank account, make your ham sandwiches, and the list goes on…), and the bulk of the people funding you are going to be in the USA, you can forget about kickstarter. they have automated walls for people outside of the US to ensure that you don’t start a project with them.

the cormo project was going to be all australian. it had to be, because that’s essentially what we were pimping – a rare australian sheep from the founders of the breed, processed from sheep to skein in tasmania & victoria. we knew about pozible from a few sources, including the famous hell hole of complete shit in both good and bad ways, messandnoise.

there was a project that was being pimped on messandnoise that was successful “given everything” – a film about oz musician maurice frawley . sure, it helped that they had paul kelly backing them, but it was a great project, and it’s awesome to see a film about  a well loved local musician come to fruition.

we did the homework on pozible. perhaps too much. we religiously checked out other projects, read all the fine print, checked the everything crowdfunding flowchart, read the blog and possibly annoyed the hell out of those boys who were successful. we googled them. we called them. we contacted them via messandnoise.

get the code.

most importantly, we got the code. if there is a way to make or save money whilst doing crowdsourced funding, take it. pozible offers a discount code through various avenues, and it’s really super duper worth your while to get one. why? here’s how pozible’s fees work:

we raised a total of $38, 893.00. if we didn’t get the code, we’d be paying pozible $2,916.00. with the code? $1,944.00. a simple task which took a few minutes saved us close to a thousand dollars.

pozible wants you to be successful, and by adding in a little extra work for you to do, they figure your chances will be greater. given that since doing pozible, that no one had asked us for a code, or the folk that we got our code from, pozible are very right. check out the statistics – less than 40% of the projects on pozible are successful – getting a code is one little step on your path to success. (update – we’ve only got one left, but if you think you’re worthy – get in touch!)

beware midgets in the porn industry

we didn’t really think about this one, because for us and our checkered history of applying for jobs amongst other things, we love addressing selection criteria. 49% of pozible projects are rejected, because they fail to meet pozible’s criteria.  before you start on your path to millions by crowdsourcing a charity that cares for midgets in the porn industry, you might like to check where pozible sits with your project.

there was nothing like TON OF WOOL, hell, there wasn’t even a craft category (like there is on kickstarter). so, we did the right thing, contacted pozible and checked. added bonus – pozible knows that you’re coming, they’ll look out for you, and they’ll approve you faster, because you checked, and you, smart person, have the code.

 coming up with your target amount.

we asked for what seems like a ridiculous amount of money – $33,000.00. we had no choice in the matter, because the minimum with the scour for white wool was two tons, and we talked them down to one. we did our homework. we did the sums. we talked to our accountant and gave them the figures and listened to them sweat over the phone and tell us that we’re doing something really dumb and risky. if our accountant didn’t do that, something would be horribly wrong.

we talked to a fibre loving knitter pal who’s also a bookkeeper who knows her way around a balance sheet, and got her to do some sums and check ours. then, we went through the scenarios, many a time, and came up with how it was all going to work. we needed to buy all the wool, and get it all scoured. then we worked out the bare minimum we’d need to sell, and how much we could charge for it in order to cover the costs of buying it all, scouring it all, and processing what needed to be sold.

then we added the fun stuff – the costs that pozible charge, transport costs, gst on any transactions, postage, labelling. to be on the safe side, we padded it out by using maximum costs for things that could possibly be a lot lower (for example, wool processing is cheaper when processing 500kg as against 250kg, but we used the 250kg figure).

whatever project you’re doing – that number crunching is uber important that you get right BEFORE you go for funding. always go for the bare minimum that you need to get your project funded – it’s not unusual for projects to be funded way over their additional goal, particularly if you spell it out that you’re going for minimum, however if extra funds occur, what they’re going to be used for.

know your product.

have awesome rewards that people are going to want. there’s a couple of schools of thought about rewards though, and there’s no one way that’s right, but there’s what works for you. we needed simple, so we stuck with product only, and a digital craft magazine – entangled that we’d been helping out with that we wanted to publicise – a win/win situation. if there’s someone you can team up with to offer something a little off the wall without too much hassle, all well and good. others warned me about going all out and giving away crazy things that cost extra and were a lot of work. for example, we do hand dyed yarn. there’s no hand dyed offerings, because we couldn’t put the costings into pozible without a lot of fussing around.

others have gone all out with weird offerings, and it’s worked for them in terms of publicity. great examples include josh freese who did some uh… interesting package deals “Take a limo down to Tijuana and he’ll show you “how it’s done””.  there’s also the wonderful $3000 grilled cheese party for bottle coozies (and james brown stickers, t shirts, all sorts of crazy). do question if you really want to be signing product a thousand times (hello trent reznor) or what else you’d be prepared to do/offer, particularly if it’ll get you media attention, and it’s something people will shell out cold hard cash for.

do a video for your project.

we know. we didn’t do one. at least, we didn’t publish one of the tens that we did do, because we hated it, and chances are, pozible hates us for not having a video, because it’s one of the things that they love to see you do. so we’re going to do a video just for pozible about pozible instead. meanwhile, we highly recommend robin sloan’s awesome advice on doing a video.