Entrepreneurs: Learn why you should tap into the $4 billion U.S. crowdfunding market and how to actually launch a successful crowdfunding project.
Headaches in raising capital for your small business and startup? Try crowdfunding. Entrepreneurs have proven that it can give you competitive amount of funding vs. other funding sources, and the market will continue to grow significantly, according to a recent paper released in January 2013.
Conducted by Fung Institute for Engineering Leadership at UC Berkeley College of Engineering, the research indicates that the U.S. crowdfunding market size has been conservatively estimated to be at least $3.98 billion.
Howe about the rest of the world? According to the press release related to the release of the research paper, crowdfunding has became the buzzword in business funding: The United Kingdom authorizes the first equity crowdfunding platform; Australia has legalized crowdfunding since seven years ago; Italy legalized it in October 2012; startup incubators and investors worldwide are exploring crowdfund investing; the World Bank is also exploring crowdfunding.
According to the same research paper, Crowdsourcing.org, the go-to site for everything crowdsourcing, estimated that as of April 2012, there were 452 crowdfunding platforms actively facilitating funding campaigns worldwide, supporting $1.5 billion-worth of investment and over 1 million campaigns (as of 2011.)
The bottom line, it will be easier for entrepreneurs and business owners to raise capital via crowdfunding in the near future.
So, how to tap into the now-popular crowdfunding market successfully?
By now, you’ve got your reason to jump into the crowdfunding bandwagon. The next question is: How to raise capital via crowdfunding?
Here’s to help you manage your expectation: According to Kickstarter, project success rate is about 44 percent. It is clearly not easy-peasy to get funded. Did you know that on platform like Kickstarter, your crowdfunding project is deemed as successful if – and only if – it reaches the funding goal you set? So, if you are looking for $20,000 funding and at the end you get $19,000, your project is considered as unsuccessful, and you won’t receive even a dime of funders’ money.
So, yes – it’s challenging. But fear not! I’ve searched the web and summarizes the following practical tips – just for you (if you want resources, you’ll get them at the end of the article – stay tuned!)
1. If your project is not interesting and solve problems, don’t bother starting a project
Launching a crowdfunding project is just like launching any other kinds of business: If your startup doesn’t stand out, you won’t likely to be successful in getting funding. It’s that simple.
2. It’s all about the pitch, baby!
You need to give funders reason why they should learn more about your project, let alone pledging their money for your project. Just like any other great pitches, you need to do it before you spill out the details about your projects. Craft one, cool pitch and woo your potential funders.
3. Shoot a pitch video
Related to number 2, you must shoot a cool video about your project. Explain about your project – what you are going to achieve; what problems you are going to solve; and so on. If you want your video to grab attention and go viral (d’uh – of course you want it to be awesome!) make something interesting, creative and spice things up with a bit of humour and quirkiness.
4. Develop funding giveaways, perks that cater the wide array of funders’ budget and interest
Thanks yous are mandatory, but you often need more than those to get your project successfully funded.
When people are interested in funding your project, you need to give them something to seal the deal. Some funders are supporting your projects because they love your ideas; some others are interested in your products and want to be the early user of yours; even some simply want to be a part of your project, and ready to send over thousands, even tens of thousands of dollar for that purpose (e.g. have your name as the Executive Producer of a movie project.)
The bottom line, you need to offer perks that cater everyone – from your $5 funders to your $5,000 ones.
5. Actively communicate and engage your funders and future funders
During the course of your project, be sure to communicate and engage your funders and future funders actively. Respond to questions, updates with anything new with regard to the project, and so on.
6. “Pre-sell” even before you launch your project.
A good tactic adopted by world-class marketers, you should try to boost interest with your viral videos, social media updates and so on – before you actually launch your project. Send out emails to your contacts; “recruit” your friends and family to buzz the project launch date, and so on.
Doing this will drive some buzz about your soon-to-be-launched project and will help you securing backers’ funds early.
7. Launch social media and email marketing campaigns
This has become a standard in promoting a crowdfunding project: Launch a social media campaign and drive your social friends and followers to your project page – and “convert” them into funders.
Also consider to “blast” emails to your email newsletter subscribers; consider other ways, such as using solo ads to “rent” others’ e-mailing lists.
8. Set milestones and launch new perks a milestone is reached – make it urgent
Updates like “Ok, guys… we have reached our goal – let’s shoot for the stars… Get X, Y and Z to help us reach new milestone!” can attract new funders; it is also giving a sense of urgency, helping you boost your funding – hopefully to pass your funding goal.
9. Choose the right crowdfunding platform.
Not all platforms were created the same. Choose the right platform which will give you better chance for success.
For example, if your projects involves with charitable causes, IndieGoGo is for you. If your project is a revenue-generating business, Rock The Post is for you. For more comprehensive coverage on this, go to this Time.com slide
10. Use your crowdfunding project as a marketing campaign
Crowdfunding is not only for someone to launch a product/cause. There are actually established organizations who use their crowdfunding projects as marketing and branding tools. Either way, you need to make the most of your crowdfunding project by embedding your marketing messages into it seamlessly.
Sources and further reading
Of course, the above tips are not originally mine! I’ve never launched any crowdfunding projects (perhaps in the near future?) But I do learn from the experts about the basics. Here are the exact resources I use to suggest you 10 crowdfunding tips above – enjoy:
Although many are still being skeptical toward crowdfunding, many others have proven that it is one of the better ways to raise capital for your products or causes.
So, how about you? Are you considering crowdfunding to launch your new products or projects?