crowdfunding, ask clay

How did crowdfunding come out of nowhere? What changed?

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This is the fifth post in our 30 Day Ask Clay Crowdfunding Q&A.

I’m answering a new question every day in June.

Submit your question by going to CrowdfundingHacks.com/AskClay, where you can see all of the questions and all of my answers.

Full Transcript

Hey everyone…this is Clay Hebert from CrowdfundingHacks.com…and today’s question is…

How did crowdfunding come out of nowhere? What changed?

I know it seemed like the concept of crowdfunding is pretty new and these platforms like Kickstarter and Indiegogo seemed to come out of nowhere over the last few years.

But the concept of crowdfunding is actually far from new.

Way back In 1713, Alexander Pope set out to translate over 15,000 lines of ancient Greek poetry into English. It took him over five years to get it right, but it was worth the wait: a translation of Homer’s Iliad that still exists. In exchange for a shout-out in the acknowledgements, an early edition of the book, and the delight of helping to bring a new creative work into the world, 750 subscribers pledged two gold guineas to support the job before Pope ever put pen to page. Yes, in 1713, Alexander Pope crowdfunded his translation.

70 years later, in 1783, Mozart wanted to perform three recently composed piano concertos in a Viennese concert hall, so he published an invitation offering manuscripts to those who pledged. Mozart’s first campaign actually failed, but a year later he tried again, and 176 backers pledged enough to bring his concertos to life. He thanked them in the concertos’ manuscript.

And in 1885, the the Statue of Liberty had no pedestal on which to stand in New York Harbor. France had given us the statue and the United States was just responsible for building the pedestal, at a cost of $100,000. But nobody wanted to fund the project… until Joseph Pulitzer (who would create the Pulitzer prize in his will), used his newspaper, The World, to launch a unique crowdfunding campaign to build the pedestal, save the project and keep the Statue of Liberty in New York City.

So we know the concept of crowdfunding isn’t new. So what’s changed?

Well, what’s changed is that the internet that connects us all. We don’t live in an industrial economy anymore, we live in a connection economy. You want proof?

Uber, the world’s largest taxi company, owns no vehicles.

Facebook, the world’s most popular media owner, creates no content.

Alibaba, the most valuable retailer, has no inventory.

And Airbnb, the world’s largest accommodation provider, owns no real estate.

Like no technology in history, the internet allows us to find and connect with each other.

If you’re Lee Miller and you want to make a new kind of device that allows you to play with your cat when you’re not home, you can find not just cat owners, but cat owners that love design and have some disposable income.

If you’re Satya Tweena and want to save New York City’s last hat factory, you can find the people that care about that and want to buy a hat to help you save that.

If you’re BSX Athletics and want to build the first ever wearable lactate threshold sensor, you can find the super serious athletes who care about tracking that.

The connection power of the internet, that’s available to all of us, is something Alexander Pope, Mozart and Joseph Pulitzer could only dream of.

The internet connects us all and makes the crowdfunding model exponentially more dynamic and accessible.

Sometimes what seems new is actually very old.

As always, you can submit your question or see all of the crowdfunding questions and my answers at http://crowdfundinghacks.com/AskClay

End Transcript

crowdfunding, ask clay

Why do some terrible ideas get funded, while some great ideas fail?

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This is the fourth post in our 30 Day Ask Clay Crowdfunding Q&A.

I’m answering a new question every day in June.

Submit your question by going to CrowdfundingHacks.com/AskClay, where you can see all of the questions and all of my answers.

Full Transcript

Hey everyone…this is Clay Hebert from CrowdfundingHacks.com…and today’s question is…

Why do some terrible ideas get funded while some great ideas fail?

This is a great question. As a creator who has either had a failed project or someone thinking about doing a campaign, it can be frustrating to see what you perceive as “lesser” ideas succeeding and what you perceive as “great ideas” fail to hit their funding goal.

The answer can be found in the following statement:

“Crowdfunding is not a meritocracy, it’s a marketocracy.”

Yes, marketocracy is a word that I made up, but that’s OK. People make up words all the time. I highly encourage you to make up some words of your own.

I’ll explain what it means.

The Merriam-Webster definition of a meritocracy is:

a system in which the talented are chosen and moved ahead on the basis of their achievement

So if crowdfunding was a meritocracy, the “best” ideas would raise the most money and the “worst” ideas would fail.

The problem is, the concept of a “good idea” is very subjective.

Let’s look at The Coolest Cooler.

To some people, a cooler that has a blender, a solar panel and an iPhone charger is ridiculous. To others, it’s literally, the “Coolest” cooler they’ve ever seen.

The Coolest Cooler campaign raised over $13.2 MILLION on Kickstarter, but what most people don’t know is, the first time out, The Coolest Cooler had a funding goal of $125,000 and they missed their goal. They only raised $102,000 and because they missed their goal, they got nothing. Zero. Zilch.

The second time out, there were a few minor changes to the cooler, but it was essentially the same thing! So what changed?

Their marketing changed.

The second time out, Ryan Grepper and his team completely revamped how they marketed and promoted the campaign.

They did the pre-launch marketing right and blew past their funding goal in a matter of minutes. Then they continued to promote the campaign effectively, targeting the people who they knew would be interested.

Same idea. Same basic product.

Completely different marketing. Completely different outcome.

Now even great marketing can’t save a horrible idea that nobody wants. It’s important to have a great product, but in crowdfunding, it’s about finding and reaching the people that care desperately about your idea. And then ignoring everyone else.

So to recap…

Crowdfunding is not a meritocracy, it’s a marketocracy.

It isn’t just the “arbitrary” quality of your idea (which is different to everyone), it’s also about the marketing…finding the small group of people who love your idea and building permission to market your campaign to them.

So with a nod to Merriam-Webster, if we were to define a marketocracy, it would be

a system in which campaigns succeed due to the combination of a great idea (to certain people) and the creator’s ability to find and market to those people (and ignore everyone else)

There…we didn’t just make up a word, we defined it.

As always, you can submit your question or see all of the crowdfunding questions and my answers at http://crowdfundinghacks.com/AskClay

End Transcript

crowdfunding, ask clay

Is My Idea a Good Fit for Crowdfunding?

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This is the third post in our 30 Day Ask Clay Crowdfunding Q&A.

I’m answering a new question every day in June.

Submit your question by going to CrowdfundingHacks.com/AskClay, where you can see all of the questions and all of my answers.

Full Transcript

Hey everyone…this is Clay Hebert from CrowdfundingHacks.com…and today’s question is…

How do I know if my idea is a fit for crowdfunding?

To be clear, for this question and this series, we’re talking about rewards-based crowdfunding.

To know whether your idea is a good fit for crowdfunding, there are three things to consider…

1. A successful crowdfunding project is

A creative project, with a beginning and an end, in which something new gets made and shared.

If you think about everything from The Pebble Watch and The Coolest Cooler to an independent film to a deck of cards, all of those things are creative projects with a beginning and an end in which something new gets made and shared.

2. Read the crowdfunding platform (by that I mean Kickstarter and Indiegogo) categories and guidelines

I’ll link to them here:

  1. Kickstarter rules (and prohibited items)
  2. Explore Kickstarter categories
  3. Indiegogo’s Terms of Service
  4. Explore Indiegogo categories

If you were thinking of making a documentary, what would you do? You’d (hopefully) go watch some documentaries and learn about how they’re made. It’s the same with crowdfunding.

Yet, I’m always amazed by how many people come to me that haven’t even browsed the Kickstarter and Indiegogo categories or read the guidelines and browsed and backed some projects. That’s the best way to really understand and get a feel for what kind of projects are good for crowdfunding.

The platform categories (and Kickstarter even has sub-categories) are pretty specific. Your project will likely fit cleanly into one of those…and if it doesn’t, it may not be a good fit for crowdfunding. And lastly…

3. Who is going to back you? And how are you going to reach them?

This gets more into the marketing of the campaign, which we’ll touch on later in this series but if you have no idea who is going to back you, or if you have no permission to market to those people, then crowdfunding isn’t going to magically bring you a bunch of traffic and backers. Crowdfunding platforms like Kickstarter and Indiegogo can amplify an interesting project with good marketing, but they’re not going to fund your project just by posting it there.

So to recap…

To know if your idea is a fit for crowdfunding…

  1. Ask yourself, is it a creative project, with a beginning and an end in which something new gets made and shared?
  2. Familiarize yourself with the platform categories and guidelines
  3. Know who are you selling to and understand how you can build permission to talk to them and let them know about your project.

You can submit your question or see all of the crowdfunding questions and my answers at http://crowdfundinghacks.com/AskClay

End Transcript

crowdfunding, ask clay

The Different Types of Crowdfunding (and which is right for you)

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This is the second post in our 30 Day Ask Clay Crowdfunding Q&A.

I’m answering a new question every day in June.

Submit your question by going to CrowdfundingHacks.com/AskClay, where you can see all of the questions and all of my answers.

Full Transcript

Hey everyone…this is Clay Hebert from CrowdfundingHacks.com…and today’s question is…

What are the different types of crowdfunding?

This is an important question because the four different types of crowdfunding all get lumped under this umbrella term of crowdfunding, but they’re actually very different.

This is also an important question, because the rest of this series focuses almost completely on one of those types of crowdfunding.

Depending on where you look online, you’ll see different answers and sometimes different terms, but the way I break it down, there are four distinct types of crowdfunding.

  1. Rewards-based crowdfunding
  2. Donation-based crowdfunding
  3. Equity crowdfunding
  4. Debt crowdfunding

Let’s look at each one in a little more detail.

1. Rewards-based crowdfunding

In rewards-based crowdfunding, backers contribute typically small amounts of money (typically between $1 and $1,000 but sometimes more) in exchange for a reward. This reward is often, but not always, the item being produced, such as a watch, an album or a film.

Kickstarter and Indiegogo are the two most popular rewards-based crowdfunding platforms but there are LOTS of other platforms.

While some of the tips and strategies apply to other forms of crowdfunding, this series focuses almost completely on rewards-based crowdfunding.

2. Donation-based crowdfunding

In donation-based crowdfunding, donors generally donate small amounts (again, typically between $1 and $1,000, but sometimes more).

Like the name suggests, in a lot of donation-based crowdfunding, there isn’t always a reward beyond the gratitude of the project creator or beneficiary (and possibly a tax deduction). Donation-based crowdfunding is typically used to raise money for a non-profit or a cause, like drilling a well or building a school in Africa or for a personal campaign like an individual’s treatment or medical bills.

GoFundMe and Crowdrise are two popular donation-based crowdfunding platforms but there are lots of others. You can also do donation-based crowdfunding on Indiegogo and even Kickstarter but you have to be within each platforms guidelines. For instance, on Kickstarter you can’t promise to donate funds raised to a charity or cause.

3. Equity crowdfunding

In equity-crowdfunding, investors give larger amounts of money (at least $1,000 and often a lot more). When investors give the money, they don’t get a reward, but instead, a small piece of equity in the company itself.

As a result, equity crowdfunding is typically used to raise money to fund the launch or growth of a company, not just initiate a creative project or cause. Often, these companies go on to raise money from angel investors or venture capitalists.

AngelList and Crowdfunder are two of the most popular equity-crowdfunding platforms in the United States, but there are lots of others. Fundable, EarlyShares and CircleUp are other popular platforms in the U.S. and and Crowdcube and Seedrs are popular in the U.K. and Europe.

There are actually three different kinds of equity crowdfunding, there are specific terms and regulations. Basically it gets more complicated, but this series is focused on reward-based crowdfunding, so we’re not going to go into all of that here.

And last but not least…

4. Debt crowdfunding

In debt-crowdfunding, it’s not “backers” or “donors” who give money, but lenders (sometimes these lenders are called investors).

Unlike other forms of crowdfunding, it’s NOT an exchange for a reward or equity. The investors don’t get a reward and they don’t get a piece of equity in the company, but instead they make a loan with the expectation to get paid back the principal plus interest.

So it’s a lot like loan from the bank, but instead of borrowing one larger amount of money from one bank, you borrow smaller amounts of money from multiple people.

Debt-crowdfunding can be used to raise money for lots of reasons, like credit card refinancing, debt consolidation, home improvement, a car or other reasons.

So to recap…

  1. In rewards-based crowdfunding, backers give a small amount of money in exchange for a reward.
  2. In donation-based crowdfunding, donors donate a small amount of money in exchange for gratitude and the feeling of supporting a cause they believe in.
  3. In equity crowdfunding, investors invest large amounts of money in a company in exchange for a small piece of equity in the company.
  4. And in debt crowdfunding, lenders make a loan with the expectation to make back their principal plus interest.

Those are the four types of crowdfunding.

You can submit your question for the series or see all of the questions and my answers at http://crowdfundinghacks.com/AskClay

End Transcript

How to crowdfund (my interview with James Altucher)

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Last week, as I was making coffee and heard the familiar “beep” of a new chat message, I smiled when I saw the message from was my friend James Altucher.

Someone had asked James, “What’s the best way to crowdfund to raise money for my project?” for Ask Altucher, the daily Q&A podcast that he co-hosts with his wife Claudia.

James asked me if I’d jump on the show for 10 minutes and explain “how to crowdfund”.

Only 10 minutes?

As I was setting up my microphone, I was wondering how I could cover anything useful about crowdfunding in only ten minutes.

We did it anyway and ended up riffing for 25 minutes. We covered a lot of great stuff, including:

  • Why creatives have trouble asking for money (and why crowdfunding is the perfect solution for that) (4:15)
  • When the concept of Kickstarter was conceived (and why it didn’t get built until years later) (5:14)
  • How much money you should try to raise in your crowdfunding project (5:40)
  • One of the biggest myths about crowdfunding (6:12)
  • How the current largest Kickstarter project ever…actually failed the first time (6:28)
  • How to get people to keep contributing once you hit your goal (7:40)
  • One specific way to get the press to cover your project (8:45)
  • The biggest myth about what press does (and doesn’t do) for your crowdfunding project (9:30)
  • The one tactic you should steal from infomercials (9:50)
  • How design impacts your crowdfunding success (11:00)
  • How people view crowdfunding projects (12:20)
  • One of the biggest mistakes I see in crowdfunding (and what to do instead) (12:50)
  • How Matt Kepnes (Nomadic Matt) tripled his crowdfunding goal, even though his app only cost $1 (14:00)
  • What kinds of rewards reduce production and shipping costs (15:00)
  • How to make a great crowdfunding video (including what to address in the first 10 seconds) (16:25)
  • Why you should think “bottom-up” not “top-down” when promoting your project (18:10)
  • How Mike Del Ponte segmented and use his personal address book to find initial backers for his project (18:45)
  • The FIRST thing anyone who is even thinking about doing a crowdfunding project should do today (19:30)
  • How Kittyo used this trick to find 13,000 pre-launch emails and was funded in 36 minutes, 200% funded on the first day and raised over $270,000 (20:45)
  • How I got started helping people with crowdfunding (23:00)
  • Why good crowdfunding is good marketing (24:00)

Click the player below to listen directly or click here to open the episode in iTunes.

Ask Altucher: Ep 170 What’s The Best Way to Crowdfund?

The Power of Instant Media

It’s worth noting how quickly this all happened.

  • James pinged me on chat…
  • 12 minutes later, we were all chatting on the air.
  • Less than 24 hours later, the episode was live in iTunes and Stitcher for anyone in the world with an internet connection to listen to, for free.

No filters. No scheduling.

No gatekeepers who can say “no”.

Just James and Claudia, generously and instantly shipping their art for free, while building trust and permission with an audience who wants to hear from them.

You have this same opportunity. We all do.

Enjoy the holidays. Enjoy the your time with your family. Laugh. Play games. Have some egg nog.

But it’s worth spending some time thinking about what kind of media you can create?

What kind of art can you ship to start building trust and permission with people, so when you launch your crowdfunding project, they’re not only already on-board, they’re actually excited to hear from you?

Leave a comment below.

Enjoy the episode, and happy holidays!

See you next year!

– Clay

Crowdfunding Project Teardown: Next Keyboard for iPhone on Kickstarter

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A lot of you have been emailing me asking for more crowdfunding videos and screencasts, so…

I put together this 4-video screencast teardown of Next Keyboard – The Perfect Keyboard for iPhone, a live, recently launched Kickstarter project.

(Note: I traded a few emails with the team before they launched, so I gave them advice on a few pieces of this, but I wasn’t deeply involved in the planning or execution.)

There are 4 video screencasts total, and in each, I analyze a different piece of the campaign:

In the first video screencast, I discuss their project title, their funding goal and their unique choice of project duration.

Crowdfunding Video Teardown – The Next Keyboard – 1 of 4 – Title, Funding Goal and Duration

 

In the second video, I review their crowdfunding video, bit by bit. If you’ve ever wondered what to include in your crowdfunding video, this one is for you.

Crowdfunding Video Teardown – The Next Keyboard – 2 of 4 – The Video


In the third video, I analyze their rewards and pricing and the value at each level. They did something really clever with the $1 level.

Crowdfunding Video Teardown – The Next Keyboard – 3 of 4 – Reward Levels and Pricing


In the fourth and final video, I review the main body section of the campaign (the part below the video). The Next Keyboard team also did something really smart here that you can steal for your own campaigns. In this last video, I also cover a two small tweaks I’d suggest to the team to help increase conversions.

Crowdfunding Video Teardown – The Next Keyboard – 4 of 4 – Campaign Body

What do you think? Did you like this? What else do you want to see?

Let me know in the comments below (or with a social share).

If you find them valuable, I’ll do them more often.

Thanks!

How to crowdfund an app

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How to crowdfund an app

In this post, I’m going to teach you:

  • how to crowdfund an app
  • why crowdfunding an app is different than crowdfunding other projects
  • which reward level you should offer your app at
  • how you should price your app
  • the two key attributes of great reward levels
  • how to increase your average contribution per backer

Why crowdfunding an app is different

Crowdfunding an app is different than crowdfunding other products for two main reasons.

  1. Consumers ALREADY expect apps to be cheap. People expect mobile apps to be either free or only cost a few dollars. For desktop apps (say, in the Mac App Store), the range is slightly higher, from free to  $5-$20. And that’s the “full retail price” in the app store.
  2. You need to price your app EVEN CHEAPER when crowdfunding – When crowdfunding an app, you should charge less than the full price it will eventually cost in the app store or on your website to compensate the backers for the fulfillment risk they’re taking on. I call this pricing “below MSRP”.

Here’s why you need to price your app “below MSRP”:

  • Your app is unproven. You haven’t launched yet. You haven’t scaled. There will be issues and bugs.
  • They have to wait. Your app isn’t ready immediately. When people buy apps in the app store, they can download them instantly. You’re asking them to wait until you ship the app.
  • It may never come AT ALL. Building apps is hard. Estimating development timelines is hard. The platforms (Kickstarter and Indiegogo) try to make sure that the creators can deliver but lots of apps never even finish and ship before they run out of funds. Of course, this won’t apply to your app, but it still contributes to overall fulfillment risk.

When people buy an app in an app store, they’re paying for a finished app, that has met certain app store requirements. It likely has lots of user reviews and will be delivered instantly.

When crowdfunding, you’re asking people you don’t know, for cash, ahead of time, to take a chance on your team’s ability to build and deliver the app you describe, on-time and on-budget.

For this, your early backers deserve a discount.

I suggest 50% off of full MSRP / app store price as a good rule of thumb. As you’ll see in the examples below, 50% off worked well.

Also, this means that the app itself should be the first and lowest priced reward level.

Unfortunately, this causes a problem

Pricing your app 50% cheaper than what you’ll sell it for once it’s available in the app store presents a problem.

The per-unit price is so low (half of a small number is a really small number), that even with a modest funding goal the math doesn’t work.

Let’s look at a simple example.

Let’s say you wanted to raise $20,000 (a solid but reasonable funding goal) for an app that will cost $2 in the app store, so you offer it at 50% off on your Kickstarter campaign.

At a $1 price point, you would need 20,000 backers. Most projects don’t get anywhere near 20,000 backers…

Fortunately, there is a simple solution to this problem…

You need to increase your average contribution per backer.

To do that, you need to offer more valuable perks above and beyond the app itself.

This is the point where most creators get stuck.

Since the app itself is “the thing being created” and it’s being offered at the lowest price point (which it should), most entrepreneurs struggle to think of what else to offer at a higher price point.

But that’s the key to crowdfunding an app.

You need to brainstorm and create other relevant and valuable perks, package them with the app at higher reward levels, and keep each reward level “below MSRP”.

Let’s look at two specific example campaigns and how they did exactly that.

Case Study: Gmail for Mac, by Zive (desktop app example)

GmailForMac_Zive

Gmail for Mac is a campaign from Zive, a startup that I’m advising. They are developing a desktop client for Gmail. Over 400 million people use Gmail but most use it in a browser tab. Eric Shashoua and his team wanted to build a desktop app that was fast and lightweight yet retained all of the useful features of Gmail (power search, plugins and extensions, etc.).

Their Kickstarter funding goal is $20,000.

The app will cost $9.99 full price (MSRP) when it’s for sale in the app store.

So (for the reasons described above) we offered it to Kickstarter backers at $4.99, a 50% discount.

To hit $20,000 at $5 a pop, they would need 4,000 backers, which is a LOT of backers, even with a strong marketing plan.

So we brainstormed other reward levels that we could offer at higher price points and then bundle them with the app.

Here’s what we came up with. We ended up with 11 total levels including the lowest and cheapest level, which is the app itself.

(This isn’t about finding “tricks” to get higher pledges from people. Zive put a lot of effort into creating levels of real value to the backers, things they could get excited about.)

  1. $5 – EARLY BIRD GMAIL FOR MAC: Get a full copy of Gmail for Mac, as soon as we launch in the app store! (50% off of retail price!)
  2. $9 level – PLUS, GMAIL POWER SEARCH VIDEO COURSE: Learn How to Search Gmail to Find Anything in Under 10 Seconds – and get the most out of Gmail for Mac’s powerful email search.
  3. $14 level – PLUS, 15 TOP EMAIL TEMPLATES FOR GMAIL + THE PERFECT GMAIL SIGNATURE VIDEO COURSE: Get the most out of Gmail for Mac – Executive secrets to writing quick responses and mastering your email communication, tailored for Gmail.
  4. $21 – PLUS, THE GMAIL NINJA COURSE: The top 10 Gmail features you should use, but you don’t. Perfect guide to harness the unique power of Gmail for Mac over typical email clients.
  5. $28 – THE NO-BRAINER LEVEL + EARLY ACCESS TO NEW FEATURES: Everything and the kitchen sink. You get ALL of the Gmail bonus video courses PLUS the full copy of Gmail for Mac as soon as we launch in the app store, PLUS early priority access to new features to support popular Gmail plugins & add-ons like Rapportive and Boomerang. Early access means you’ll get priority access to these special features before they come out.
  6. $40 – THE SIX PACK: Everything above, plus five more licenses to give to your best friends and family. Holiday shopping? Done!
  7. $80 – THE TEN PACK: Everything from the NO BRAINER level, plus NINE more licenses. Give them to friends and family, your startup team or your favorite officemates. Holiday shopping done in November? Done!!
  8. $100 – PLUS, EARLY ACCESS TO GMAIL FOR MAC + ALPHA INSIDER TEAM: Want to get your hands on Gmail for Mac now? Get early access to the app very soon, before it even launches, and become an optional part of our alpha product insider team.
  9. $150 – PLUS, ONE HOUR STRATEGY CALL WITH FOUNDERS – All of the above, plus a video call with the Gmail for Mac founders; the CEO and CTO. Ask us about raising venture capital, selling a company while still in your 20s, getting featured in the Apple Store, a burning passion for software design — or anything else!
  10. $300 – PLUS PERSONAL GUIDED SETUP WITH FOUNDERS – We’ll help you personally setup and optimize Gmail for Mac, including full setup of the app, optimizing your settings, labs, contacts, and accounts, and helping you build your perfect email signature. Let the experts help you master Gmail, once and for all.
  11. $1,000 – THE STARTUP MASTERCLASS – Bring your whole team. The Zive team will meet with you or your team for one hour a month for 6 months, helping your startup think through marketing, growth, fundraising, product design, and development. We’d love to help you do awesomely with your startup!

Each additional perk met the two key attributes of all good reward levels:

  1. Is it relevant to the project?
  2. Is it valuable to the backer and priced “below MSRP”?

Did it work?

Absolutely. The campaign just passed $30,000 with 3 days to go.

Here is a breakdown* of Gmail for Mac’s backers by reward level and the percentage (%) of backers that each level represents.

  1. $5 – 1866 backers – 76% of backers (As designed, the lowest level, the app itself, offered at a 50% discount, had 76% of the backers, the most by far)
  2. $9 – 77 backers – 3%
  3. $14 – 56 backers – 2%
  4. $21 – 56 backers – 2%
  5. $28 – 210 backers – 9% (notice that this “no-brainer” level easily has the second most backers)
  6. $40 – 120 backers – 5%
  7. $80 – 10 backers – Less than 1%
  8. $100 – 33 backers – 1%
  9. $150 – 3 backers – Less than 1%
  10. $300 – 4 backers – Less than 1%
  11. $1000 – 1 backer – Less than 1%

And here is that same revenue breakdown* by reward level and the percentage (%) of total funds raised.

  1. $5 – $9,374 – 31% of funds raised
  2. $9 – $700 – 2% of funds raised
  3. $14 – $787 – 3%
  4. $21 – $1,180 – 4%
  5. $28 – $5,894 – 19% (again, the “no-brainer” level has the second highest % of funds raised)
  6. $40 – $4,84 0 – 16%
  7. $80 – $800 – 3%
  8. $100 – $3,300 – 11%
  9. $150 – $450 – 1%
  10. $300 – $1,200 – 4%
  11. $1000 – $1,500 – 5%

 

GmailForMac_Graph

 

* This breakdown was done with 3 days left, so these numbers will change slightly by the end of the campaign.

Analysis and takeaways from Gmail for Mac:

  • Notice that just the app level itself, even with all the backers (76% of the total backers), would NOT have been enough to even hit 50% of Zive’s $20,000 funding goal ($9,374 of $20,000).
  • The use of a “no-brainer” level (the ‘extra value meal’ of crowdfunding) resulted in the second most backers and % of funds raised)
  • The lesson is clear. You need to offer other relevant and valuable perks at higher reward levels than the app itself.

Let’s look at one more example, this time using a mobile app.

Case Study: TripSaver from Matt Kepnes (mobile app example)

TripSaver

Matt Kepnes is a good friend, a top travel blogger and the author of How to Travel the World on $50 a Day. Because Matt is a travel budget expert, one question he repeatedly got from his tribe was how much to budget when traveling to different parts of the world. As his readership grew, responding to everyone individually became unsustainable so Matt decided to build an app that would serve as a travel cost and budgeting calculator.

He called this app Trip Saver: The Ultimate Travel Budgeting App. You can view his successful Kickstarter campaign here and we’ll break it down below.

Matt wasn’t trying to make a bunch of money from his campaign, he just wanted to cover the cost of iOS and Android development so he could build the app for his tribe that was clamoring for it.

For development of the app on iOS and Android, Matt and his team needed $8,000, so that’s what he set his Kickstarter funding goal at.

Since it’s a mobile app, he decided that full price (MSRP) when it was available in the app store would be $1.99.

So (again, for the reasons described above) Matt offered it to Kickstarter backers at $1, a 50% discount.

Even with a very modest funding goal of $8,000, at $1 a pop, Matt would need 8,000 backers to hit his goal. Even though Matt had an active and passionate tribe, very few crowdfunding projects ever get that many backers.

So again, Matt and I brainstormed other reward levels that we could offer at higher price points and then bundle them with the app.

Here’s what we came up with. We ended up with 13 total levels (but really only 10, since the last four were variations of the same perk to different destinations). As with Gmail for Mac, the lowest and cheapest level is the app itself and it’s offered at a 50% discount to retail.

Because Matt had previously developed other digital goods (like digital guides and e-books), physical goods (his own hardcopy book) and services (his sold-out travel tours), he was easily able to stack other valuable rewards on top of the app itself.

TripSaver reward levels

  1. $1 level – THE APP BEFORE ANYONE ELSE: You’ll get the app for $1 (retail price will be $1.99) and you’ll get it before anyone else.
  2. $5 level – PLUS EBOOK: Everything above, plus my ebook, How to Build a Travel Blog (Retail price: $9.99).
  3. $14 level – PLUS SIGNED HARDCOPY BOOK: Everything above, plus a personalized signed copy of my book, “How to Travel the World on $50 a Day” shipped to your door. (Retail price: $15) A KICKSTARTER EXCLUSIVE.
  4. $30 – PLUS A T-SHIRT: Everything above, plus a custom Nomadic Matt T-shirt with my logo and the quote, “Keep Calm and Travel On.”
  5. $50 – PLUS MY TRAVEL BLOG GUIDE: Everything above, plus my exclusive guide “How to Make Money with Your Travel Blog” with included expert interviews (Retail price $67)
  6. $100 – THE NO BRAINER LEVEL: Everything above: The app, the How to Build a Travel Blog ebook, the signed hardcopy, the How to Make Money With Your Travel Guide, PLUS THREE MORE SIGNED HARDCOPIES (total of 4) of my travel book (retail value $60), PLUS a copy of my upcoming new ebook A Complete Guide to Travel Hacking (Retail $47), which will teach you how to easily gain tens of thousands of hotel points and airline miles and redeem them for free travel.
  7. $250 – PLUS, ONE HOUR TRAVEL PLANNING CALL. Everything above, PLUS a one hour travel planning call with me personally. Want to travel like a pro? I’ll spill all my knowledge in an hour call where we will plan your trip and make it the most life-changing trip ever.
  8. $500 – PLUS PERSONAL DELIVERY AND LUNCH ON ME: Everything above, PLUS I will come to your city, take you out to lunch, and talk travel with you. I’ll hand deliver my book, take you to your favorite restaurant, and talk with you about travel, life, and answer any questions you want. (Lunch is on me and US domestic only). +++NOTE: You must be within 60 miles of the following cities: New York, Boston, Providence, Philadelphia, Chicago, Washington D.C., Richmond, Miami, Jacksonville, Orlando, Tampa, New Orleans, Nashville, Austin, Dallas, Denver, Fort Collins, Omaha, Tulsa, Kansas City, Des Moines, Fargo, Milwaukee, Las Vegas, Phoenix, San Francisco, Los Angeles, San Diego, Portland, Ashland, Madison, Santa Fe, Cincinnati, and Seattle. If you are in a city that is not on this list and want to know if we can include you please feel free to submit a question. +++
  9. $1,000 – PLUS FLIGHT TO AND A PERSONAL GUIDED TOUR OF NEW YORK CITY: Everything above (except the $500 level) PLUS, I’ll fly YOU AND A GUEST to New York City and give you a personal guided tour of the best city in the world. (Includes one free economy round trip flight and one day guided tour and meals. You are responsible for your own accommodations but I will be happy to make affordable suggestions. The personal tour is only one day but stay as long as you want!) (US domestic only)
  10. $2,000 – PLUS A GUIDED TRIP TO THAILAND WITH ME: Everything above (except $500 and $1,000 level), PLUS an exclusive reserved spot on my always sold out reader tour though Thailand in February 2014. Come with me to my second home – a country I have lived in many times over. In this two week tour, I’ll show you an insider’s view of the country including my favorite bars, restaurants, dishes, and locations. We’ll eat a storm, explore chaotic Bangkok, relax on quiet Thai beaches, and hike beautiful jungles. (Airfare not included)
  11. $2,000 – PLUS A GUIDED TRIP TO AUSTRALIA WITH ME: Everything above (except $500 and $1,000 level), PLUS an exclusive reserved spot on my always sold out reader tour though Australia in November 2014. Come with me to the land down under and see the harbor bridge in Sydney, eat great food in Melbourne, enjoy the beaches and jungles in Queensland, and swim in the Great Barrier Reef. This two week tour will show you one of my favorite countries, you’ll learn budget tips with me, and walk away with lifelong memories. (Airfare not included)
  12. $2,000 – PLUS A GUIDED TRIP TO EUROPE WITH ME: Everything above (except $500 and $1,000 level), PLUS an exclusive reserved spot on my always sold out reader tour though Europe in July 2014. Explore Europe and learn budget tips with me as I take you to beautiful destinations, amazing eateries, and wonderful sights and reveal to you the hidden treasures around this continent that seven years of visits have let me found. (Airfare not included)
  13. $2,000 – PLUS A GUIDED TRIP TO CENTRAL EUROPE WITH ME: Everything above (except $500 and $1,000 level), PLUS an exclusive reserved spot on my always sold out reader tour though Europe in August 2014 (Prague, Vienna, Budapest, Bratislava). Explore Europe and learn budget tips with me as I take you to beautiful destinations, amazing eateries, and wonderful sights and reveal to you the hidden treasures around this continent that seven years of visits have let me found. (Airfare not included)

Again, each of Matt’s perks met the two key attributes of all good reward levels:

  1. Is it relevant to the project?
  2. Is it valuable to the backer and priced “below MSRP”?

Did it work?

Absolutely. Matt’s campaign raised $27,669, over 345% of his original $8,000 goal.

Here is a breakdown of Trip Saver’s backers by reward level and the percentage (%) of backers that each level represents.

  1. $1 – 681 backers – 44% of backers (Again, as designed, the lowest level, the app itself, offered at a 50% discount, had 44% of the backers, the most by far)
  2. $5 – 364 backers – 23%
  3. $14 – 323 backers – 21%
  4. $30 – 66 backers – 4%
  5. $50 – 62 backers – 4%
  6. $100 – 40 backers – 3%
  7. $250 – 2 backers – Less than 1%
  8. $500 – 2 backers – Less than 1%
  9. $2000 – 4 backers – Less than 1% (For this breakdown, I combined the three different $2,000 reward levels, which were essentially the same reward to different locations.)

And here is that same revenue breakdown by reward level and the percentage (%) of total funds raised.

  1. $1 level – $1,033 – 4% of funds raised
  2. $5 level – $2,035 – 7% of funds raised
  3. $14 – $5,339 – 19%
  4. $30 – $2,140 – 8%
  5. $50 – $3,335 – 12%
  6. $100 – $4,110 – 15%
  7. $250 – $500 – 2%
  8. $500 – $1,000 – 4%
  9. $2000 – $8,000 – 28%

 

TripSaver_Graph

 

Analysis and takeaways from TripSaver:

  • Again, notice that just the app level itself, even with more backers than any other level (44% of the total backers), only raised 4% of the funds, the third lowest level of funds raised!
  • The two slightly higher reward levels ($5 and $14 levels) contributed to 26% of the total funds raised.
  • Again, the lesson is clear. You need other, relevant and valuable perks at higher reward levels than the app itself.

Summary and Key Takeaways

  • Consumers already expect apps to be cheap (and they expect mobile apps to be cheaper than desktop apps)
  • You should price your app even cheaper than full (retail / app store) price when crowdfunding, because of fulfillment risk. A 50% discount is a good rule of thumb.
  • The app itself should be the first and lowest priced reward level.
  • However, this makes the per-unit price low, so you need to increase your average contribution per backer.
  • The easiest way to do this is to brainstorm and create other relevant and valuable perks and package them with the app at higher reward levels, while keeping each reward level “below MSRP”.
  • If these higher level rewards are digital (like Matt’s e-book guides), that makes fulfillment easier and decreases shipping time and cost.

If you liked this post…

While I love helping individual project creators like Matt and advising startups like Zive, there’s only one of me and I get too many inbound requests for crowdfunding help and consulting to handle them all.

So I’ve decided to take all of my expertise (from helping 80+ projects raise $20M+ total) and put it into an online crowdfunding course. There will be multiple instructional video modules, templates, a reward-level modeling spreadsheet and downloadable scripts and bonuses. If you’re on my email list, you’ll be the first to hear when I launch the course (soon!).

If you’re not on the list yet (or if you want to forward this to a friend), signup here.

When you sign up, you’ll also get three free bonuses instantly:

  1. My never before published crowdfunding presentation from Yanik Silver’s Underground conference
  2. An audio interview, where I shares my best crowdfunding tips and tricks with Dan Martell
  3. A bundle of my favorite crowdfunding tips, tricks and links

Thank you.

As always, thank you for reading. Time is the most valuable resource we all have and attention is the most valuable currency. I appreciate that you’ve given me both today. Thank you.

Crowdfunding Strategies and Tips: Audio Interview with Dan Martell

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In this audio interview with my good friend Dan Martell, we cover..

  • Why good crowdfunding is good marketing (0:50)
  • The difference between crowdfunding and crowdsourcing (and the simplest way to remember the difference between the two) (1:18)
  • How the concept of crowdfunding isn’t new at all but what changed to allow crowdfunding to blow up in the last few years (2:50)
  • How Kickstarter almost got started back in 2001 (4:40)
  • What you can’t do on Kickstarter than you can do on other platforms (6:00)
  • What to consider (and what not to consider) when choosing a crowdfunding platform (6:55)
  • The differences between the four different types of crowdfunding (6:55)
  • The only time you should use a “roll-your-own” crowdfunding platform (9:30)
  • The biggest mistake I see in crowdfunding (10:12)
  • The best way to test and validate a crowdfunding campaign (11:18)
  • Why (and where) you should publish your crowdfunding video months before your campaign launches (12:20)
  • How Lee Miller built a landing page that converted at 40% and gathered 13,000 pre-launch emails, was fully funded in 36 minutes and raised over $270,000 (13:10)
  • When crowdfunding projects typically get funded (14:30)
  • How to craft the perfect title for your crowdfunding campaign (15:20)
  • The way people view crowdfunding projects (16:55)
  • One critical element for your crowdfunding project (17:30)
  • The most important part of your crowdfunding video (18:40)
  • The key elements of your video (19:25 + 21:20)
  • The brilliant opening line of the video that helped Jake Bronstein raise over $1M (19:55)
  • The best way to end your video (22:50)
  • How to price your reward levels (24:35)
  • The one DUMB reward level everyone uses, but that you should delete from your campaign (and why it never works) (26:10)
  • The unique reward level that nobody uses that you should use instead (27:05)
  • The difference between “top-down” marketing and “bottom up” marketing (and which one you should use) (28:15)
  • A unique way to use Facebook to promote your campaign (30:15)
  • How to use Twitter to find people interested in your campaign (31:55)
  • How to use a little-known Google trick to find out what press and blogs covered similar projects to yours (34:28)
  • The best way to get your project featured by the crowdfunding platforms (37:45)

 

BackFriday_BlogImage

An alternative to Black Friday

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Last week, I was flying through Toronto and while checking in, the ticketing agent exclaimed, “You live in New York City?!”

I was surprised that she was surprised, given that Toronto is only an hour flight and that she must handle routes to New York every day. I quickly realized that her excitement wasn’t that I lived in New York but that she would be heading there soon.

“I’m going there next week! Technically for Thanksgiving but really for Black Friday!”

It took my brain a few beats to process the fact that not only was she looking forward to battling the sharp-elbowed Manhattan crowds…but that she was actually more excited about that than the prospect of sharing a Thanksgiving meal with family and friends. I wondered if she chose to attend a lesser Thanksgiving dinner in order to enable her discount shopping binge.

Black Friday was originally a very negative term

The term Black Friday (when not referring to a stock market crash) was originally used by police officers in Philadelphia in the 1960’s to complain about the traffic jams caused by the combination of shoppers on the Friday and Saturday after Thanksgiving and thousands of fans attending the annual Army-Navy football game, which back then was played in Philadelphia on the Sunday after Thanksgiving.

From NPR:

Black Friday “was not a happy term,” department store historian Michael J. Lisicky told CBS News last year. “The stores were just too crowded, the streets were crowded, the buses and the police were just on overcall and extra duty.”

Even a sales manager at the department store Gimbels in Philadelphia back in 1975 acknowledged the term’s negative connotation and link to traffic headaches. “That’s why the bus drivers and cab drivers call today ‘Black Friday,’ ” she told The Associated Press, while watching a policeman struggle with a crowd of jaywalkers. “They think in terms of the headaches it gives them.”

“Prior to the mid-1980s, the term ‘Black Friday’ was always used for some calamitous event,” columnist Paul Mulshine wrote in New Jersey’s Star-Ledger. “All of that negativity makes sense. ‘Black Friday’ has a naturally gloomy sound to it.”

It took decades for retailers and the media to spin the originally negative term to mean “blank ink”, the accounting signal for profit.

Back Friday is an alternative to Black Friday

So instead of celebrating huge crowds, mass consumerism and ten-dollar toasters, what if we celebrated entrepreneurship and creativity?

My friend Chris Nordyke came up with a great concept called Back Friday.

The concept of Back Friday is simple. Instead of engaging in a faceless transaction with a massive company, you back an entrepreneur’s crowdfunding project.

Instead of buying a bigger TV or a new tablet, what if we perused Kickstarter and Indiegogo to find a worthy craftsman or startup business to support?

Instead of lining the pockets of big box retailers, what if we all found and supported an entrepreneur trying to bring her art to the world?

But if this idea caught on, what kind of art, literature and projects could we help bring to life?

An opportunity to teach kids entrepreneurship

Even better…what if we did the browsing, selection and backing alongside our kids, nieces or nephews?

What if we used this opportunity to teach them about creativity and entrepreneurship and art?

Who will you back?

If you back a crowdfunding project today, feel free to use the hashtag #BackFriday, like I did in the tweet below.

Note: The #BackFriday hashtag will also include pictures of weightlifters working on their deltoids and others who have problems spelling. 🙂

What do you think of #BackFriday?

Who will you back?

Kittyo_GA

How Kittyo Gathered 13,000 Opt-In Emails in Only 5 Months – Part 1 (Includes Successful Templates, Strategies, etc.)

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UPDATE: Congratulations to Lee and the entire Kittyo team. They ended their stellar Kickstarter campaign on Friday, May 23rd, raising $271,154 from 2,425 backers.

NOTE: Before you read this post, please go back and read last week’s post, I explained exactly how Lee and the Kittyo team optimized their landing page until it eventually converted at 40-50%, well above the industry average.

The best way to build permission is to consistently deliver quality content, usually via a blog. But most crowdfunding creators haven’t done that. Many crowdfunding projects are brand new ideas. So a clear, effective landing page with an obvious value proposition is critical to building permission and trust (and collecting emails.)

A high-converting landing page is the key to your success. Sending traffic to a poorly converting landing page is like pouring water in a sieve. Once you have a landing page that converts well, you can turn on the traffic faucets using the strategies below, which sent people to the optimized landing page at Kittyo.com to collect their email and let them know when Kittyo launched on Kickstarter.

Again, if you haven’t read last week’s post, I encourage you to go back and review it before reading on.

How Kittyo Attracted 50,000 Targeted Visitors and Gathered Over 13,000 Emails in Only 5 Months

Once the landing page was optimized, it was time to send traffic to it. Below are the strategies that worked for Lee and the Kittyo team and can help you find and drive targeted traffic to your landing page and campaign.

Focus Like a Laser

Most people love to focus on the larger media outlets – there’s a thrill in seeing your name mentioned in a big name publication – but not all traffic is created equal.

A big part of Kittyo’s success is that they didn’t try to reach everyone but laser-focused specifically on the exact customers who would want to hear about their product. The big eyeballs and impressions offered by larger media outlets seem enticing, but they often send only “drive by traffic” that rarely results in actual customers, or even quality leads. More relevant sources will convert at a higher percentage, so if you want email opt-ins and backers, it pays to find highly targeted traffic.

Define Your Ideal Customer and Develop Your Customer Avatar

One of the best ways to make sure you’re focusing on targeted traffic is to develop a “customer avatar”, a detailed, hypothetical description of the ideal customer you want to reach. Broadly, Lee and the Kittyo team knew they were trying to reach “cat owners who owned smartphones”, a fairly broad demographic group.

More specifically, the ideal customer also worked outside the home, was an early adopter of technology, appreciated design and had at least moderate disposable income.

That’s enough detail to start developing their customer avatar.

The concept of developing a customer avatar is not new or particularly novel, but it’s often overlooked or poorly executed. If you Google “customer avatar”, you’ll find a lot of templates. The exact template doesn’t matter much. More important than the final document is the rigor used to think about specific details, needs and problems of your ideal customer. Etsy has a great blog post on how to define your ideal customer, so let’s use Etsy’s “ideal customer” template from that post (because Etsy is awesome.)

Kittyo’s Customer Avatar

If we were to use this template to define Kittyo’s customer avatar, it might look something like the following:

Kittyo_CustomerAvatar

Speak Like a Human

The specificity of your customer avatar is not meant to be limiting. It’s meant to help focus the messaging and keep it in a conversational, human voice.

When you talk to your best friend over dinner, you talk like a human.

When brands try to speak to everyone at once, they sound like, well, brands.

For the rest of your campaign, when you’re writing the project title, video script, reward level copy, campaign description, ads, etc., pretend you’re speaking to your friend Jessica over dinner. Your copy and messaging will be more human and conversational, which will not only convert better, it’s more fun to write.

What Sites Does Your Customer Read? Who Do They Trust?

OK. You’ve decided to laser focus your outreach, you’ve defined a detailed customer avatar and you have committed to communicate in a human voice. The next step is to find out where they hang out online. What sites does your customer read? What sites do they buy from? Who do they trust? Make a list.

Put yourself in their shoes. This is even easier if you are somewhat similar to your target customer.

Who do they follow on Twitter? What brands do they like on Facebook? Are they active Pinterest users, or do they stick to Instagram? What Google searches would they do?

Does this take time? Absolutely. But very soon, you are going to be asking people you have never met, who have never heard of you, to give money to you, an unproven stranger, to pre-buy a product that doesn’t even exist yet. 

So you owe it to your future customers to do the research to understand their needs and problems. Researching them takes time, but it’s well worth it.

Start With Google and Pinterest to Find the Ideal Sites & Blogs

This is where you get to play a little CSI without the blood or rubber gloves.Your job is to identify the sites and blogs your ideal customers knows, likes and trusts.

We know Jessica (our ideal customer avatar from above) loves her cat. We knows she reads Refinery29 (which has lots of well-designed products) and uses Pinterest. So Jessica may do a simple Pinterest search for “cat design” (possibly to find new cat products for her apartment.)

If we do a Pinterest search for those keywords, it turns up some interesting products but one source site in particular kept coming up…HausPanther.com. (see screenshot below – 3 products from hauspanther circled in red)

Kittyo_Pinterest_HousePanther

A quick review shows us that HausPanther is a site completely dedicated to Kittyo’s target market.

The tagline of the site is, “The premiere online magazine for design-conscious cat people.”

On the site, there are high-end, designer cat products and even a “gear guide.”

Hauspanther is perfect and will convert to opt-ins much better than larger, more broadly targeted media outlets.

 

Kittyo_HausPanther

Find Similar Sites & Blogs

Once you find one “perfect” site (like HausPanther in this case), it’s actually easy to find similar sites.

Tools like, SimilarSiteSearch.com, SimilarSites.com and SimilarWeb.com show you similar websites, including the types of visitors.

This step is so important, I’ll expand on it in an upcoming post but just by entering HausPanther.com into those sites, Lee can generate a long list of similar cat websites and blogs to reach out to.

SimilarSiteSearch_HausPanther

Work With Press and Bloggers to Add Value to Their Readers

Most creators approach press and bloggers in the wrong way. They assume it’s all about them and their project, when it’s really about adding value to the press outlet or blogger. Lee did his research and found out that HausPanther occasionally runs giveaway contests for their readers, so Lee worked with them. Over the course of five months, HausPanther covered Kittyo three different times.

  1. The first post in announced Kittyo and teased that there would be more to come and linked to Kittyo.com to allow readers to opt-in.
  2. The second post was one of HausPanther’s regular contest giveaways where readers could win a free Kittyo unit. Again, this adds value to both HausPanther’s readers and to Lee – when entering the contest, with a simple checkbox, readers could choose to opt-in to the Kittyo email list.
  3. The third post was announcing Kittyo’s Kickstarter launch on launch day.

Have a Clear, Compelling Value Proposition and a Great Headline

If you want to get covered by sites and blogs, they need a hook, an interesting reason to write about you. This hook is communicated via the headline, which often contains the key value proposition of your product.

Why is it new? Why is it interesting? Why should anyone care?

A great headline gets the reader intrigued enough that they want to read more.

Kittyo came up with the perfect headline that also communicated their value proposition. “Play with your cat. Even when you’re not home.”

KittyoHeadline

It’s the perfect headline. It speaks directly to cat owners. If playing with your cat when you’re not home is interesting to you, you’re intrigued enough to read more.

Engage On a Few Specific Social Media Platforms Well

In the next post, we’ll outline Lee and the Kittyo team’s social media strategy. We’ll show how they effectively leveraged a few specific social media platforms well, instead of spreading themselves too thin across too many platforms.

Any Questions?

As always, please leave any questions or comments below and I’ll try to answer as many as I can.