Imagine you have an idea and need some funding. You go to a bank. Right? You might have a conversation like this:
“Hey, Bank Loan Officer, I’ve got a fantastic idea, but need cash to get it off the ground.”
“Fine. I’ll need your date of birth, date of birth of your dog, blood samples from you, your mom, your dad, your neighbor and your neighbor’s neighbor. Then also the name of your future grandchild, the make and model of your first car and the birthplace of your grade school teacher.”
“Yeah, just kidding. Still no.”
Of course it doesn’t. The reliance on bank loans to help get a small, fledgling idea off the ground is a thing of the past.
So what does an entrepreneur do these days instead of begging on bending knee at the glass and marble relics of the past? You turn to a very public, very social, very now way of raising capital.
Socially Raising Money in a Very Social World
What is crowdfunding?
Simply put, it is requesting and receiving money online from strangers in the hopes of funding a particular project, charity or business.
Easy enough, right? Well…
Crowdfunding has been around for a while, as early as 2003 on the internet. During much of its infancy, musicians or filmmakers were the main forces behind the phenomena. Producing content for fans, paid for by fans.
Recent years though have shown it to be a truly viable source for funding creative and business projects alike.
Past campaigns have raised millions of dollars for everything from a smartwatch to video and board games to a cooler to a Veronica Mars movie. That’s an eclectic list.
There are hundreds of thousands of people looking to be part of a new or updated idea. Whether just wanting a perk from the creative process to actually owning a piece of the pie, no idea is too big or too small for a willing online community with a want to be part of something fresh and exciting.
And that’s where you and your fantastic idea come in. Before we get to that most satisfying of places in the creative process – the finish line – there are a few basic tenets to understand to ensure a successful crowdfunded campaign.
Know Your Project
Sounds simple enough? Maybe even a bit trite?
Perhaps, but it is key to crowdfunding success.
Knowing what you want and what you want to achieve in this process drives everything forward. Yes, there may be components along the way more directly tied to the success of a funding campaign, but your idea sets it all in motion.
So you really need to know it, inside and out. Specifically, knowing your goals and what your endgame may be. To get from there to here a series of questions to ask and answer yourself will help coalesce your approach heading into a crowdfunding project.
First, is my funding goal realistic? How long do I need to reach it? Do I need the entire funding goal or just a portion of funds? It’s essential to think through every aspect of funding here. You probably need more than what it costs to produce your project. You also need to be able to market it, distribute it, and deal with setbacks. Think through every single detail of funding.
Next, figure out what makes your project enticing and what will push it over the funding finish line. What rewards can you offer those contributing to get the project off the ground. If you really want people to get on board, you need to offer really good rewards. Most people aren’t going to fund your campaign out of the goodness of their hearts. Your close friends and family will, but the rest want to get something valuable. So what will you offer and why will people want it?
Finally, understand who will benefit from your idea? Who will it reach? Who should it reach? When it comes to marketing your idea, you need to know exactly who you’re targeting. Without this knowledge, you won’t reach your target audience.
You are certainly not expected to have all the answers at this stage. Ideas evolve and outlooks change. But knowing your project and the direction you are aiming puts you well above others vying for crowdfunding dollars.
It doesn’t matter if you’re a creative with a song to sing or an entrepreneur with a widget to sell. Every story has a story, and knowing yours moves the needle much high on your funding success.
Know Your Platform
You’ve crafted and understand your idea, your story, more fully. Now you need a place to tell it.
Needless to say, the crowdfunding world is…crowded. And varied.
There are a multitude of outlets to facilitate your project funding, but which one to use? Different sites provide different services.
Do you want rewards based crowdfunding (contributions unlock rewards) or an equity based service (funding party becomes a shareholder)?
Do you need to keep a potion of the funds even if a campaign does not meet its intended goal?
To help cut through the crowd, here’s a quick overview of five primary crowdfunding platforms:
The Major Players
When it comes to crowdfunding, Kickstarter and Indiegogo are the Google and Amazon of the industry. They have been crowdfunding mainstays the past decade producing the most consistent results. Together they have raised a combined $3 billion for their entrepreneurs.
Summary: It wasn’t the first – that distinction goes to ArtistShare – but Kickstarter has been the most successful, raising over $2 billion since coming on-line in 2009.
Best For: Creatives. Art. Film. Games. Music. Publishing. Kickstarter gears itself to those wanting to share what they create with the masses.
Funding and Fees: If a campaign is unsuccessful, no money changes hands. Kickstarter keeps 5% if a campaign meets its funding goal with a processing fee up to 5%.
Summary: Launched in 2007, Indiegogo has facilitated over $1 billion in funds across 150,000+ campaigns.
Best For: Pretty much everyone, from general creative projects to charity and humanitarian geared groups.
Funding and Fees: Indiegogo offers the option to keep your funding even if a goal is not met. Their fee is 5% of all funding. Processing fees are 3% plus $0.30 per transaction.
A Few More to Consider
Smaller, but no less dynamic, these sites offer a more tailored approach versus Kickstarter and Indiegogo.
Summary: If you ever needed loose change to complete a gas station purchase, the person in line you asked was named GoFundMe.
Best For: This is the small stakes side of crowdfunding. Born of people needing to cover personal costs, GoFundMe has evolved into a hub for locals seeking funds through a grassroots network of donations.
Funding and Fees: Like Kickstarter, 5% of fully funded campaigns. Zero dollars if a goal isn’t met. Handling fees are up to 3%.
Summary: Around since 2010, in the past few years RocketHub has redirected its focus as more venture capital than crowdfunding, although that component does remain.
Best For: Startups. RocketHub is a bit more limited than Kickstarter and Indiegogo with only four main categories. A partnership with A&E affords the right pitch the potential for wider exposure.
Funding and Fees: RocketHub takes 4% commission if a goal is reached. 8% if it’s not. They also charge a 4% credit card handling fee. You can keep funds regardless of campaign success.
Summary: Smaller and not as well-known as some other sites, Razoo is no less powerful. Since 2006, Razoo has seen $500 million raised for a multitude of causes.
Best For: Worthy Causes. Razoo helps connect donators with the causes they care most about. Anything from water programs in third world countries to uniforms for a local youth soccer team.
Funding and Fees: 4% to 5% depending on fundraising type. 2.9% processing fee.
These are just a few. Research as many platforms as necessary to find one that best supports you, your idea and your funding campaign.
Know Your Audience
You’ve developed your idea and narrowed down the best place to present it. It’s time to get funded.
Crowdfunding is a social exercise. It doesn’t happen in a vacuum and to effectively score that much needed capital you must reach people willing to support you.
The best starting point is a small circle of trusted friends and acquaintances to help spread the word and tap social networks that you may be unable to access. Remember, the most effective crowdfunding is viral. But to get your idea spreading quickly, it needs a starting place. Usually, your friends are that starting point. If you can get them on board with your idea, they can be your greatest evangelists.
From there, you’ll have to move beyond friends and convince strangers to give you money. To maximize that generosity, target those that will boost your project to its funding goal and beyond. This goes back to knowing your project and who should hear your story.
People who love sports are drawn to sports. People who love movies are drawn to movies. People who love cooking are drawn to avocados. You get the idea. Appeal to their interests and reward them for it. Don’t offer random rewards unrelated to your project. Offer rewards that your audience will love.
Don’t be afraid to tap into the emotions of those you are seeking to reach. It’s easy to get caught up in the excitement of selling your idea, but there is a finished project on the horizon you will want people to touch, see, taste or hear. You’ll want to as many people as possible there at the end to experience it with you.
Who are you?
No seriously, who are you? And why do you want my money? Why should I give to you?
You are not only selling your idea, you are selling yourself. It is shown over and over that people who contribute to a project are not only buying into the project or idea, they are buying into the person or persons behind it.
They are buying into you.
As important as the right idea and the right platform and the right audience are, none of those matter unless you sell yourself as the one to pull the whole thing off.
Make your pitch clear and concise. Whenever possible do a video. Offer cool rewards or milestone shares. Keep your campaign tight. Thirty to sixty days is the most effective time period for the vast majority of funding campaigns.
Whatever the message and regardless of how you deliver it, always be mindful that people funding your project or idea are really funding you.
As you can see, crowdfunding is no small feat. There is plenty to consider when ramping up your foray into crowdfunding. Not to mention living in a time of very short attention spans, makes rising above the crowd even more daunting.
Be prepared. Don’t be afraid to stand out. Understand who you are trying to reach and let them understand you. Put yourself on the platform that suits you and your ideas and goals the best.
Like anything in this world – building a house, making a movie, creating a website – if the blueprints, script or code is well conceived, on point and thoughtfully developed, the foundation laid will be incredibly strong.
Crowdfunding is no different. Build the right foundation, and your venture will easily stand tall amongst the crowd.