A start-up waiting to be funded. A businessman aiming to expand his small business. A movie maker trying to get his film out. A group of would-be musicians determined to release their album. An artist seeking to get his project exhibited. A bunch of teenagers dreaming of a world tour. Researchers striving to fuel their research.
There are limitless options waiting to be realized. The canopy of crowdfunding seems to be spreading at a greater rate than ever. If you are quite determined on achieving those dreams, and you have the ability to reach out to like-minded people, funding should not be a bottleneck.
The mantra seems to be “Don’t be deterred from aiming at the skies and achieving your dreams for want of funding”. The financial world is ready – you just need to step in and share your dreams.
Millions of people out there with similar views might be ready to shell out their money and fund you. All you need to do is to convince them to give a small donation each of $10, $50, $100, or more. As the number of donors increase, you will have a sizeable fund.
Crowdfunding refers to raising funds for projects in small amounts from a large number of people, typically via the internet.
Crowdfunding extends support to people’s funding problems, helping them turn their ideas into realities. It amplifies their chances of getting funded by widening the set of potential investors beyond the traditional circle of family, friends, banks and venture capitalists.
With support from policymakers and institutional investors, and with increasing influence of social media, crowdfunding is going mainstream as an alternative to traditional fundraising options.
Raising funds via crowdfunding is simpler when compared to most other financing options such as bank loans, angel investors or venture capital funding. You post the project / product / business idea as a “campaign” onto a crowdfunding website, with a detailed description.
You need to set a monetary goal and a timeframe to achieve this goal. If people want to support or back your campaign, they can donate via the crowdfunding platform to help you achieve your goal. You can start with known acquaintances from your connections, including family and friends. This creates some traction and the necessary impetus to kickstart the campaign.
What Types Of Crowdfunding Are Available?
There are four main types of crowdfunding:
- Donation Crowdfunding: This is the most basic and oldest form of crowdfunding. It refers to raising funds from people who are personally or socially motivated to do so for supporting a cause, without expecting a tangible return. The donors benefit by the “feel-good” factor or an acknowledgement. This type of campaign suits charities and social organisations most, are often 1-3 months in duration, and are perfect for amounts under USD 10,000. For example; DonorsChoose, is a crowdfunding platform that empowers school teachers to request much needed materials in their classrooms. Two applications of donation crowdfunding are:
- Charity: You can crowdfund to support your cause, be it charitable, personal or social, or raise funds to support a homeless family, war victims, refugees etc.
- Non-profits: Many non-profits are realizing the power of crowdfunding, and have started using crowdfunding platforms. In addition to the funds raised through crowdfunding, they also gain publicity, which helps grow their network further.
- Rewards Crowdfunding: Rewards crowdfunding, similar to donation crowdfunding, offers tangible or intangible return and is open to all, with few regulations. This type of crowdfunding involves setting varying levels of rewards based on the amount donated. The third generation version for the Pebble SmartWatch, called The Pebble Time, was one of the highest backed projects on Kickstarter, a crowdfunding platform. People could use this to raise money for either:
- New Product: This is especially helpful to those minds brimming with ideas to create new products. You can find funds via crowdfunding for the same purpose.
- Music/Arts: Artistshare brought in the concept of crowdfunding in a professional manner with their launch in 2003. Now many musicians & bands use this for funding their tours, albums, exhibitions, performances, etc.
- Films: Filmmakers have started relying on crowdfunding, which offers better creative space with minimal interferences. They can make use of different crowdfunding platforms for funding the production of films, short films, videos, etc.
- Education: Universities, students, and research scholars are using crowdfunding to support the educational initiatives of both students and the faculty.
- Equity Crowdfunding: Raising funds from the crowd, in return for a stake in the equity of the project or business, is known as equity crowdfunding. If the venture succeeds, the share value increases and the investors stand to gain; they lose if it is the other way around. You can set investor caps, minimum pledge amounts, and so on.Equity crowdfunding was accessible only to accredited investors till the JOBS Act (Jumpstart Our Business Startups Act) was passed. According to SEC regulations, accredited investors are those investors who have a net worth of at least USD 1 million individually or earn an annual income of at least USD 200,000 or USD 300,000 combined with their spouse.
With the JOBS Act, investors are able to invest irrespective of their annual income or net worth, thus making equity crowdfunding all the more accessible. Equity campaigns usually extend up to many months in duration and are perfect for start-ups seeking USD 100,000 or more in funding. Let’s have a look at you can make use of this:
- Start-ups: Start-ups are now benefitting in a large way with the passing of the JOBS Act, allowing startups to solicit investments from both accredited and non-accredited investors in exchange for equity. The expectation of investors is the financial pay-off as a percentage of profit, once the startup is sold.
- Small Businesses: Small businesses may offer a part of their equity to the crowd in exchange of funds. The risk in crowdfunding is less than that of a bank loan. However, as the business grows, so will be the size of the investor’s investment in your business.
- Business Expansion: Equity crowdfunding can also be undertaken by established businesses for expanding their product line or geography.
- Real Estate: The opportunity for crowdfunding real estate is making big waves, with each funding platform taking a different approach. It is an opportunity for investors to invest money in quality institutional properties. The top players in this arena are RealtyMogul and CrowdStreet.
- Debt Crowdfunding: When you raise funds from the crowd in the form of loans to be repaid with interest, it is called debt crowdfunding or Peer-To-Peer (P2P) lending. This lending may be secured, usually against property/asset, or unsecured. The financial returns, in the case of debt funding, are in the form of interest. Default risk is inherent in this type of funding.Every site has their own policy on default, and investors need to have a clear understanding of these policies in order to protect themselves. These campaigns typically need a shorter time span of around five weeks and fit those entrepreneurs who are not ready to give up equity in their start-up.
Debt crowdfunding is suited for individuals and larger companies who are not ready to share equity ownership, and who do not mind resorting to multiple rounds of funding and may again be broken into four categories:
- Unsecured Peer-to-Peer (P2P) Lending: Individuals lending to individuals without any security is known as unsecured peer to peer lending. It is widely used for small amounts but is the most risky form of P2P lending, as the lender is at the risk, in case of default by the borrower. To tackle this, some platforms now insist on a kind of safety fund to pay back in case of a default.
- Unsecured Peer-to-Business (P2B) Lending: In this type of lending, individuals lend only to businesses without any security, thereby assuming a business risk.
- Peer-to-Business (P2B) Secured: Here the individuals lend to businesses, but the loans are secured, mostly against property or bills receivables.
- Business-to-Business (B2B) Secured: Small companies who lend money to other businesses, with security, come under this category.
In short, crowdfunding is an evolving concept, and so there are no hard and fast rules to which type will succeed or not. You need to select the type based on your requirement, product, risk tolerance and legal compliance. Stay tuned for the next part, as we dive deeper into the world of crowdfunding.
(8 Reasons) Why You Should Look To Crowdfunding Your Venture, Project or Business?
We touched upon what crowdfunding was all about, the various flavours and what you could expect. Today, we’re going to touch upon WHY you should consider crowdfunding for your next venture, project or business.
Reason #1: Crowdfunding is a powerful way to build momentum. Period.
Ok, while that’s probably the number one reason, there are plenty of other reasons why you should consider crowdfunding as an alternative.
The main objective of a crowdfunding campaign is to get funded. However, it’s important to realize that crowdfunding is not about funding alone; it provides you with other financial solutions as well.
Crowdfunding is a great way to reach a wider audience, validate your business or product, increase your customer base and develop long term professional relationships.
You’ll appreciate some of the important reasons as to why entrepreneurs, small business owners, real estate developers, artists, film directors/producers, students and non-profits are looking to to crowdfund their projects.
- Meager Funding Sources – Being low on capital is the common reason that stops entrepreneurs from turning their dreams into a reality. Venture Capitalists, previously, made huge investments in companies like Twitter and Instagram, which had large user bases and investors hardly took profitability into consideration while investing. However, things have changed. Now, VCs are investing in conservative and profitable business opportunities. There’s also an ever increasing need for follow-up funding for startups as they’re riskier business ventures that have a funding crunch. In these difficult times, crowdfunding seems to be the answer. It’s turning out to be the new way of funding the private sector. Crowdfunding helps you to reach out to a growing pool of small investors who would be interested in your business.
- Instant Customers – In a crowdfunding campaign, you get customers even before you launch your product. The very fact that someone is supporting your campaign is proof enough to believe that they like your idea, because the people who support your campaign from the very beginning are your early adopters and potential brand ambassadors. These early adopters help keep the momentum of your campaign by spreading the word through their social networks.
- Cost Effective – To run a crowdfunding campaign doesn’t cost much. You can get help from friends and colleagues to write your content, take professional photographs and make an attractive video of your product. A campaign on the appropriate crowdfunding platform can help you drive your point straight to your potential backers.
- Saves Time – Convincing angel investors, VCs and banks is not an easy task and definitely a time consuming process. Crowdfunding, on the other hand, takes hardly a month or sometimes even a week to raise funds. You may have heard stories of how some funding campaigns reached their target within hours of launching.
- Better Deal – With banks offering very low or no deposit rates, and capital being a very scarce thing for borrowers, crowdfunding seems to be the silver lining. You no longer have to approach the local banks with hat in hand for a loan. Instead you have the opportunity to connect with people all over the world.Some of the peer-to-peer (P2P) lending platforms like Zopa offer 4.9% to lenders and charges around 5.6% on a personal loan. For investors, crowdfunding is definitely a better option compared to their bank accounts, which provide very low or literally no interest on deposits. Meanwhile, for borrowers, it’s more competitive to use P2P lending compared to what the banks charge.
- Reduces Business Risks – You think you have a great product in hand. But is it fit to be launched in the market? Crowdfunding helps you gauge your product and gain market validation. Some potential backers could also be asking you some tough questions. Consider this as an opportunity to engage and interact with your potential customers, get their feedback and refine your idea. Thus, crowdfunding helps you reduce the risk of launching a wrong product.
- Empowers People – People can invest in what actually matters to them, be it arts or real estate or some new product which they feel will hit the market bang on! Other than the funding itself, it encourages people to get involved, share their ideas and be part of the crowdsourcing initiative.
- Publicity – Once you are on the crowdfunding platform, the platform itself will assist you in gaining publicity. Media coverage can be in various forms, including, a feature on a popular news channel, a blog or in print. A mention on Twitter or a featured story can catapult your campaign to great heights and bring in investors you wouldn’t have otherwise dreamt of.
If you’re a venture capitalist or investor, there’s a different set of reasons why you should consider crowdfunding:
- Emerging Markets – Crowdfunding is fast evolving as a powerful business tool that will create a new breed of entrepreneurs and investors in emerging markets. It is likely to reduce the communication gap between the investor and entrepreneur.In markets like the Middle East, where there is unequal access to capital, crowdfunding could act as a great leveler and help create meaningful partnerships between regional governments and investors.
- Attracts The Young Crowd – Younger people are attracted to crowdfunding and think of it is as a tool to get involved directly with causes they are supporting. People in their 20s & 30s (the Millennials) like to fund something which they can connect to and have interests in.
- Incubation platform – Crowdfunding is turning out to be the world’s incubation platform. In the past, entrepreneurs had to approach banks, institutional investors or VCs for funding, so most ideas were subjected to selection by a few people. With more and more people looking forward to participate in the world’s incubation platform, it’s expected that crowdfunding will improve the health of the financial ecosystem.
- Tap into a new ecosystem – Equity crowdfunding in particular throws open a myriad of opportunities to mentors, advisors and partners to connect to various local communities and invest online. Also, many countries are implementing new legislation to help entrepreneurs’ access capital online.
What Are The Disadvantages Of Crowdfunding?
Uninformed Contributors – The people who donate or invest in crowdfunding by and large may not be as smart as the venture capitalists or the investors whom you would come across in the traditional funding route. There is a lack of professionalism, which is not the case when institutional investors are involved.
Transparency – There is too much information about your product on the public domain. It is difficult to enforce trademarks and patents across the globe. Competitors may rip-off your idea or product and use it as their own. There are instances where simultaneous crowdfunding campaigns have been run on well-established platforms with stolen ideas.
Reputation At Stake – If your project fails to gain the required attention and publicity, you would feel embarrassed. Failure could be due to poor management skills and miscalculation of market demand, but the fact that the project failed will remain for long in everybody’s memory. This could pose as a hurdle in raising funds in future. Unless, of course you’re immune to failure!
Number Of Investors – It might be difficult for a first time entrepreneur to manage the expectations of all investors at a time. The investors could also mount pressure to start the business as soon as possible, or may want to receive their rewards or incentives at the earliest.
Personal Campaigns – Crowdfunding addresses the needs of individuals. Impulse donating to single-issue causes is common, say to a woman who is undergoing treatment or a student who wants to fund his education. This individual funding nature of crowdfunding may act as a deterrent to big charity organizations like the Red Cross.
What if your crowdfunding campaign fails?
You put your heart and soul into launching your campaign. You work really hard to set up a site, pitch to friends and family, and do everything possible to succeed. Yet things don’t work in your favor. It’s a tough pill to swallow when things simply don’t work the way you expect them to.
While the number of crowdfunding campaigns being launched continues to skyrocket, not all crowdfunding campaigns meet their funding goals. For every successful campaign on Kickstarter, there are two that don’t succeed. The case on Indiegogo is much worse, with 9 out of every 10 projects failing.
Crowdfunding campaigns fail the first time for several reasons, but that doesn’t mean you can’t give it a shot again. If your campaign has failed, instead of fretting over it, scrutinize the reasons for the failure and bring out the best in your second attempt.
But before we discuss what you should do if a crowdfunding campaign fails, let’s quickly analyze why crowdfunding campaigns fail. The failure could be attributed mainly to one of the following reasons:
- Video was too long or complicated and not strong enough to convince.
- Campaign was marketed to the wrong crowd on an incorrect platform.
- Untimely launch.
- Launch lacked momentum.
- There was nothing innovative or new that was offered, campaign was not unique.
- Funding goals were unrealistic.
- Campaign perks were not unique, personal or scarce.
- Campaign had low exposure/popularity, not enough social capital.
- Project owner lacked enough experience.
- The campaign was promoted online only.
- Not enough planning and campaign run-time was too short.
So, What Do You Do When Your Crowdfunding Campaign Fails?
All’s not lost. Let’s admit it could be one of the best experiences in your life. But here are a few things that you can do after you have failed:
- Accept the failure – This is the most difficult task, and it’s intimidating when this reality hits you hard in the face, but you don’t have a choice if you want to succeed. Pick yourself up and try again with renewed vigor.
- Recognize the positives in your campaign – The next step after accepting the failure is to do a post-mortem of the campaign. Sit with your team and analyze what was good and what went wrong. You can start off with the positives first: focus on what you and your team did well. For instance, which strategies worked, why some people contributed to your campaign, etc. The idea is to strengthen these areas when you launch your next campaign.
- Identify what went wrong – Try and analyze the reasons under “why crowdfunding campaigns fail”. You may need to ponder over the very idea of your project and the platform you used. Also, identify what you spent too much time on and what caused delays, if there were any.
Make a plan for your next attempt – To quote Henry Ford, “failure is simply the opportunity to begin more intelligently.” Failed crowdfunding campaigns could well turn out to be golden opportunities. Learn from your mistakes and chart out a plan on what you would do differently the next time. Focus on making your next campaign a success.
Which Crowdfunding Platform Should You Choose (7 Step Checklist)
I’ll share a step-by-step checklist, so you can decide which crowdfunding platform will suit your needs better.
STEP 1: Decide On What Sort Of Project Or Business You Plan To Fund
If you’re crowdfunding for a cause or to buy some new machinery, then it would be better to look at platforms which cater to nonprofits and small businesses rather than rewards-based platforms. One way of making the right choice would be to select the correct platform for the kind of project/business you are creating. We will delve into the details on the types of platform that are used.
When you want to maintain autonomy and not lose creative control on your project, it’s best to offer unique rewards or perks as incentive for funding your project. These platforms are also suited for service-based businesses. The donors are generally offered an early version of a product or service (say a music CD), perks and thank-yous. You also don’t need to repay your contributors. Reward-based platforms are suitable for projects related to music, films, games or products which need market validation. Examples of reward based platforms are Kickstarter, Indiegogo, and RocketHub.
As the name suggests, people give money or donations because they believe in a cause. It’s the online version of our age-old practice of giving away in charity. This route best works for social causes and non-profit organizations. GoFundMe and GiveForward are donation-based platforms used for personal cause crowdfunding, while Razoo, Causes and Buzzbnk cater specifically to non-profits.
Equity-based crowdfunding platforms work for small businesses, start-ups and real estate. The backers on these websites are generally accredited investors. It saves you the task of hunting for venture capitalists and angel investors.
You can target small investors who would be happy to get a stake in a business they can identify with or see a potential in. It would be prudent to remember that these investors invest in businesses with a proven business model. You can post your campaigns on platforms that allow accredited investors to participate. Some of the top equity-based crowdfunding platforms include SeedInvest, RealtyMogul, CrowdCube and Seedrs.
Established brick and mortar companies that have a fixed cash flow for over a year are the typical customers of a debt-based platform. Since a fixed rate of interest is to be paid to the crowd, the business owner needs to be pretty sure of his cash flow. Examples include Zopa, Prosper and Lending Club.
Hybrid-based models are the new emerging platforms in the crowdfunding space. Hybrid-based models are a natural progression from the established crowdfunding platforms. These platforms integrate two or more of the above models of crowdfunding. Examples include Fundable and Fundrazr.
STEP 2: Identify Which Funding Model Would Suit You Best
All Or Nothing Vs. Keep It All Crowd Funding Models – The allocation of funds are structured by crowdfunding platforms in two different ways, namely the all-or-nothing model or keep-it all model. Some platforms support only one structure, while others have both structures. However, the commission charged by the same platform for both structures could be different.
You may be quite tempted to go for the keep-it-all model, but an investor may be more comfortable with the all-or-nothing model. This is because they don’t have to worry about a weaker product launch in case the funding goal is not achieved. Research suggests that investors are more likely to fund an all-or-nothing campaign.
STEP 3: Choose A Popular Or Niche Platform
Popularity of a crowdfunding platform should not be the only criterion of choice. Just because Kickstarter or Indiegogo is popular, doesn’t mean it’s necessary to choose one of those platforms. Sometimes, niche platforms can support your needs better than the more popular and established ones.
Though niche platforms don’t enjoy the same amount of traffic as popular ones, the audiences that visit these platforms are more likely and willing to pledge, as these platforms cater to their area of interest. If your product targets the mass market, then a popular and established platform will suffice.
STEP 4: Select The Fees Based On Your Need
Crowdfunding platforms charge fees ranging from 2% to 8%, depending on the platform you choose. In addition there are also processing charges of 3 to 5%. The fee structure varies from platform to platform. Some platforms charge commission on funds raised, while others offer a monthly or yearly subscription to their services for a fixed fee.
Apart from these two variants, some platforms charge a pre-determined fixed flat fee. If you are not a resident of the U.S., then you may incur more. In case you are planning to hire a crowdfunding expert, it would be prudent to do some research of your own on the fee the consultant is likely to charge.
STEP 5: Establish Your Own Network
If you have an established network, then you may even think of creating your own website and avoid platform fees. There are several websites, tools, and open source frameworks that help you create a self-hosting crowdfunding campaign. Having said that, this is much harder than it sounds because you have to make an effort to attract the crowd, there’s no ready audience.
STEP 6: Determine Your Target Audience
The quality of the audience on the platform plays a vital role in driving traffic to the campaign. For example, Kickstarter has an engaged and supportive community, so the effort you put in the form of marketing is minimal; on Indiegogo, it takes a lot more effort from your side to spread the word. While choosing a platform, you need to determine if you will need support from the community/backers or if you have the hang of what you need.
STEP 7: Decide On The Support Level Required
If you’re looking forward to support from platforms, then smaller ones like RocketHub handhold you better. There is also better relationship management with project owners when it comes to these smaller platforms.
However, there are fewer groups, forums, or communities that support the project owners of smaller platforms. Meanwhile, on popular platforms like Kickstarter, communication is imperfect – likely due to the large volume of traffic.
In short, there are hundreds of tiny, unknown Kickstarter-wannabe sites out to make quick money. And it’s not possible to cover all of them here. Having said that, you’ve got a head start – so go out there and get funded!
Now that you have a fair idea of crowdfunding, its convenience, and its potential to reach a wider audience, it’s time to move onto the practical side of things. Despite all the advantages, crowdfunding is not child’s play, especially since you’re engaging a crowd to fund your dreams.
How To Crowdfund Successfully In Just 3 Steps
Launching intelligently, marketing aggressively, and communicating in a timely manner seems to be the winning solution in crowdfunding. In other words, a successful crowdfunding campaign is the end result of undivided attention, hours of hard work and meticulous planning.
If you are still enthusiastic about pursuing this funding technique and ready to put in your full effort, continue reading below! We’ll attempt to demystify the process of a successful crowdfunding campaign, simplifying and enumerating the various steps during pre-launch, launch and post-launch.
PHASE 1: PRE-LAUNCH
There’s an old saying: good business planning is nine parts execution for every one part strategy. Thorough and painstaking planning covering all the aspects of the launch is the key ingredient of a successful crowdfunding campaign. Here are a couple of points that you should focus on:
Marketable Idea / Product – Your crowdfunding campaign centers on an idea or product. To have a marketable idea or project is the most basic requirement for a successful crowdfunding. At times, projects promoting out-of-the-box ideas also get funded very fast.
Prototype – The more advanced you are with your project, the better will be the impression you create as a campaigner. It is always advantageous to have a prototype ready.
Timeline Or Roadmap – Before you actually start out, prepare a plan on how you’re going to implement your campaign, along with the timeframes for each activity. Try to stick to these timelines and treat slippages with seriousness. Provide for unexpected delays so that you have a cushion to adhere to timelines.
Budget – Handling other’s money is a double-edged sword, and unless and until you handle it with care, you can end up tarnishing your image. Do your homework and find out what you need to raise for achieving your target, prepare a budget detailing your outflows and inflows, and try to stick to it. Also, clearly convey this to the crowd so that you can set the right expectations.
Goal Setting – Let the goal revolve around the product/project rather than the money. You can also use a top-down approach to fix your funding target. You can get a rough picture by multiplying the number of persons in your network by the expected average contribution per person. In crowdfunding, a reasonable goal means greater momentum and reaching your fund goal early; then, if you still want more, you can raise through stretch goals and add-ons.
Research Similar Projects – Though all projects are launched to succeed, not all achieve success. Learn about the projects which succeeded and those that failed. Research and find out more on similar projects that succeeded, their strategies including the platforms chosen.
Choose The Platform – Think about what type of funding will best fit the project – donation, rewards, equity or debt. Weigh the pros and cons of these platforms and select the best suited one for your project. Also take into account whether these platforms run on the Keep it All (KiA) or All or Nothing (AoN) approach and select whichever suits your campaign best.
Identify Potential Backers – It pays to identify the people to whom this project matters and create a list of potential backers in order to establish trust. Start off with your friends, family and dedicated fans who know you well, then extend beyond that circle to friends of friends and acquaintances who may contribute once they see the initial buzz. They will also publicize your event to their personal social networks, both online and offline.
Find Partners For Launch – In addition to backers, you may also approach groups or local business houses who might be interested in joining and supporting your campaign.
Develop Promotional Material – Hire professional help to get your promotional material such as storyboard, messages, photos, videos, music professionally. Make use of the services offered in Fiverr.com and get your designing works done at a fraction of the normal cost. You may also get freelancers to work on these from Upwork and Freelancer also, but the rates vary a lot.
Timing – Any time is perfect for crowdfunding, though some suggest December may attract more givers, especially for charity or non-profit campaigns. Whatever be the time, the launch should definitely be in tandem with the type of product.
Campaign Duration – The length of the campaign should be long enough to engage with the audience, but not too long to lose momentum. Studies show that 45 days is the optimal campaign length. Get an idea of the duration by comparing how much you want to raise against how much you expect to raise, versus how much effort you need to put in. If what you want to raise is more than what you expect to raise, then you need to adjust the timelines, probably by breaking into phases, allotting against a certain phase only, and so on.
List All Methods For Reaching Out To Potential Backers – Once you have a list of backers, find out the best ways to communicate with them. The options for this are emailing, social media, support from influential bloggers, traditional media, your own blog/website, forums or messageboards or even on video sites like Snap or Youtube. If your category is specialized, find out which online blog, magazine and/or trade publication the industry is reading. This can give insight into how your potential contributors gather information. This is one step which is manpower intensive, but unless you put your heart and time into researching how to engage effectively with your potential backers, success is hard to come by.
Pre-marketing & Publicity – Once your list of potential backers, channels and promotional materials are ready, start off with your pre-publicity campaign 2-3 months in advance of the launch. This will help the campaign gain enough popularity and initial funding by the time it is ready for launch. Release your posts and emails as scheduled. Start off with emails to your immediate circle first and then slowly start using the entire database. Use mail merge to send personalized mails.
PHASE 2: LAUNCH
After all the days of planning, this is the stage where you launch your campaign, step by step as per your plans.
Soft launch – Before the official launch do a “soft launch” by uploading the campaign within your circle. Engage into an open communication with the first funders and thank them. This helps gain traction and builds credibility. By the time of your “real” launch, you should have enough supporters and a starting fund to encourage others to donate. It also gives you an initial feedback with a chance to improve your campaign.
Launch – This is your test field. Make the launch big and exciting. Lively launch parties with food, fun and music provide the perfect tone. A Facebook event may also be used. Either way, assure that there is proper media coverage for the event. It helps to have a surprise element like a celebrity endorsement or surprise announcements. More importantly, ask people to pledge; remember that there are projects which were fully funded at the launch event itself.
Updating The Campaign – Update the details of your campaign on a daily basis. Pass on details such as the percentage of target achieved, number of supporters, etc.
Build On The Momentum – Organize fundraisers and other live events to keep the buzz going. Meet the press once the initial momentum has been built. Getting featured in the “recently launched” section of your crowdfunding platform helps gain momentum.
Publicizing – Your work is not yet over; publicity in this stage is as important as was during pre-launch. Exploit your marketing prowess and market the campaign irrespective of the platform. Get professional help if required and bring in crowdfunding marketers if you feel the need.
Dip In Between – Most projects are launched with huge fanfare but go on to lose momentum as they reach midway. Be reminded that it is only a natural process. Understand that this is the time when people are usually thinking about whether to invest or not. You need to pull yourselves up by organizing some events to popularize the campaign and reassure these potential donors. Most projects again pick up momentum during the finishing hours.
Take feedback / Converse with your backers – Give updates and feedback on a regular basis. Interact with your backers, clarifying their doubts, taking in their suggestions and responding. Remember that these are not just your backers: they believe in you and your campaign, and so it pays to respond to their trust.
Tracking Via Analytics – Be shrewd about the numbers. Followers and likes hardly matter unless they convert into pledges. Many platforms offer analytic tools to help the campaigner. You may also use Google Analytics tracking code, which will give you a clear idea of your visitors, the content they prefer, and where they learned about the campaign (Facebook, Twitter, etc.). Keep track over these figures, check and track the conversion rate. and use this to improve the campaign statistics. Social media analytics tools like Buffer or Hootsuite will help track the contents in social media that are preferred by the audience.
Rewards & Responses – Start sending thank-you messages and rewards as and when the milestones are achieved. You can use an email marketing tool to create targeted campaigns, to manage your mailing lists and monitor the results of these mails.
Backers Dropout – Also be aware that at times some backers may drop out during the campaign. Do not be worried; a small slippage is only natural and is to be expected. However, if it is on a larger scale, it needs to be investigated.
PHASE 3: POST-LAUNCH
It’s not over, until the fat lady sings! You still got some more work to do.
Final 48 hours – It is usually observed that, towards the end of a campaign, it starts getting the most pledges. However, this will only be in proportion to the effort put in by you. Act vigilantly in a do-or-die manner. Updating on a more frequent basis is a necessity during this stage. The project will also get more response as it gets featured in the “closing soon” campaign lists of your crowdsourcing platform. Ensure that you thank all your backers and convey the need of urgency.
Follow Up – Send a closure message and inform the supporters of the final statistics. Also, even after closure, give updates on how the money is being used. Send off the pending thank-you messages and other rewards as promised.
Extend or Add-On – This is also the time to decide whether to add on or stretch the funding.
Review – At the end of the day, do a detailed analysis, find out what you did wrong and what worked best for you. Learn from your mistakes and move on and decide on what you would do differently in a new project.
If your crowdfunding campaign achieves its targets, it opens a whole new world of opportunities.
Often, people who create crowdfunding campaigns have no idea of how crowdfunding works; such campaigns are likely to fail. For entrepreneurs who continue to live in the fantasy world that crowdfunding is an easy way to raise a few thousand dollars, this is magical thinking!
You need to be clear in your thoughts that crowdfunding is just a more simple and efficient to reach out to your potential backers. Here’s an attempt to debunk some of the common crowdfunding myths that still exist today:
Myth #1: Your project will go viral without much effort – Let’s get straight to the point – going viral is a tough task. The simplified version of crowdfunding seems to suggest that you sign up on a platform, launch your product and funds start pouring in.
Yes, this was true to an extent when crowdfunding was new, but with the crowdfunding landscape becoming dense, a lot of hard work goes into a successful campaign.
The two most important factors for success today are creating a credible pitch (check out http://pitchprocess.com if you want to get good at this) and building momentum before launching on the platform, so roll up your sleeves and be ready to work hard.
Myth #2: Popular platforms are the best launch pads – Popular platforms like Kickstarter are flooded with thousands of projects at any given point of time. The odds of making it to the homepage are really close to zero. It is easy to get lost in some of these popular platforms, so finding the right platform to launch on is an important aspect of crowdfunding.
Myth #3: Crowdfunding is for the young – With crowdfunding being a relatively new form of funding, many people believe that only students and young entrepreneurs embrace it. This is not true; it actually appeals to people across generations.
Seasoned businessmen and real estate developers also have tasted success on crowdfunding platforms. For these veterans, it’s a great way to validate a new product and test their project or idea to see if it resonates with investors or customers.
Myth #4: Crowdfunding is the last resort – On the contrary; for many project owners, crowdfunding is the first choice, especially when they have no track record of having run a business. In crowdfunding, success will depend on your ability to market the product, convince your audience of its value, and motivate them to back your idea.
Myth # 5: Crowdfunding success is based on the quality of your ideas – Crowdfunding success is first based on how well you market your product. The quality of your product is only the second most important thing. This is why many campaigns like the Coolest Cooler succeeded the second time, though the product remained the same.
Myth # 6: Too many investors is trouble – It’s common to think that too many investors complicate the scenario, and potential angel investors or venture capitals may not approach you. However, there are several ways to work around this – investors can actually be used as brand ambassadors.
What are your fears when it comes to crowdfunding? Sometimes the best way to tackle them is to head them on. You’re an entrepreneur right, I’m sure you have it in you!