Crowd Funding: The 80-20 rule applies

Pareto’s Principle: The 80-20 rule

Definition: 80% of the results flow from 20% of the causes

This theory can be applied to

• gardening – 20% of pea pods produce 80% of the peas
• land owning – 20% of the population own 80% of the land
• software – 20% of bugs create 80% of crashes
• global wealth – 20% of the world’s population owns 80% of the wealth

In business the theory would be;

• 80% of your profits come from 20% of your customers
• 80% of your complaints come from 20% of your customers
• 80% of your profits come from 20% of the time you spend
• 80% of your sales come from 20% of your products
• 80% of your sales are made by 20% of your sales staff

Application to crowdfunding
The research shows that the majority of your donations come from your close social networks. 

If this theory is true, approximately 80% of your funds will come from 20% of donors, who will be well known to you.  

It may also be the case that only 20% of your entire social connections will be donors to your campaign.

It is your task to a) discover who are the 20% who are willing to support your campaign or invest in your business, b) map these people in your strategy, before you launch your product or service and c) involve your core supporters directly from the outset.

Be Aware your potential donors will be;

• closely connected to the team
• have a long history of connection
• existing customers or service users
• be passionate about the cause or idea

Be aware, the key 20% of all your social connections will show one or more of these characteristics. 

The ones who tick all the boxes are the ones you need to focus on. 

Once you have connected with these potential donors, bring them into the campaign early so they are fully engaged, believe in it and want it to succeed. 

Continue to engage them throughout. Focus 80% of your energies here. If they bring you 80% of the funds then the 20% is more likely to follow.

NB: Be Aware that 80% of your complaints and service issues will come from 20% of your supporters, but that's another discussion for another day!