Deciding on a target amount is not always easy: In fact, CHF 10,000 would be enough to launch the project, however you could expand the project with CHF 15,000. In such cases, stage funding is a good choice namely when a project can be implemented in various sizes.
Stage funding integrates additional security levels in the “all-or-nothing” system. Once a stage is reached, the amount for the project is secured. After that, the game starts all over again: Once the next stage is reached, the difference in the project's crowdfunding pot is secured. Therefore: Not all projects are suitable for stage funding.
STAGE FUNDING EXPLAINED USING AN EXAMPLE
Johanna wants to open a café. She already found a suitable place. She needs CHF 20,000 to cover the rent for half a year as well as buy the minimum required equipment. But for another CHF 6,000, she could add a wonderful outdoor seating area. And for an additional CHF 3,000, a super cosy reading corner. But CHF 29,000 is a lot of money and she doesn't know if many people are interested and will support her. So instead of risking everything (remember: Crowdfunding = all-or-nothing-principle), she decides to use stage funding. She sets the first stage (the first crowdfunding goal) at CHF 20,000, the second stage (the second crowdfunding goal) at CHF 26,000 and the third and final stage (the final crowdfunding goal) at CHF 29,000. This way, your crowd can decide if they also would like the outdoor seating area and the reading corner.
If she collected CHF 22,000 at the end of the crowdfunding period, CHF 2,000 would go back to the donors. However, she still receives CHF 20,000 (1st stage) (less the processing fees), although her final goal would have been CHF 29,000. But, if she reaches her final goal (or more) she then, of course, receives the entire amount.
Here is an example of how this could look (from the A future for Soufra project):