Crowdfunding continues to be a very popular option for entrepreneurs seeking to raise capital for their business projects. It has become attractive because of its numerous obvious advantages over traditional sources of business financing. But it also has to be noted that crowdfunding has its own challenges that an aspiring business owner must be prepared to deal with. It is never a walk in the park to get enough people committing to fund your project. So there must be something unique you offer with your product idea, and again you must know the right people to communicate to about it in the most convincing manner possible. Crowdfund social believes in giving massive value whether you work with us or not, that is why we put out content like this.
Failure rates across popular crowdfunding platforms is still high and in most cases only about 40% of the campaigns launched actually succeed. So it is important to learn some of the best tips for crowdfunding before you go ahead to launch a campaign on Indiegogo, Kickstarter or any other major crowdfunding platform.
Identifying the value of the community
For every business project that requires fundraising the crowdfunding way, there must exist a community that cares about it if it is going to realize any success. So the target audience must be well known and adequate marketing activities used to reach out to prospective backers. Failure to do that alone has been identified through research to be the main reason explaining what happens for the campaigns that fail.
Choosing the right social media platforms
When the target audience has been understood, the next most important thing to do is to identify the channels of communication through which you can engage them. Crowdfunding doesn’t succeed without a strategy to reach a wider audience with your message. Social media today provides the best way you can easily reach your target audience and prospective backers. So your social media presence must be strengthened months before launching the campaign on Indiegogo or Kickstarter. The nature of your business project can guide you in choosing the right social media platforms. Facebook and Twitter are used for almost any type of project because of their numbers. But there are other important platforms to consider taking into account user demographics. A film project can benefit more if also marketed and promoted on YouTube in addition to Facebook and Twitter.
Deciding on the size of your goal
A large goal in most cases reduces chances of success but where it is reached then benefits are more. It can take longer to achieve such a goal, not unless the product idea is very unique and attractive to a large community that cares. But again effective marketing can make a very big difference. If you do adequate social media marketing and quality PR outreach, you can build up the momentum required for the campaign launch. The pitch for your Kickstarter or Indiegogo campaign must be brilliant to stand out from the competition. If you raise significant amounts of money at the beginning of your campaign, that increases chances of hitting your goal because it sends the right signal to potential backers.
Crowdfunding is a perfect way for skyrocketing your business. Compared to traditional methods of raising funds, crowdfunding comes with numerous benefits that entrepreneurs will find useful for their startup businesses. Some of these advantages are discussed below.
Very efficient vs conventional fundraising
Unlike in traditional fundraising where you have to invest much time in looking for accredited investors or applying for a loan, launching a crowdfunding campaign can be more rewarding because you will have the opportunity to communicate with the right people that can financially support your business. If you find a good crowdfunding platform, you can work towards attracting potential supporters. Some tasks to carryout that will send out your message include providing attractive rewards, highlighting important details about your business and making a video to support the information given out. That way, investors interested in the information on the platform will support your business. Crowdfund Social is a leader in crowdfunding campaigns and strives to deliver the best communication and results in the marketplace.
Effective media exposure and marketing tool
Successful crowdfund will stir investor interest. Going to the media will not only make your business known but will as well attract potential investors to your campaign. Media can give you good coverage through various options which includes publications and feature story on popular TV station or blog. The social media can propel your brand further. For instance, a Twitter mention can attract potential investors who might have heard about your campaign or read something about your product from a blog.
Provides social proof and market validation
An effective crowdfunding campaign can build social proof and market validation important for the survival of your business. If potential buyers are interested in your product or service, then it means you have built some social proof. When your startup product or service is bought by initial customers, other people are likely to do the same. Interested investors will also come in the support of a known brand.
Raising a business to the next level has its own challenges. Crowdfund social protects you from accumulating debt and helps you gain market validation without giving up equity.
A useful source to refine your business idea
Your startup business idea should not be the final decision if you care to listen or answer questions from interested persons who would backup your business. You can grab the opportunity to listen to the needs of the customers and improve your product or service on areas that don’t meet the customers’ needs. Crowdfunding exposes you to market insights from your fans, tough questions and complaints. Remember that all these customer feedback is free and very vital. Making the best use of it will lift your startup from the ground.
Generates early audience and loyal backers
Crowdfunding generates early audiences who trust your product, service or business story. These people can fund your business to see it succeed. Even after the end of your crowdfunding campaign, these brand advocates are likely to share your business story with their families, friends and even promote it on their social networks. These loyal backers can create a successful crowdfunding campaign and promote your brand to potential investors and customers which is important for its existence.
Crowdfunding provides great opportunities for entrepreneurs to have their business startup projects funded. It is definitely the best option for many who cannot manage to get funds from traditional sources like banks, venture capitalists (VCs) or angel investors. But that doesn’t make crowdfunding an easy way of getting all the funds you need for your startup because you still have to work hard for it. Indiegogo and Kickstarter are the two biggest crowdfunding platforms, but you don’t just launch your campaign there and sit back to wait for the money to come in. crowdfunders that have made that mistake before are part of the 60% campaigns that fail to get funded successfully. One of the best crowdfunding secrets to avoid such a mistake is to know the importance of building a community and actually doing it.
A community is more than just a target audience
Building a community for your crowdfunding campaign should go beyond the usual audience targeting methods most academic classes like to talk about. To get someone funding your project is more difficult than selling any ready product or service. A higher level of trust from your potential backer is necessary because you have nothing with immediate gratification to offer in return for the donations you will be asking. If you promise to give any reward like a finished product to your backer, that will only happen if you get funded successfully and it may be months later. The level of trust required can only be possible if you have a community built around your crowdfunding project. Your efforts in building it should start months before launching your campaign on Indiegogo or Kickstarter. That’s during the crowdfunding pre-launch stage which helps to build the necessary momentum and following. Like most startup entrepreneurs seeking for opportunities to get funded, you don’t have big advertising money. So creating a community that cares about your project is the only option you have and your efforts should begin early enough. Where you can’t afford to spend a lot of money, you must be ready to spend enough time instead.
Communication is key to building community for crowdfunding
You identify your target audience and platforms where they hang out, so that you can begin communicating to build a community that will feel part of your project. Valuable relationships must be established with media reporters, bloggers and key influencers even before the launch of your campaign. You must contact them directly via email, phone calls, direct messages on twitter or Facebook and so on, to tell them more about your project. You must also have resources providing more detailed information to share with them, so having a website in addition to social media accounts is a great idea. You must make every effort to provide information that is of value to your contacts in the media, bloggers and influencers. That gives you an opportunity to get in front of their big audiences.
When that translates to more than just Facebook likes, you should be prepared to start engaging with your online followers. Update them frequently and monitor their conversations to know if they care about you project and what you should say to them. That will build momentum and when you finally launch the crowdfunding campaign will likely start with a good number of funders. Communicate with your initial backers to erase any fears they might have with more information, but don’t miss an opportunity to constantly reach out asking them to share your campaign messages with friends and other people in their networks. That should help to keep your community growing, even after your funding goal is met because you might as well want to get business partners or additional funds.
In recent years, crowdfunding has become a popular and often effective means of raising money to start a business or a project. Although it may seem like a new concept, its roots actually date back hundreds of years. It is generally performed online through a number of websites specifically designed for fundraising purposes, but it can also be executed through other means, such as benefit events, solicitation letters, and the like. Is crowdfunding a good option for you? Find out more about raising money on Kickstarter, GoFundMe and Indiegogo. Crowdfundsocial will walk you through the history of and how people use the crowdfunding platforms differently.
Raising Money on Kickstarter
Kickstarter is one of the most popular crowdfunding platforms currently active. It was launched in the U.S. in 2009, and has gathered momentum from there, attracting investors and donors from other countries.
Best For: Kickstarter focuses on raising funds for creative projects, such as music, publishing, films, video games, photography, technology, shows, and even food-related endeavors.
What You Need to Know: If you want to raise money through Kickstarter, your project must qualify in one of 13 categories and must follow the site’s rules on prohibited uses. You must only enter a project, not something that has already been produced, manufactured or sold.
If you are asking assistance for a project that involves hardware or product design, there are additional requirements you must follow, including providing a manufacturing plan and a physical prototype of the product. You must also provide a target amount and a deadline for the project. You are also required to state the challenges and risks associated with producing your project.
A note: There is a 5% fee calculated based on the total amount of funds you raise, plus a 3% to 5% fee applied through their payment processor.
Raising Money on GoFundMe
GoFundMe was initially called CreateAFund in 2008. When the site was founded in 2010, the name was changed, and more features and upgrades were added to make transactions easier. With GoFundMe, you can create your own website to inform potential donors of the purpose of your fundraiser and your target amount. You may also include videos or photos.
Best For: GoFundMe focuses on collecting funds for events and not projects. These events can include life events such as illnesses, loss of a job or loss of a home, school tuition, medical bills and other causes.
What You Need to Know: Raising money on GoFundMe is slightly different than on Kickstarter in that the site is not incentive-based. GoFundMe charges a fee of 5% for each donation. Its payment proecessor, WePay, also deducts 2.9% and US$0.30 out of each transaction. Note that as of 2015, the site no longer supports funding for legal defense.
Raising Money on Indiegogo
Indiegogo was founded in 2008 and is one of the earliest websites to promote crowdfunding. It has partnered with other companies such as MTV New Media, Metamorphic Ventures, MHS Capital and ff Venture Capital, along with Startup America to expand its crowdfunding activities.
Best For: Raising money on Indiegogo allows you to fund startup businesses, charities, goals or even an idea.
What You Need to Know: You have to be at least 18 to start a campaign through Indiegogo independently. Otherwise, consent from a parent or guardian is required. The site is popular due to a less stringent list of guidelines and excellent customer support. Indiegogo charges a fee (5%) on contributions you receive through the site. This is on top of other fees that may be charged by PayPal and credit cards used. It also has a system that rewards donors, customers and investors.
Good to Know: There is also a sister platform that the company launched called Indiegogo Life (renamed Generosity.com) that allows people to raise funds for life events such as celebrations, medical bills and emergencies.
Crowdfundsocial is the longest running social media marketing agency for crowdfunders. We specialize in helping get your project in front of social media influencers to get you the right people who want to invest in your project and get you funded!