There’s a current dearth of trust in the relationship between new entrepreneurs and the banks.
The banks don’t trust the new entrepreneurs. After all, they’re an unproven commodity. They are an element of risk in an industry that has conditioned itself to be extremely risk averse over the past decade.
Moreover, most new entrepreneurs don’t come to the table with vast sums of capital to match the bank’s investment. Often, no matter how strong their business plan may be, no matter how comprehensive the market research, no matter how well calculated and honest the cash flow projections or no matter how original, fresh and downright brilliant the concept may be the entrepreneurs are met time and again with a resounding no.
Likewise, many savvy young entrepreneurs don’t trust the banks. They have seen what happens when financial institutions gamble recklessly with their customer’s assets, speculatively buying and selling extraordinarily complicated financial packages that they barely even understand. They’ve seen the subprime mortgage fiasco and are likely old enough to remember just how many people lost their homes as the banks faltered. As far as they’re concerned, the banks collapsed under the weight of their own greed and/or incompetence.
The financial crisis of 2007-2008 has likely already made it harder for them to get a mortgage or other form of consumer credit. Thus, when the banks turn them down for business funding for their startup, they likely see it as just one more nail in the coffin of this already fragile relationship.
But entrepreneurs should not see the rejection by a bank as the end of their business career. It can, and should, be seen as a new beginning. There are many forms of alternative business funding out there from unsecured loans to government grants. Indeed, if you like in the UK and have had your request for business funding declined by your bank, did you know that the bank is obliged to help you to find alternative funding under the Small Business Enterprise and Employment Act of 2015. In a fragile economy, however, where consumer behaviour can be erratic and difficult to pre-empt, do you really need those high-interest loan repayments eating into your profit margins in your all-important first year?
Wouldn’t it be amazing if you could secure the capital you needed from the very people who’d benefit the most from your business model, the customers themselves? If all those myriad costs from marketing and stock purchases to getting Cochran Engineering to design your premises could be covered by people with a genuine interest in your business. How great would it be if you could raise the capital without the need for all that interest to impinge on your all-important cash flow? If you’re pursuing every available avenue of funding for your business you’ve likely given crowdfunding some sort of consideration if only in the abstract. However, you’ve likely never taken the plunge for a few reasons which we’ll now address…
Why most entrepreneurs don’t seriously consider Kickstarter.
Most entrepreneurs are aware of crowdfunding platforms like Kickstarter, but comparatively few pursue it as a viable source of business revenue. Why? It’s a great way to build relationships with your core clientele, it allows you to reward your patrons in exciting and creative ways and while you will have to devote some resources to this, these pale in comparison to the interest repayments on a commercial loan. Nonetheless, many entrepreneurs shy away from crowdfunding because…
- They fear not gaining any support and the damage to their brand that this represents.
- They consider it begging and their pride won’t allow them to seriously consider it.
- They know that statistically, the odds are against them, and this prevents them from even trying.
While crowdfunding platforms are not a digital land of milk and honey, where all who make it past the login screen are instantaneously granted the funding they require, there are nonetheless demonstrable opportunities for success. In this article, we’ll look at some of the most successful Kickstarter campaigns of all time to see what you can learn from them. If you’re prepared to dedicate time, effort and resources to your crowdfunding campaign there’s no reason that you can’t match the success of these campaigns…
After experiencing a boom in popularity in the ‘90s the whole VR thing quietly went away for decades until the Oculus Rift brought it roaring back into the popular consciousness. It is now a popular choice among gamers who want to feel completely immersed in their games. While there are games made specifically with the Oculus Rift in mind, it can be used to enhance any game… But how did a concept with such niche appeal raise $2,437,429 eventually becoming a $2BN business? The success of the Oculus Rift campaign is a clear parable of the power of influencer marketing. The YouTube gaming scene is huge with gaming content accounting for a whopping 15% of all content on the video platform. Oculus Rift’s campaign gathered momentum by getting YouTube influencers and the likes of Gabe Newell to lend the concept a sense of legitimacy that got the gaming community on board.
It’s important to believe in your product, however whacky it may seem to the cynics. Sometimes all it takes to sell a product is the right angle. Take Coolest Cooler, for example, this gadget was intended to be the ultimate tool for enjoying your summer outdoors. It was built not only with a lot of space to keep food and drinks cold but with a whole bunch of fun accoutrement. It had a Bluetooth speaker for playing music, a rechargeable blender for making fresh smoothies and even a magnetic bottle opener.
But for all it’s awesome bells and whistles, Coolest’s Cooler was a tough sell. Retailing at over $400, conventional wisdom would dictate that the product would be too expensive for its presumed target audience of families on a budget taking to the country for a picnic. Nonetheless, their Kickstarter campaign made an impressive $13,285,226. The success of the campaign can be traced at least in part to the power of nostalgia. Nostalgia, inherent in the prospect of picnic and the vaguely ‘50s retro design was a huge selling point for the coolers, combining nostalgia with the convenience of contemporary technology. It just goes to show that the right spin can help a product to find its audience.
You have a great idea for a product. It’s stylish, it’s innovative and it has the power to revolutionize an entire industry. The trouble is that there’s already a product just like it on the market. You worry that your product will be compared unfavourably to it, that it will be perceived as a poor man’s version of the original product. You should just give up, right? Wrong! Pebble Time has shown us that their smartwatch can stand shoulder to shoulder with the might Apple Watch. Not only is this product a serious contender, it’s a Kickstarter record breaker, making $2M in under an hour. Pebble Time is switched on all the time without draining the battery as much as an Apple Watch and is navigated with four buttons rather than a touchscreen.
Here is a product that dares to be different to its biggest competitor while all the rest are aping it. It celebrates its differences and shows belief in itself.
Every business needs to make money, but in today’s increasingly ethically and ecologically aware climate, consumers will always favour a company with a conscience over one that doesn’t have one. Flow Hive is a crowdfunding success story on a number of levels. First of all, it raised an extraordinary $12,239,226 to create innovative techniques to make the harvesting of honey easier and more time efficient. Prior to these techniques, honey harvesting had remained virtually unchanged for hundreds of years and involved some unnecessary processes. This campaign proved that there are few things more effective than creating a solution that addresses a particular problem. In a time when consumers are increasingly aware of the importance of protecting honey bee populations for the benefit of our ecosystem, it also demonstrated how effective a timely campaign with the right ethical focus can be.
It’s not just businesses that can be brought to life by Kickstarter, artistic endeavours can also be brought to life with the right financial backing. The documentary film Loving Vincent is a truly brilliant piece of cinema that would not exist were it not for crowdfunding. Every frame of the film is hand painted by one of 40 artists and the contributions of patrons allowed for the training of artists to help complete the film which would otherwise have taken years and years to complete. Loving Vincent shows that there’s value in staying true to your artistic endeavours.
The people behind each and every one of these crowdfunding campaigns likely felt the same sense of self-doubt as you did at some point. They likely doubted the viability of Kickstarter as a source of funding and even the viability of their own business plan. But like them, don’t let these feelings of doubt prevent your business from achieving great success through crowdfunding.