Josh Allen is the founder of WO Design, which makes and sells pet toys through a network of specialty retailers in addition to its own ecommerce website. In October, Josh set out to raise $7,500 to pay for the design work on new products using the Kiva loan crowdfunding platform. By the end of November, he achieved his goal. This is the fourth and final in a series of posts chronicling his experience.FREE KIVA LOAN CASE STUDY
Kiva Facilitates Microloans Around the World
Kiva is a non-profit microloan crowdfunding platform. It has facilitated loans by more than 1.5 million individual lenders to more than 2.2 million borrowers worldwide. For U.S. small business borrowers, the process of raising 0% interest rate term loans consists of five steps:
- Apply – Fill out an online application.
- Lend – All applicants are required to make a loan of at least $25 to another small business.
- Invite – 5 to 30 friends, family, and acquaintances to make a loan of at least $25 within 15 days of the approval of your application (the “private fundraising period”).
- Fundraise – Upon the successful completion of your private fundraising period, your personalized loan page will be made available to all Kiva lenders (the “public fundraising period”). You have 30 days in which to raise the balance of your loan.
- Repay – use the Kiva platform to payback your lenders.
From Start to Funds in 58 Days
Josh started his Kiva loan application on October 5th and received $7,500 in loan proceeds on December 2nd. It took less than a month to reach his goal from the date his application was approved:
Kiva gives borrowers a total of 45 days in which to complete both the private and public fundraising stages. It only took Josh 18 days. Obviously, he did something right.
Building Momentum During the Public Fundraising Stage
As detailed in previous installments of this series, Josh used a combination of phone calls, emails, and texts to get commitments of $1,500 (20% of his goal) from 13 friends, family, and supporters during the six days it took him to complete the private fundraising stage. Loan commitments from that group averaged $155 and ranged from $25 to $500.
A few days into the public fundraising stage, Josh edited the headline on his loan campaign page to highlight his company’s affinity with pets and its charitable cause. Josh attributes much of his success to his decision to emphasize those elements of his business:
I think the international mission and pet aspects combined made my loan proposal appealing to people who were cruising around Kiva looking to lend.
The data is consistent with Josh’s conjecture. During the public fundraising stage, an additional 160 lenders – most of whom were unknown to Josh – pledged an additional $6,000. While friends and family commitments averaged $155, loans made by others during the public phase averaged $38. It turned out there were a lot of people who were willing to commit the minimum of $25.
Reflections and Lessons Learned
Kiva loans live somewhere between charity and investing. A 0% loan isn’t going to make you any richer. On the other hand, it’s not a gift. In any case, Kiva lenders aren’t going to undertake financial analysis or due diligence when making a loan decision. Rather, they seem to respond to proposals that strike a chord and to which they may feel a sense of affinity. On the one hand, it probably doesn’t take strong sense of affinity to prompt a $25 loan. On the other hand, it takes a lot of lenders at $25 each to fund a $5,000 to $10,000 loan.
In retrospect, it’s not surprising that pets, widows, and orphans turned out to be a winning combination for Josh and WO Design. Even so, Josh had a couple of concerns going into the process.
His prior crowdfunding experiences made him cautious – even a little skeptical, perhaps – regarding the effective breadth and depth of Kiva’s active lending community. It’s one thing to say that 1.5 million have made loans on Kiva. It’s another to conclude that nearly 200 will lend to me.
The response from the larger Kiva community was a really pleasant surprise! It was amazing to me that the Kiva community even encompassed 6th grade students that were choosing projects to support in their classrooms. It’s so cool!
Noting that many – or even most – of the projects listed on Kiva were from startups, Josh had also been concerned that WO Design would, somehow, be perceived as being too established.
I worried that people would see my proposal and be like, “Oh, they don’t really need our help.”
In retrospect, he thinks he should have been more open about telling people that WO Design already had a couple of products for sale but needed a loan to grow. After all, buying a product provides people another way to show their support. In fact, Kiva has an online store featuring artisanal products made by Kiva borrowers from outside the U.S. In any case, WO Design experienced an uptick in its online sales, which Josh attributes to the visibility generated by his Kiva loan campaign.VISIT KIVA STORE
Advice to Other Small Business Owners
Based on his successful campaign, Josh offered some advice to prospective Kiva borrowers:
- Follow the Kiva playbook. Kiva offered several tips and suggestions throughout the process. Listen to them. They work.
- Put thought and effort into your photo and headline. Kiva believes that your photo is the single most important element of your personalized loan page. Josh thinks the headline below the photo is the second most important. Kiva lenders scan. Make it easy for them to pause to consider your project.
- Utilize your Kiva contact. Josh asked his contact to add several additional keyword tags to his loan page, which he thinks made his project easier to find and distinguish from other projects.
Upon reaching his fundraising goal, Josh immediately posted an update to his new lenders detailing his action plan:
As one of those lenders, I’m looking forward to following the continued success of Josh and WO Design.