“If you empower an entrepreneur, an entrepreneur can change the world.”
Crowdfunding; it’s gaining steam as an important buzz word in the small business community, but what exactly does it mean? From the more well-known Kickstarter and Indiegogo to CrowdFunder, CircleUp and AngelList, there are many platforms from which to choose, which provide a space for you to get your ideas out in front of a pool of eager investors. “Platforms for crowdfunding are not in the business of funneling traffic to your campaign, they are your stage, not your town crier, and you’re in charge of the marketing.” Dominique Juleon addresses the class, discounting the theory that crowdfunding is as simple as it may seem. “It’s not upload and lean back, there’s a lot of legwork that begins once you’ve published your page.”
The first step in the crowdfunding process is deciding which type of funding you would like to receive: equity, debt or rewards-based crowdfunding.
• Equity – neither good nor bad, it is a decision you must make with the best interest of your company in mind. It means that person owns a piece, much like a partnership where one person has the intellectual capital, and one person fronts the hard capital. You can raise the MOST money for your business by this method.
• Debt – they do not own a part of your company, you are obligated to pay them back Community Sourced Capital, or Street Shares are good examples. Risk averse investors, debtors often require you to meet certain criteria. Look at it as paying a fee for your platform to stay open while you pay off debt interest free. Debtors want you to have been in business for a year or so, as a proven business model and as such it is not as good an option for start-ups.
• Rewards-based Crowdfunding – This is what most people are thinking of when they want to crowdfund. Essentially, it asks supporters to give you money, and if your business does well, you give them some sort of a reward or perk that you decide upon. Treated like a donation from goodwill and trust, it is not regulated so that if your business model fails, you are not obligated to make good on your proposed perk or reward. There is no contractual agreement if you don’t deliver on your promised perk. 10-15k is the “Sweet spot” for this type of thing and you raise the least amount of money through this method.
The next step towards a successful crowdfunding campaign is choosing the right platform for what you are trying to accomplish. “If you are new to the process, and you just want to ‘see what you can raise’ Indiegogo is the most user-friendly and flexible of the major sites, though it raises less money on average. Kickstarter on the other hand, is for people who are pretty sure they are going to do awesome, and already have a lot of community support.” This step requires some research. You should be thinking about which site has the, “pool of investors” that is most likely to support your cause or product, so the more work you put in to finding the best site for your business, the higher your chance of success. Remember that what may work for one company could be ill-fit to another. “Each platform is like a box, with its own set of rules, and you need to understand those rules to determine whether it is worth it or not to you.”
Alright, so you’ve decided which type of funding best suits your needs, and you’ve researched every crowdfunding platform under the sun to find your best fit, so what next? Our resident crowdfunding maven Adra, who has run many successful campaigns says the first step is to give to yourself. “Don’t expect someone to invest in you if you cannot invest in yourself.” After you’ve enlivened the pot with your personal investment, throw kickoff parties and let your potential investors see that you are committed. “The more personal you can make your pitch, the more action you will stir up. It is an over-saturated market so it’s imperative that you stand out and don’t lose the confidence of your donors. If nobody has donated in two weeks and you’re only at 10% donors will look at that and not want to fund you. PLAN or it will die on the vine, we see it happen all the time.”
Dominique adds, “If you are not 10% of the way towards your goal by the end of the first week, you will likely not be successful. This is why it is so important to know what you are doing, to work hard every day of the campaign, to have a solid well researched plan and to know your customer base before you begin.”
Plan what you are going to do each day, every three days, weekly, every ten days, monthly. Campaigns NEED updates, you have to show people that you are active, engaged and excited. “When you talk about something you are passionate about, people will see it in your face,” Says Adra. Touting the importance of video, audio and visual updates. “Make business cards pass them out, leave them everywhere, video updates of you talking about what’s happening today, tweets, Facebook posts, personalized thank-you’s.” Hootsuite will become your best friend, it allows you to schedule posts across all social media platforms to go out at different times during and after your campaign.
One of the most crucial steps in a successful crowdfunding campaign occurs at the very end. You’ve reached your fundraising goals, and engaged with supporters from within your customer base, now show them what you’re doing with their money. Thank them for supporting you, have a success party, and follow through on your rewards or commitments. The best result is a strengthened bond with your customer base, and the chance to target the same group when you next need funding. Get out there and Crowdfund It!