Defensibility and the Commercial Elements of Whitelabel Crowdfunding

By on June 17, 2013

Introduction

hubbub receives around 5-10 requests for whitelabel crowdfunding platforms a month. In the vast majority of cases, we are either not told various pieces of information around the project, or we are told but only under NDA. The information can include:

To all those who believe they can exploit a new “niche” in the crowdfunding space, we say great. There are still plenty of interesting niches out there – both geographic and sector-based.

However, this comes with a caveat. If you really believe your concept is so indefensible that you aren’t even willing to tell us who you are or what you’re trying to do before we give you a quote, you might have a problem.

Markets

See, hubbub is one of at least 10 major players in crowdfunding who can provide people with new platforms. In some cases these platforms can be up and running in a few hours, and even large-scale custom deployments can be live in a month.

Consider what this means if your financial viability rests on capturing a significant slice of a new market or niche for crowdfunding. If you have a truly attractive niche, then the second your site is up and running others are going to see it and – given the really low barriers to entry that now exist in the space – potentially enter your market and clone it. If they do this, you will be in a race to the bottom on site fees, as your only real differentiator will be your commission – your technology after all was provided probably by one of a small number of vendors selling effectively the same solution.

And if you don’t have an attractive niche, well… then it’s never really going to take off.

Tips on Whitelabelling

So here are my recommendations for those considering whitelabelling a platform for a new sector or geography:

  1. Make sure that you are bringing more to the table than an idea – e.g. if you are looking to launch a new crowdfunding site for the planet Mars, make damn sure that you know all of the creative Martians, have signed up the Mars Film Society as a partner, and know the Royal Martian Academy of Arts staff well. In addition, ideally, secure match-funding from Mars Bank, so that projects running on your platform truly benefit from association with you. The real acid test – imagine that someone else tried to launch a platform for the same space at the same time as you – would you still feel confident that you would take over the whole market, or at least a reasonable share of it?
  2. Make sure that you are comfortable to tell us who you are and what you are trying to achieve. This ties into the above. If you haven’t developed the institutional relationships that are going to help you succeed, then we understand your reticence to share your idea – after all, others can go and build those relationships and take your market! However, you should never let yourself get into that position – you should be sufficiently comfortable that you are going to execute on your idea that you can tell us what it is and let us help you out. We don’t mind signing NDAs when we know people have prepared properly – particularly if that helps you on the legal/investment front.
  3. Make sure you’ve incorporated a company or entity that can legally take on the project. A new platform is a major job – you can’t do it in your spare time. When new platform founders come to us with just a concept and ask for a quote, consider how this works from our perspective – we don’t know who you are, nor do we have any assurances that you are serious. Putting together a quote takes us time, particularly if we tailor it to your proposition. Signalling that you are serious about the project – e.g. you know your market, you’ve set up a company, arranged finance, registered a domain, build institutional relationships etc – is a good way of getting our attention!
  4. We are frequently asked to take a risk on a revenue model – e.g. to build and run the platform in return for a revenue share from the platform commission. Think about how this looks and sounds to us. If you are a new startup, you’re asking us to put in most of the effort and take most of the risk for some unknown and unquantified reward. Moreover, if you really believe your idea is a killer idea, you wouldn’t want to share the commission with us – you’d want to pay a fixed fee/ongoing monthly fees that enable you to make more money in the upside case. We will consider revenue share models, but really only when we know and trust the organisational partner running the site. Which is why it’s so important that you show us you’re serious!

Summary

Think hard about your niche or application for crowdfunding. Figure out what happens if you get competition, and what the key relationships you need to establish are. Once you’ve built those relationships, analysed the finances of the platform, figured out your own revenue model and how you’re going to get paid, and started talking to the key players in your niche, then it’s time to start looking at commissioning technology – such as ours.

One final point – for anyone looking to build their own site from the ground up, or “outsource it to India/Eastern Europe/some other low-labour rate country”, please don’t. We have spoken to endless people who have tried this and most of them have ended up having to throw away the “solutions” and starting again. It’s not worth it. Use our technology, or use a competitor’s technology (we’ll even introduce you!) but please, for the sake of our own sanity, don’t “just build your own”.

 

Jonathan May

Founder & CEO at Hubbub
Founder of Hubbub and digital fundraising strategist and technologist. I work with nonprofits globally to leverage digital as a fundraising and campaigning channel.

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