Think leverage. The best crowdfunding campaigns on platforms like Kickstarter, Indiegogo, and Pozible provide leverage to launch your business or to move your business to the next level. And successful campaigns leverage your existing resources and social capital to help you succeed. While many see funding as the ultimate goal of crowdfunding, anyone who has run a successful campaign will tell you the non-monetary value of crowdfunding exceeds the funding.
Crowdfunding provides proof of concept and market viability, and allows for customer feedback while your product is still a prototype. Smartphone breathalyzer start-up Breathometer leveraged the proof of concept from the 3,814 backers of their successful 2013 Indiegogo campaign to raise a $1 million on Shark Tank. Venture-backed companies with millions of dollars in funding like Jibo, makers of the first family robot, assert that crowdfunding is the single most effective way for them to get customer feedback to refine their products prior to manufacturing. Crowdfunding also allows potential investors, strategic partners, advisors, and distributors to see how the management team of a business will handle marketing, customer service, and product fulfillment.
Since Indiegogo launched the first digital crowdfunding platform in 2008, the business of crowdfunding has advanced to a professional level. If you don’t know the rules for the new crowded road, your campaign will end up in the graveyard of failed campaigns. Over 60% of campaigns never reach their goals. In fact, the majority of campaigns never reach 20% of their goals, a strategically important marker for campaign success. Still the crowdfunding economy has tripled in the last three years and is expected to generate $12 billion in 2014. Hard work. Yes. Worth the effort? Absolutely.
So how do you put your best crowdfunding foot forward to leverage your success? Here are 5 rules for the road:
Do your research. Find successful campaigns like yours and reverse engineer them to learn how they succeeded. Examine their campaign text, video, rewards, updates, team, social media, and PR. Find a few failed campaigns and learn what not to do. And then back a few active campaigns to watch them in action. Research is the key to understanding the human element of running your campaign. You should also check out the well-written guides provided by the platforms themselves: Kickstarter has its Creator Handbook, Indiegogo its Playbook, and Fundrazr its Crowdfunding Success Guide.
Build an audience before you launch. The myth pervades that if you post a campaign people will just happen upon it and fund you, but the reality is anything but this kind of “if you build it, they will come” fantasy. Statistical evidence from the major platforms and anecdotal evidence from the accounts of successful crowdfunders indicate that strangers do not give to your campaign until you reach at least 20% of your goal. People want to back winners. When you are able to show that your professional network and existing customer base believe in your product, strangers will follow.
Let the 20% rule guide your funding goal. Will your existing customer base and professional network enable you reach 20% of your goal in the first days of your campaign? Campaigns that reach 20% of their goal in the first week have an 80% chance of succeeding. If you do not have an existing audience that will fund that 20% in the first week, reduce your goal and look for alternate funding sources to attain your total funding needs, or spend more time building your audience in advance of your launch. Crowdfunding phenom Coolest Cooler set a $50,000 goal for its campaign that raised over $13 million. A low goal doesn’t limit your success, but setting your goal too high can make you appear to be failing when you have actually raised thousands of dollars.
Create a strategic crowdfunding plan. Build a campaign that will not only provide you the short-term capital to get your business off the ground, but will support your long-term goals. Months before you launch begin to drive your social media and marketing toward your campaign. By the time you launch, your network should be well aware of your campaign and ready to act. Develop a day-to-day marketing plan for the six weeks prior to the campaign as well as for the campaign itself. Gather a capable team around you that can help you put the plan into action. Develop a post-campaign plan for production and fulfillment. Smaller niche players like Seed&Spark, a film-only platform, offer crowdfunding tools such as calendar templates to guide your day-to-day planning on their “How To” page, and Salvador Briggman’s CrowdCrux blog is your place to look for data-driven answers to your crowdfunding planning questions.
Communicate with your backers after the close of your campaign. The future of your business depends on it. Keep them posted on the development of your product and let them know if there will be delays on your promised delivery dates. The better care you take of your backers post-campaign, the more likely they will become your evangelists and loyal customers. Treat them like friends and family, continue to invite them into the process, and they will make your product and your business better.
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