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Crowd Funding - An "Old Pro's" guide to success and failure - Kickstarter and Indiegogo

posted May 24, 2013, 10:22 AM by Andrew Manzo   [ updated Jun 6, 2013, 9:17 AM ]
We got notice that Indiegogo has disbursed the funds today and 
Raymond Loo's campaign is now really over with the goal of $12,000 fully realized. 

This work is not easy. It is not as simple as filling in the blanks on the sites and launching.

In my old life I was an investment banker. I used to syndicate bond deals out of London. I never thought I would need these skills again but as I work on a number of Crowd Sourcing deals all the old lessons come to the front. So here are a few lessons from an old pro. Take them as you choose. But remember, there are thousands of years of lessons behind the lessons I offer. 

Make it Personal - No matter how noble the cause, we are most attracted to a person. If you have a cause, then put a person in the centre. 

The Person Must Have Social Weight - The more the person is widely recognized as being a good person, being trustworthy and a person who helps others, the stronger the appeal. 
We can all say no to an idea. Harder to say no to someone we know.

Make the campaign about something aspirational - Design it so that our hopes and dreams are attracted. It can be the rebel game designer who gets shafted by the publishers and then appeals to the gamers to give the corporate funders the finger. It can be like Raymond, to back a food system that gives the finger to factory farming. It is not enough to just ask for help - get explicit about what this really means to others.

We care about saving the world but we care about people who are saving the world more. 

It's ALL about the inner network - People like Raymond have a small group of people who are close to him who love him and in turn have their own network. Think of petals on a flower. Their networks branch out - they touch each other but are largely different. The key is to know these people and to work with them well before you launch. Bring them into the planning. THEY do most of the lifting. And it they who you have to pay a lot of attention.


This is the deep structure of a deal done in the correct way. Think of who is at the root of each petal. Think of whom they represent. In London Underwriting, we use nationality as a key determinant. So there are Swiss, German, Japanese, American, Benelux, Canadian "Petals" and there are those that have a connection to the sector and those that have a connection to particular types of investors.


Fill in this Permaflower with your equivalent. Ask who and what is missing. Go and fill in the gaps - BEFORE you launch. As in the Art of War, the campaign is largely won or lost before you launch by the way that you have involved this core.

You don't need more than 8 people in your core. With 8 people each with 4 close friends with 4 close friends, you are connected closely to 4,000 people.


This inner 8 are the entire deal. You have to work a lot with them BEFORE the launch.

You have to have a Road Show -
You have to meet face to face with your inner core. This is the norm of underwriting in London and on Wall St. It's all very personal. So when you are invited or not or you turn down or not, there is a social impact. This is not a mechanical business. It is about as personal as it gets. Most of the work has to be done BEFORE you launch.

The better the core the better the deal. And a way of getting other influencers in on the deal is to start with 3 of your own. Then you can say "X" is in. If "X" is a hitter, the "Y" will come in and so then will"Z". Sounds crass, but that is how people are. We want to be with people we admire. We want to be part of a success.

Face to Face trumps online. Real Syndicators spend face time with each other. It's so we can ask for help from each other. We have to care about each other. 

Reciprocity -
To get you have to give - In this world you don't get far by being a "taker". Help as many other deals in your network as possible. Help can be to contribute or if you cannot do that then help by spreading the word. Again most of the work happens BEFORE the launch.

For there is more than your deal in your community. The more the community gets used to "Barn Building" like this - then the more capacity you build. The more you give, the more your social bank account builds and then so does your capacity.
Think about the size - Size is everything. The Underwriters took too much for Facebook and now everyone feels screwed. The only way to get large size is to have something to sell. In Raymond's case it was meat. Others have sold CD's, books, Games and watches. If the reward is only honor, you cannot ask for much. 

The key perk size is between $30 - $50. 100 people coming in at $50 gives you a chunk. 100 coming in at $20 is not much. 
You have to design the perks so that most will pay in this range. It has to be worth their while. If you do not have a perk that is a valuable thing, then you have to plan on small size. 

Bingo Perks -
If you have a big "Bingo" Perk - then set it up so that it does not take Bill Gates to do it. Design it with how it will be taken into account. In Raymond's case the Bingo was a dinner for 10 cooked by a well known chef. We designed this so that 10 friends could get together - not impossible and fun. In Patrick Ledwell's case, he aimed at businesses that would have a Christmas party - his Bingo was to be their entertainer. 

A success in the "Bingo" is what makes the difference often. So design it with great care so that you have a chance to get it. 
Luck is important in any deal but don't plan for luck, plan for a realistic chance that someone will take the Bingo and get something from it. 

Financing is all about momentum -
You are going out for dinner, you pass 3 restaurants. One is empty, one is a bit busy and the third is packed with a line up. Which one do you choose? The packed one. It's the same with syndications. Your deal must open with a bang and keep this going for the first 4 days. You must plan to raise at least 30% in the first week. You do this by getting your core to get in early. You must open on the first day with 5- 10%.

Don't beg!!!! -
Each Day Tell a new Positve Story - The moment you start to beg - "Please help us" with less than 10% by week 1, you are doomed. If you are struggling you have to get more influencers to go public about their support and why they support this. Your job is to build confidence. 

Every day in the first week -
tell a new story and better have another person tell the story of why this is good. When you have momentum, tell people about the success. Success breeds success. 

Timing - Financings go in waves.
You want to be early in the cycle. What happens is this. There is a lull in the market. A new deal comes out that gets everyone's attention. We all pile in. Then another that will be bigger. We all pile in. At some point though, we all get tired and we all get tapped out. But many, seeing how well the early birds did, go to market. They don't do well. Some bomb. Then we get a lull. And the cycle continues.

You have to be plugged into your local network to know the cycle. To reopen the cycle, you need a special deal. 

Again this is not a simple, let's use Kickstarter and get money like Patrick did. For when you fail, you close a door for a long time. If you fail more than 3 times in a row, the door will shut permanently.

This is not a game - This is not Farmville.
Once you have your money, the next round of hard work begins. As with a farmer with a CSA, now is the time that you truly create the confidence that will enable you to ask again at some time. You have to work hard to make sure that all you have promised happens well. You have to deliver and in a strong way.

You now have a community that has supported you. Look after them. Cultivate them. Honor them. 
If you do this right, they will advocate for your enterprise all the time and when the time if right, you can go them again and get more financing. 

It's all about Trust - The Motto of the City of London is "My word is my bond".
This is the eternal motto of anyone who seeks to ask others for money. It has been lost today in the big markets. But Crowd Sourcing is a return to how banking always was - a personal business based on trust.

Everything you do either adds to trust or takes it away. Assess everything you do in this framework.