The Fixed vs Flexible Funding Crowdfunding Model
In a crowdfunding campaign with the fixed funding option, the entire funded amount is returned to the backers if the funding goal is not achieved. With flexible funding the project receives all funds raised regardless of its outcome. It is important to understand that your choice between these two funding options should depend on the type of project or business you have.
An example, if you have a goal to raise $50k to build a prototype of a product you want to sell as a product for you new business, and you must have the specified amount of capital in order to build this prototype the fixed funding model is the only alternative. An example for using a flexible model would be if you were raising campaign funds for a family that had lost everything through a fire that destroyed their home any amount of money would help in this case.
Using the flexible funding campaign model may have a negative impact on a campaign because it may give the impression that the business/project owner is not confident or experienced, and may not deliver on their promise. On the other hand, fixed funding campaigns provide a higher degree of transparency because all backers know they will get their money back if the campaign is not fully funded.
As the campaign owner remember that crowdfunding is not only about raising money it is a business endeavor that requires research and strategic planning and during the process of research and writing you use data points and comparisons to determine the exact amount of funds needed to complete the project. Crowdfunding is an incredible marketing and branding machine that can be a two edge sword. In the branding and marketing world driven by social media bad news spreads at the speed of Internet just like good news. If a project fails to make good on a promise the world will know instantly.
When it come to the decision of fixed or flexible remember crowdfunding is a business function that can help entrepreneurs fund and market their dreams and business ideas, but crowdfunding is business and as such must be treated as such. In-depth market research, strategic business planning , a strong marketing plan, and a budget to guide all business decision that are made is a must. Crowdfunding portals can be the catalyst for building new businesses, but they have service fees, credit card fees, and of course you must fulfill the rewards so think about all of these functions before deciding fixed or flexible.