And How to Make Yours Even More Brilliant
You’ve probably seen crowdfunding campaigns or at least heard of them.
Financing a new business is not easy. There are multiple options, and knowing which one to choose is only the first battle. The right business idea combined with the right financing can be a powerful weapon that will win the war before the first battle even starts.
Choose wrong however, and you may not even get a chance to fight. Sometimes, it isn’t just choosing one option, but choosing the right combination of financing that gets you going. What are your options?
You could self-fund if you are independently wealthy. If not, you could still borrow from retirement or borrow from a friend. There is always the traditional business loan route, or you could find investors. One of the newest funding options and one that is gaining popularity fast is crowdfunding.
What is Crowdfunding?
What is the newest innovation in small business funding? It is actually quite a captivating invention. Crowdfunding sites allow you to pitch your business to thousands of micro investors. Anyone who wants a piece of the action can buy a piece of the proverbial pie.
Investors pledge amounts on a broad spectrum depending on the campaign and the platform in use. They may give $80, they may give $150, or they may give over $500. Or they might give $5.
Though not always necessary, most entrepreneurs offer rewards to investors for their generosity. Most often, this comes in the form of the product the business will be selling. Different levels of giving result in different rewards. For example, a $50 gift may get your product A, and a $100 gift will get you an upgraded version of product A.
Where Does the Magic Happen?
There are many crowdfunding sites, but the most popular are Kickstarter and Indiegogo. While the platforms are similar, there are some very large differences. The most obvious is the timing in which you receive the funds from investors.
With Kickstarter, you have to reach your preset goal before you can receive the funds. If you set a goal to raise $12,000, investments have to reach that amount before you get your hands on any of the money.
Indiegogo on the other hand lets you choose if you want to receive funds as they come in or wait until you reach your goal.
In addition, they have the option for InDemand. It lets you continue to raise funds after your initial campaign is over, without technically starting a new campaign.
Indiegogo also has a flexible funding option for those who may need it.
Each have warranted amazing results for many entrepreneurs. To make the choice for yourself, you need to evaluate who your audience is, and which platform will best reach them.
How Successful Can Crowdfunding Campaigns Really Be?
Quite, actually. While it certainly isn’t the norm, these top campaigns far exceeded their fundraising goals.
Pebble Smart Watch
Pebble actually has several of the top 10 campaigns ever on Kickstarter. Their 2nd campaign is the highest funded campaign to date, reaching over $20,000,000. That’s not too shabby for a goal of only $500,000. They blew it out of the water!
Are they still successful? Well, yeah, but not in the way you may think. They actually sold to FitBit. So I call that success.
This one is not one that most would expect to explode onto the scene the way it did. The FlowHive Indiegogo campaign definitely generated some major buzz. The idea was to find a way to get the honey from bees without harming the bees.
Traditionally, hives are simply broken open to obtain the honey. This process can kill the bees. FlowHive developed a fake hive of sorts, made from reusable plastic. Bees make honey in it, and the honey flows through a spout out into the world.
The bees are safe and fresh honey is ours for the taking.
Apparently, beekeeping is growing in interest. This campaign raised $14,000,000. Though they won’t disclose exact numbers, the queen bees claim they are still buzzing and in the black.
The coolest cooler was a super cool Kickstarter campaign that came in at over $13.000,000 raised. The cooler boasted bluetooth and a blender among other things. Investors received a cooler for their donation toward the cause.
This one did run into some trouble when it wasn’t able to deliver investment rewards as quickly as promised and there was actually a lawsuit. In the end, everything worked out and everyone got their rewards.
The cool gang at CoolestCooler says they are glad to put that behind them and get back to work. You can still buy one today, and it is definitely cool.
Kingdom Death Monster 1.5
Yeah, you read that right. What do you say to that? Well, apparently a lot of people said yes. They said yes to the tune of $12,000,000 on Kickstarter.
It’s a board game, if you are wondering. It did take a while to get the ball rolling, but investors finally got their copy. After production stopped resale values went upwards of $1,000. A later campaign promising updated material did just as well. Seems like a lot people love horror games.
BauBox Travel Jacket
This jacket was set to be hot with 10 different go-go gadget like design elements like a drink holder and a neck pillow. They raised over $11,000,000 across 2 campaigns. While it had a bumpy start, including the jacket being available on retail sites before investors even got theirs, it is still selling today.
What Puts the “Epic” in Crowdfunding Campaigns?
While there is never a guarantee, there are a few things that most campaigns that reach epic status have in common. These things don’t guarantee success, but they can usually help you get over any bumps in the road if you also have a great business idea and everything else in place.
Without further ado, here are out top tips for hitting epic status with crowdfunding campaigns:
Research. Let Me Say That Again. Research.
Don’t jump in blind. Know how deep the water is and how many rations you have. While you aren’t taking a hike, you are taking a risk. Risks are risky by nature, but you can still bring a life preserver and plenty of food.
Make sure you can meet demand. Know your market. Find out how much you actually need before you set your goal. Many a well-meaning entrepreneur has kicked off a campaign only to find the demand isn’t there or their goal fell short of what they actually needed to get started.
Have a Prototype.
If you are selling a product, have a sample to show investors. This is key. People are much more likely to jump on board if they can actually see the ship. This one is so important that Kickstarter actually requires you to have a prototype to show backers.
Choose the Right Platform for your Audience.
Once you know who your target audience is, you can decide if you would be best served by Kickstarter, Indiegogo, or some other, lesser known yet equally successful platform. If your audience doesn’t frequent the platform you are on, it won’t matter how great your idea or product is. They will never see it.
Offer Fearless Rewards.
But be sure you can deliver. What do I mean by fearless? I mean don’t hold back. Don’t give away the company. But if someone one is going to help you get started, they deserve something pretty epic themselves. Go beyond a thank you note. Be fearless with what you offer as a reward for their support.
Setting attainable goals is absolutely necessary to success. Make sure you crunch the numbers with actual facts before you set a fundraising goal. Make certain you have production facilities on the line that can meet the timeline goals. Don’t set random goals with no clue what it will take to reach them, or if they are even realistic to reach.
Your Marketing Materials Must be Fabulous.
You can’t just throw something together. If you do a video, it needs to be professionally edited. Any social media needs to be specifically geared toward your audience. If they are a cheesy, campy audience, then that is how your social media and videos need to come off.
If they are an audience that is too cool for school, your campaign needs to be as well.
Do Epic Crowdfunding Campaigns Guarantee Success?
In a word, no. If you don’t have the other pieces of the puzzle in place, it doesn’t matter how much you raise, you won’t be able to make a go of it. Meeting your crowdfunding goals certainly helps however.
Just be sure you can meet expectations. If you make promises to investors, keep them. Get your arms around how long it will take to deliver and don’t promise anything any sooner than you can actually handle.
If there are problems, address them like a professional. Communication with investors goes a long way.
Have a Back Up Plan
Now, what if you do everything right and it still isn’t enough? This is where having solid business credit comes in. If you need to bridge a gap between your crowdfunding funds and capital needs, a good old-fashioned working capital loan can get you there.
They aren’t easy to get however. You need to be working on your business credit now so you will have it in place when needed. Get a business name, incorporate, list the business in the directories with its own phone number, and pay your bills on time.
This will ensure that in addition to epic crowdfunding campaigns you also have epic business credit. That can lead to epic success.