If you are planning to run a crowdfunding campaign to raise money for your small business startup project, here are some commonsense tips you can use to up your game.
1. Pay Attention to the News
Although an argument can be made that crowdfunding has been around for a long time and has roots in micro-lending, it has really taken off in the past few years with new sites and concepts popping up on a daily basis. Also Government regulations around equity crowdfunding are just now coming into effect in 2016 and will shape the industry in years to come. In order to keep abreast of these changes, set up a crowdfunding list in Twitter, create an RSS feed for crowdfunding blogs and search for crowdfunding news on Google.
2. Determine the Appropriate Type of Crowdfunding
If you are planning to use crowdfunding to raise money for your project or business, then you need to decide whether to go with rewards or equity crowdfunding. Rewards based crowdfunding allows you raise small amounts of money for your project from a lot of individual backers in exchange for some type of reward, like a t-shirt, coffee mug, or deeply discounted product. Equity based crowdfunding, on the other hand, allows you raise money for your business by selling shares to individual investors — in essence they become part owners of your business in exchange for their investment.
3. Choose a Crowdfunding Platform
Once you have decided on rewards or equity based crowdfunding, then you need to decide on a platform. There are platforms like Kickstarter and Indiegogo that specialize in rewards based crowdfunding and others like Crowdfunder that are for equity based crowdfunding. There are also some that do both rewards and equity crowdfunding, like Fundable. Not only do you need to decide on a rewards vs equity platform, but you also need to dig deeper and find a crowdfunding site that has an audience that will be interested in your project. Some sites, like Kickstarter, have traditionally been focused on artistic projects like music, film and live performances. Other sites like, like Indiegogo, have a category for small business. Check out the Crowdsourcing.org website to see the thousands of different crowdfunding platforms and find one that meets your needs.
4. Check Out the Listing Fees
In addition to matching your crowdfunding venture with the right platform audience, you should also check out the fee structure of various sites. Some sites are “all or nothing,” which means that you only get to keep the proceeds of your crowdfunding campaign if you meet your fundraising goal. If you don’t meet it, then you get nothing. Other sites allow you to keep whatever you raise, but take a larger percentage of the proceeds. There are also sites that charge a flat monthly fee for as long as your project or business is listed.
5. Study the Competition
Go to Kickstarter, Indiegogo and any of the other sites that might be suitable for your crowdfunding project and check out the competition. Find the category where your project best fits in and study 5 to 10 of the currently active campaigns. Watch the videos and read the comments. Make a note of those that reached their funding goals quickly. Look at others that haven’t reached their funding goals yet and probably won’t because they have been listed for a long time. Check out the types and levels of rewards being offered. There are many reasons why some projects get funded and others don’t and this exercise will give you a flavor of what you need to accomplish in order to be successful.
6. Prepare a Professional Sales Pitch
Once you have studied other competing crowdfunding campaigns, it’s time to start working on your own sales pitch. In addition to a well written description of your story and business idea, you will also need to produce a video demonstrating the benefits of your product for the greatest chances of success. It must be clear to your audience why they need your product and why you are the right person or company to deliver it.
7. Develop Your Prospect List
A big reason why crowdfunding campaigns are successful is that the creator has already developed a large list of prospective backers before launch. In many cases it’s already a foregone conclusion that the project will be fully funded after launch and it’s just a question of how much more will be raised through the crowdfunding website. Therefore you need to start developing your list of potential backers well in advance of launch. Reach out to your Facebook friends, Twitter followers and LinkedIn contacts and let them know what you are working on. From your initial outreach, develop a lead list of people that might be interested in backing your project. Send them a few updates as you get closer to launch and solicit feedback. Once you launch make sure everyone knows that your project is live and give them a link so they can easily find your campaign online.
8. Establish Appropriate Reward Levels
As you study other crowdfunding campaigns, you’ll notice that different rewards are offered based on the amount of money a backer contributes. For example, someone running a crowdfunding campaign to publish a new book might offer a free copy to anyone that contributes $10, 3 free copies to anyone that contributes $25 and so on. Based on the type of project you are crowdfunding you will also need to create a rewards for increasing contribution levels. If you are building something that is very expensive and it’s not practical to give any away one for free, you can always offer t-shirts, coffee mugs, a luncheon with yourself, or even a speaking engagement. It is important that your backers don’t feel cheated with the reward you are offering. For instance, if you are crowdfunding a new App that will cost $1.99 to download from Google Play once it is launched, you shouldn’t offer a reward level at $25 for a free download. Most people don’t want to pay $25 in advance for something that only costs $1.99 when it is launched.
9. Get Your Backers to Contribute Immediately
Most successful crowdfunding campaigns reach their fundraising goal shortly after launch. So before you launch you should have a list of people that you know will back your project, and ideally how much they are going to contribute. Right before you launch you should let this group of key contributors know what day your campaign is going live and then follow-up right after it is live. This initial burst of activity will not only make you feel secure that your project is going to reach its goal, but hopefully draw attention from other potential backers on the site.