Crowd Supply-Side Economics: Here's the Money

After spending months developing a new product, launching a crowdfunding campaign, and seeing the pledges come in, creators are understandably anxious to get started actually manufacturing the first batch to send to backers. As such, it's important creators understand when they can expect to receive their funds.

Similarly, backers who use their hard-earned money to support campaigns and order goods from Crowd Supply want to know when and why they are charged, and when they can expect their orders to be fulfilled. These are all fair questions that span a lot of territory, so we thought we’d take some time to explain it all here.

There are three transaction types on Crowd Supply: crowdfunding campaign pledges, pre-orders, and standard in-stock orders. Each works a little differently:

Crowdfunding Pledges

These are pledges to live crowdfunding campaigns that will help launch a project. That means backers are giving money to a creator who will use the capital to fund the first manufacturing run and bring the product to life. In exchange for this early support, backers are first in line to receive the product, often at a discount off the intended retail price.

Backers are charged only if and when the project meets its funding goal. Once the goal is met, product creators will also receive backers’ contributions from Crowd Supply.

Should the goal be reached before the end-date of the campaign, creators will get funds shortly after the goal was met (collecting and transferring the money can take a few days), with any additional contributions transferred to the creator on the end-date of the campaign (assuming there were additional contributions).

Pre-orders

Once a project’s campaign has concluded and its funding goals are met, it can start taking “pre-orders” for the product. Pre-orders are next in line after campaign pledges to receive the product, also often at a discount off standard retail pricing. Pre-orders are fulfilled after all commitments to crowdfunding backers have been met.

We charge customers right when they place the pre-order because the project has already reached its funding goal and manufacturing is underway. Also, charging at the time the order is placed greatly reduces the number of failed charges that don’t go through. The more time elapses, the greater the likelihood of charges failing: cards expire, addresses change, etc. This is much less of an issue for crowdfunding backers because crowdfunding campaigns have hard, relatively short-term, ending dates.

Even though customers are charged at the time pre-orders are placed, funds collected from pre-orders are not transferred to creators until crowdfunding orders have been fulfilled. Pre-orders, unlike campaign pledges, can be canceled for a refund, so those funds need to be available for that purpose if and when it arises.

This should not present a hardship for creators because the campaign goal (plus anything raised beyond that) should have been calculated to wholly cover the costs of fulfilling those crowdfunding pledges. That is, after all, the entire point of the funding goal in the first place. This system has proven effective for every fully-funded campaign in Crowd Supply’s history: all have been able to deliver product to backers and then go on to fulfill pre-orders and receive those funds.

In-Stock Sales

Once a product has been manufactured and all crowdfunding campaign orders and pre-orders have been fulfilled, many creators choose to continue to sell their product on the Crowd Supply site.

Crowd Supply often serves as the first retail outlet for the new product. This works like any other traditional retailer/wholesaler relationship; creators sell product to Crowd Supply on wholesale terms and Crowd Supply pays those invoices accordingly. There is no exclusivity - creators are free to sell their product anywhere they like. Customers purchasing in-stock items from Crowd Supply are charged when they place their order and products are shipped almost immediately.

We've built Crowd Supply to support new products as they evolve from crowdfunding to pre-order to in-stock. Each stage in this life cycle is aligned to help creators and protect backers. If you have an thoughts or questions about these stages or Crowd Supply in general, please don’t hesitate to get in touch.