Crowdfunding is a great tool to help small business raise startup capital, test the marketability of their product, and build a loyal tribe of consumers.
Crowdfunding is one of the hottest methods to fund small businesses by trading perks or rewards for monetary support from a large network of contributors. Sites like Indiegogo (the world’s biggest) and Kickstarter (the coolest) offer online platforms for entrepreneurs and others to host a project. The other important benefit to crowdfunding for startups is the truly consequential consumer research when a campaign pre-sells their product via crowdfunding. As anyone who has sat through focus groups and prepared surveys will tell you- there is a big difference between someone telling you they will buy your product and them actually trading their hard-earned cash for it. Through crowdfunding startups can attract loyal users who can be help evangelize the product/business and bring additional users thru word-of-mouth.
Setting up a project is the easy part. As I found out, there are many tricks to successfully crowdfunding that take diligent consideration and preparation. I hope I can save you some precious time as you contemplate crowdfunding for your venture with these 5 P’s of Crowdfunding:
1) Platform There are many platforms to choose from and many aspects that need to be understood (see table). The biggest differences between Kickstarter and Indiegogo, for example, are that Kickstarter projects have to adhere to a strict list of allowable product types and be approved by their staff while Indiegogo is wide open and no review is done. Kickstarter campaigns all work on an all or nothing basis- if you earn any less than 100% of your goal you get $0 funding and all contributions are refunded. Indiegogo lets you choose between that model and, for a higher fee, a keep what you earn model.
|Crowdfunding Site Comparison||Fee – max||Fee – min||All or Nothing?||Project Selection||# Facebook likes||Traffic Rank||Notes|
|kickstarter.com||8%||8%||Yes||Staff Evaluation||387,544||726||Must have a US SSN and bank account|
|indiegogo.com||12%||7%||You choose||Automatic Approval||50,280||2,302||Includes charity projects|
|rockethub.com||12%||8%||No||Staff Evaluation||7,105||51,476||Science/Art/Social focused|
|peerbackers.com||8%||8%||Not necessarily||Staff Evaluation||660||200,803||Entrepreneur and Innovator focused|
2) Preparation All the major crowdfunding sites have awesome training materials available online. The advice is largely the same between them but there are some exceptions. Kickstarter confirms that videos are a must to improve your chances for success. Indiegogo shares that most successful projects have multi-person teams, the bigger the better, to help spread the word.
One of the best ways to prepare for a successful campaign is to find the campaigns that are most like yours and learn as much as possible from them. Study their message, video, perks, timeline and project description to build on what worked and improve what seems not to have.
3) Perks Why will someone sponsor your project? Because your idea is compelling and clear AND they get great stuff for contributing. Perks range from a $1 thank you postcard to a $95 watch, to a $10,000 all expense-paid trip to Tokyo to visit the illustrators and bookbinding facility. Perks have to be relevant, compelling, and a good value for your target consumer. The most common contribution level is $25 so don’t miss that tier. Make sure perks are simple to understand and have clear and amazing value.
4) Picture-It Help your project’s visitors clearly understand your project, why you need their help, and what you will do with their money. A video is necessary. It shows every viewer who you are, what you are doing and that you are trustworthy. Pictures are important to help visitors to your page visualize what you are talking about. Testimonials from people who have used your product are a great way to build more trust as potential consumers see another angle of your product.
5) Publicize Crowdfunding relies upon the crowd that is aware of your product. It is your team’s job to make them aware or there is no way they can support you.
For many new to crowdfunding there is a false sense of “Build It And They Will Come”. This is not true. There are very few projects that end up on the front page of the sites and in the update emails from the platform. All awareness stems from your teams’ efforts. The more Facebook updates, Tweets to those who care, and updates through your network, the more views, interest and extra network sharing can take place. This is where the hard work comes in. After your project is launched, every day of your campaign, this will be your concern: keeping your project relevant and on people’s minds. Regular updates to your supporters and on your page also keep people engaged and excited about each stage of your project.
Crowdfunding is an amazing opportunity for artists and entrepreneurs to raise funds and create a community. If your project makes sense to crowdfund, I highly recommend the experience. The considerations are plentiful and the opportunities are endless.