For most, crowdfunding success isn’t as easy as posting an offering and sharing it on a favorite social network. A successful offering takes careful planning and active management both during and after the campaign. In this crowdfunding how to guide, I’ll outline the process and share tips and tricks according to the founders of IPO Village and ProHatch, two leading crowdfunding web sites.
Any self-respecting crowdfunding how to guide should admit that crowdfunding isn’t right for everyone. Whether it is right for you is a hard question to answer and just depends on what you’re seeking funding for. Consider the following when assessing your approach:
Elizabeth Smith Kulik, ProHatch: “Before social and business entrepreneurs consider crowdfunding as a means of sourcing capital, they must learn what crowdfunding means to the future of their enterprise, because along with the funding comes a large number of stakeholders. This is particularly important to explore when raising funds for your enterprise is not a one-time event and the consequences of crowdfunding will influence future financings.”
Simon Erblich, IPO Village:
For more about different types of crowdfunding, visit our guide to crowdfunding basics.
Here are some truisms about crowdfunding platforms:
Kickstarter is an awesome platform with a well-established networks of willing contributors, but they may not be the right choice for your specific project. Indiegogo has a “flexible funding” option that allows you to keep any funds you raise even if you don’t hit your goal. Fundable offers one-on-one support. MedStartr specializes in the medical industry. ProHatch allows raising money in phases instead of one fell swoop. IPO Village deals only with companies selling public stock. Selfstarter can be installed on your own web server and has no royalty fees. Others allow you to white-label their platform and design your own campaign web page without having to host it yourself.
Get the point?
The good news is you have options. It helps to know your options and pick the one that makes the most sense for your campaign. If you want extra guidance or need a niche investor to succeed, the big platforms may not be your best bet.
To get up to speed on these options quickly, I’d definitely suggest following the #crowdfunding hashtag on Twitter. You can also visit our crowdfunding website directory which can help sift through these sites to find listings specific to a certain region or industry, or visit ourcrowdfunding website news category for the latest news.
Nail the pitch. According to Simon Erblich, what is the most often overlooked step in preparing a campaign? ”The online investor presentation. This seems like a small factor but similar to the elevator pitch, it is the most critical. This small window is where the investor either jumps on board or they move on… it is your one chance to get them.”
Remember, attention spans on the internet are short. Distill your pitch and make sure your video is concise and to the point. In general, 2-3 minutes is a solid target. If you’re mediocre with video editing, consider hiring an outside firm to assist. Spending a few hundred dollars here may be the difference between success and failure.
Remember your friends and family. There is an adage that in order to be successful you should try and have 30% of your raise lined up before it even hits the Internet. What is that all about? Four things:
I wouldn’t take the 30% rule as gospel, but it is worth considering. The fact is crowdfunding isn’t necessarily an internet-only endeavor.
I was in a crowdfunding seminar held by SoMoLend founder Candace Klein when I first heard this and it makes a lot of sense. She suggested holding an in-person event to announce your launch before your campaign. This is a great way to gauge interest among your immediate network. If you can get a list of individuals who have already pledged money, how much they’ve pledged and a way to contact them that can be a powerful tool going forward.
Don’t forget marketing. There is no doubt you should have a marketing plan, and Erblich thinks you should definitely allocate money for marketing as well:
Simon Erblich, IPO Village: “Yes… there should always be a marketing budget. The size of the budget typically relates to the average customer acquisition costs in the given industry. With crowdfunding the customer is the investor. Investor acquisition costs are among the highest in the industry. However, since any paid for marketing is being augmented by social media/viral marketing, the acquisition cost will likely average out to be significantly less then industry norms. Only time will tell how much less…”
Elizabeth Smith Kulik, ProHatch: “We live in an age where people’s on and offline lives regularly intersect, at many points and in many combinations. Crowdfunding gives people the opportunity to use their own money to support social and business entrepreneurs who they connect with online. Because the process is internet based, it’s easy to rely on online communication and overlook traditional means of getting the word out; after all, the internet enables direct communication at light-speed.”
“However, a balanced approach recognizes the value of integrating on and offline communication plans for maximum exposure to the most relevant audiences who will fund and broadcast your Project through their personal networks. Think of the internet as a distribution channel, and traditional communications and the events that surround them are a source of content and updates on the state of the Project. Leveraging real world communication as internet broadcast content ultimately adds credibility as the Project moves forward day to day.”
So you’ve planned your campaign, exhausted your network, chosen your platform and honed your pitch. You’ve submitted your campaign and today it launches! Here is what to do on day one:
Efforts during a campaign should mirror what you do on launch day. I covered the Lumawake launch in detail, and they targeted a big raise of $150,000. It didn’t come easy. They were written about numerous times over a period of weeks in huge publications like VentureBeat and TechCrunch. Even with all that exposure, they only raised their last bit of funding in the final hours of their campaign. I know their team had to work extremely hard to make it happen. Assume you will, too.
This isn’t the Ronco Food Dehydrator. You generally don’t “set it and forget it.” If you’re that lucky congratulations, but most successful campaigns are the result of a ton of hard work and dedication. A raise can feel like a part- or full-time job in itself! Take it from Elizabeth Smith Kulik… ”The most important step that people overlook when preparing a campaign isn’t specific to crowdfunding at all, but is a challenge for any fundraising efforts. The classic entrepreneurial mistake is to underestimate the time and effort it will take to articulate the value of a Project from a funder’s perspective and capture funder interest, all the while managing constant communication around the campaign.”
If you haven’t been successful, the good news is you can try again. There is no rule saying that crowdfunding is a one and done endeavor. Try learning from your mistakes and reassessing your approach. Come back stronger and better than your first attempt!
If you were successful, congratulations! Now what? That depends on the type of raise you completed.
If contributors are now expecting something from you, establish a place where they can be updated on progress. That is usually the campaign page on your chosen portal, but you may wish to move conversation elsewhere. For example, a Facebook group may make more sense for you. Again, be available! Nervous contributors can and do turn on those that solicited their funds.
If your raise was for charity, share the effects of contributions with your contributors. That will build goodwill and may give you more leverage for future fundraising efforts.
Was your raise bigger than expected? Do you suddenly have hundreds or thousands of individuals eager for constant news updates? Consider hiring a PR firm if public relations become difficult to manage. This may even be a cost you want to consider before your raise!
As idealistic as it sounds, consider karma. Let people know their contributions were used in the way specified.
If you decide to defraud the crowd, the crowd will make sure your efforts live in infamy any time someone runs a Google search on your name. This could affect future employment among other things. You may even be prosecuted!
Sometimes projects fall through, but failure doesn’t make you a criminal or even a jerk. Contributors and investors know they assume some risk by investing in your startup or idea. Be transparent and act with integrity and the rest should take care of itself.
Thanks for reading our crowdfunding how to guide and good luck in your future crowdfunding efforts! Think we missed something? Leave us a note in the comments.