The Rise (and Fall) of Niche Crowdfunding

It all sounds pretty good in theory: local, self-hosted platforms that serve one specific niche in the overall crowdfunding market. These platforms could consolidate all of the crowdfunding traffic in their chosen community or demographic — be it cat lovers, cycling enthusiasts or residents of southern New Hampshire — creating a vibrant marketplace of campaigns and ideas.

In practice, however, these niche platforms face several imposing problems that curb their ability to attract campaigns and, ultimately, donor contributions.

Their limited scope — the hallmark of any niche platform — means that these platforms are working within a small market, which makes low deal flow a chronic issue. Particularly as they are starting out, platforms that cater to only one group lack the flexibility to adapt to the market and, as a result, tend to face funding shortfalls.

The smaller the niche, the greater the funding problems; a platform for real estate, for example, will have more traffic than one that targets real estate in Baltimore.

Niche platforms will often attempt to compensate for low deal flow by maximizing penetration into their chosen market. While this is theoretically a viable strategy, it somewhat naively assumes that the platform will be able to steal away a large proportion of their vertical market from popular third-party platforms.

One primary reason why these niche platforms often fail is that market penetration on the scale that they require can only be possible with extensive, long-term marketing strategy — which carries a price tag that most startup platforms simply cannot afford.

The reality isn’t that niche crowdfunding is somehow intrinsically doomed, but that niche platforms that try to frame themselves as ‘The Kickstarter of _________’ face long odds in establishing credibility and gaining sufficient market share.

“My advice to someone starting a niche crowdfunding platform would be to make sure that their model either includes other revenue sources other than just percentage fees on transactions or that they don’t look at it necessarily as a business,” said Launcht Founder and CEO Freeman White.

As White suggests, these platforms must take a less conventional route.

“It could be something they want to do for reasons other than business,” he said. “There are lots of good reasons to be involved in a certain niche, other than just to turn a profit.”

Successful past platforms have built themselves around a single event or competition, capitalizing on the momentary attention of their market and then fading into the background. Platforms that hang around for too long tend to go the way of the infamous Dole/Kemp ’96 webpage — attracting more dust than donors.

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