We can agree that crowdfunding is certainly trendy right now, especially in the startup community. It’s easy to understand why.
Getting funded by appealing to the public seems like an incredibly appealing funding solution for a myriad of reasons.
In fact, both established business owners seeking cash to launch new products, services, or programs and startup founders can find the concept of crowdfunding compelling – after all, it’s a way to get a decent amount of cash for relatively low risk on both sides. Or so it seems.
By crowdfunding, you’re essentially building a future audience of customers, since people tend to fund business ideas, causes, or concepts they are interested in buying, being involved with, or taking advantage of in the future.
However, developing an effective crowdfunding campaign is much more complicated than simply putting the word out that you’re seeking low level investments from individuals or non-venture capitalists.
The Art and Science of Crowdfunding
There is both an art and a science to launching a successful crowdfunding initiative – and this blend is not dissimilar to the process of pitching an investor or potential client. After all, the people who crowdfund your goals are investors, and you’re selling them on an idea that most likely doesn’t even exist yet.
After all, the people who crowdfund your goals are investors, and you’re selling them on an idea that most likely doesn’t even exist yet.
So you need the art in the form of a good story to tell, a platform from which to share it to go along with the science or the numbers and plan to back it up and a step by step process which helps you achieve your goals.
Set Goals for Crowdfunding Campaign
Like any successful project or initiative, start by determining what your goals are before launching a crowdfunding campaign. Now, obviously, you want money to fund your company, but you need to get more specific than that.
Do you want to generate extra publicity in addition to improving your cash flow? Do you want to reach a certain demographic or audience? Do you want to use your crowdfunding audience to get potential user data and feedback in order to further refine your offerings?
And perhaps most importantly, how much money do you need to get things going?
Designate a minimum amount necessary to move forward with your business plans and an ideal figure that when reached, will decrease or cease your crowdfunding marketing activities. Anything above that is gravy.
Finally, there is one more thing to keep in mind once you’ve set your goals. After you make them public on the crowdfunding platform(s) of your choice, you cannot easily change them. So make sure you are realistic about what you need to be successful.
Understanding the Crowdfunding Psychology
There’s a certain thought process, or psychological aspect, to crowdfunding that even the savviest of business owners may not be consciously aware, even as they execute successful campaigns.
For instance, one common way to crowdfund is to run an “all or nothing” campaign, where the recipient of the funds doesn’t keep any money unless they meet their goal (as opposed to campaigns where the fundee keeps the cash regardless of whether they reached their goal or not).
Balance your startup fund raise between want and need
While the latter seemingly poses a lower risk for the business, the former is often more successful for both the startup raising funds and the investors – the all or nothing campaigns show that the entrepreneurs involved are “betting it all” and that appeals to the target audience.
Besides, it puts all the risk on the recipient, not the lender.
Causing the audience to feel slightly guilty also works – but be careful with this sort of trigger.
It works best by comparing the price of funding your startup with a low-cost luxury, e.g. “for the value of a week’s worth of Starbucks, you’ll get access to technology that will improve your life and everyone else’s”.
Play to their middle- or upper-class guilt just a little and you’ll likely be rewarded.
Finally, target people who can empathize with your initiative in some ways, whether it is entrepreneurs who’ve been successful with crowdfunding themselves (and therefore may want to pay it forward), people who currently are customers of your competitors or brands that are similar to yours, or people who are connected to people who’ll directly benefit from a favorable outcome for your company.
How to Prepare for your Crowdfund Campaign
Before you start telling your audience that you’re looking to crowdfund, you need to make sure you’ve got all your ducks in a row.
This involves not only determining your goals (although that should definitely be your first step), but more prosaic but equally important steps like:
- Establish a budget for advertising and promoting your crowdfunding campaign
- Understand the rules and regulations from each platform
- Create and/or source the resources and assets that you’ll need
- Determine how to get the word out
- Crunch the numbers as you go in order to refine your campaign and position your brand
- Reward your investors once you get your business, product line, or other initiative rolling”
What’s more, you’ll need to determine where you’ll be promoting your campaign, including what platforms to use, which social media sites you’ll be targeting, and where you will engage your audience with content and advertisements.
It is important to consistently market your crowdfunding campaign across channels, steadily repeat and reiterate your message, and diversify your reach.
Not only does that maximize your success in general, you won’t be at the mercy of one particular social media site or platform and its requirements.
You can also download our free eBook, The Ultimate Guide to Crowdfunding for even more tips and tricks.
Spend Money To Raise Money
Hopefully, you’ve built the costs of marketing your crowdfunding initiative into your overall marketing plan – the phrase “you have to spend money to make money” has become an adage for a reason, after all.
Not only do popular crowdfunding platforms like Kickstarter, IndieGoGo, IgnitionDeck, and GoFundMe take a percentage of the funds raised, you’ll likely need to advertise your efforts and your business in order to make people aware of the campaign in the first place. Those are the hard costs.
Soft costs like more indirect forms of outreach like using social media to promote your campaign, working with influencers in the industry to get the word out, and creating content about your company should also be factored into the budget.
For example, perhaps you’ll hire a dedicated marketing specialist or an intern(s) to get this done – and these people need to get paid. Even if all these forms of marketing cost is your (and your team’s) time, that needs to be factored into the overall budget.
Crowdfunding Rules And Regulations
Consider the crowdfunding guidelines and requirements for the funding site that you plan to use to market your crowdfunding opportunity. For instance, Kickstarter is one of the most popular crowdfunding sites, and accordingly they are quite selective about the projects they’ll accept – so be prepared for that process to take a while, and you may have to make changes to your overall plan to get things going on the platform(s) of your choice.
Another thing to keep in mind is the sheer availability of resources out there. Even if you’re not planning on using Kickstarter yourself, checking out their Creator’s Handbook. It is a great resource for inspiration and a place to learn about all those little details that you’ll need to address during the planning process.
Other popular platforms like GoFundMe, IndieGogo, and startup-centric IgnitionDeck all have extensive resources and example use cases available for your learning purposes.
Tell Your Story: Crowdfunding and Content Marketing
One of the key aspects of capturing the hearts and minds of potential investors is telling your story in a way that’s authentic, compelling, and effectively communicates the value of your business, products, and services.
Really, promoting your crowdfunding campaign is essentially just content marketing. Create content that people find compelling, whether it is text, images, audio, or video, or ideally some mix of the aforementioned. And by compelling, we mean something that inspires people to take action in some way – whether it is to share it, sign up for something, make a purchase, or in this case, invest in a business or cause.
Keep in mind that this often easier said than done, and you’ll likely want to work with a partner or two in order to refine your brand, produce high quality messaging that includes videos and related imagery, and disseminate that message in a coherent way that reaches the desired target audience where they live, work, and play.
Personalize Your Campaign with a Heartfelt Video
Video is often a popular way to share your startup with the world, and for good reason – if a picture is worth a thousand words, a video is worth at least a million! That said, you’ll need to come up with a treatment, write a script, and otherwise make the video happen yourself – and spread the word about it (more on how to do that in the next section).
Don’t worry about the quality of the video itself. Research shows people relate to amatuer video footage online so…