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How to Use Kickstarter to Fund Your Small Business

Published By Janet Gershen-Siegel at November 25th, 2018

Incredible or Infuriating? Is Kickstarter Right for Your Business’s Funding Needs?

Do you know how to use Kickstarter to fund your small business?

Crowdfunding with Kickstarter has become popular and that’s not surprising. It’s (normally) free money which you do not have to repay. And you can get these funds without needing to give up any ownership or control over your startup company.

Plus it can help you to assess the level of popularity of an idea or a prototype or invention. Since there is no sense in continuing if there is no interest in your design.

You will have to make a lot of choices before you even launch a business crowdfunding campaign.

Use Kickstarter to Fund Your Small Business: How much?

Your very first decision should be: how much do I need to crowdfund? If you need $1 million, you are going to need to crowdfund more than that. Why? Because that is how Kickstarter makes their money. They take a portion of any money you can raise.

Thus, you will have to take that into consideration.

Fees

Here is their fee structure:

  • 5% fee on all funds collected for creators
  • Stripe, their payments processor will also apply payment processing fees (roughly 3-5%)
  • Campaigns that don’t make it don’t pay a fee
  • There are also fees of 3% + $0.20 per pledge
  • Pledges under $10 have a discounted micropledge fee of 5% + $0.05 per pledge

Use Kickstarter to Fund Your Small Business: Will I succeed?

Another decision concerns how successful you feel your campaign going to be. If you are super confident that you will be 100% funded by the end of your campaign, then traditional funding is for you, and that’s right up Kickstarter’s alley. They don’t have a flexible funding option.

Use Kickstarter to Fund Your Small Business: What should I offer for perks?

Yes, you will need to offer perks to your donors. Perks can take a number of forms – buttons, tees, book marks. Every one of those is a possible tangible perk. Consider a perk format which can dovetail with your startup.

If you sell homemade jam, then maybe develop an exclusive flavor just for the campaign, and provide bigger and bigger-sized jars depending upon donation amount. For a horseback riding stable, offer a complimentary lesson or a postcard with a cherished horse’s picture on it, or the like. Does your business flip houses? Then think about providing a discount coupon to a local home supply company or something like that.

But Virtual Perks May Be Better 

Pro tip: tangible perks are a pain! A lot of people love them, and they will stand out. But they also must be delivered. International shipping is remarkably expensive, even for small items.

So if you offer physical perks, specify if you will permit international donor addresses. Even if everything has to be shipped in the US, you are still left with dealing with a database of names and addresses and typically a selection of available perks. Who wanted what? What if a perk is lost or damaged in the mail?

For this reason, if you can do it, try for online or virtual perks. For a house flipping startup, you might possibly record videos about home decorating or repairs. Are you a bakery – you could supply downloads of recipes. And for a health spa, maybe offer electronic coupons for a cost-free month of membership.

Use Kickstarter to Fund Your Small Business: Your Campaign

Your campaign’s effectiveness is far from assured. However, you can benefit from a few known approaches. First off take into account these four feelings that you want to engender in donors. Use one or more of them as the centerpiece of your campaign as a starting point.

Urgency

The very first two and final two days of a crowdfunding campaign are nearly all the time the days with the biggest payoffs. Often, prolonging the campaign doesn’t make you substantially more money.

So why not open a campaign for just a week? Don’t let donors believe they can chip in any old time they feel like it.

Scarcity

If you have thousands of something or other to supply as a perk, it won’t be as desirable. If you only have one or two of a certain perk, that will produce an emotion in some potential donors that they simply need to have it.

Do this with your larger donation levels only. So you might want to set up a perk/donation level scheme similar to this:

Donation Level

Number of Perks

Lowest

1,000

Second lowest

500 (reward also incorporates lowest level reward)

Second highest

50 (reward also includes two lower level rewards)

Highest

10 (reward also includes all other levels’ rewards)

Remember: a great deal of variety in physical perks will make fulfillment a lot more challenging, so don’t work with greater than perhaps five separate varieties of physical perks – and even that is pushing it.

Demolish your funding problems with 27 killer ways to get cash for your business.

Novelty

If you are supplying the very same thing as a thousand other sites, nobody will want to make a donation. Your widget should be lighter, hotter, cheaper, or more long lasting. Your food needs to be reduced in calories or higher in nutrition or better-tasting.

Or your services have to be provided better or faster, by friendlier and more skilled employees, and with a money back guarantee your competitors doesn’t offer.

Cool factor

Is your product a form of art? Is it a brand-new, gadget-like innovation? Then it may well have a coolness aspect which you can develop your campaign around.

But do not be discouraged if it isn’t! Today, some of the most remarkable ad campaigns are based around a product the majority of people found boring not ten years ago – insurance.

Use Kickstarter to Fund Your Small Business: Strategy

Here are a few words on strategy.

Pitch Videos

Your pitch video should be great. Use a specialist to film it and develop the script. Can’t afford professionals? Then try schools, both pupils and instructors. Your script doesn’t need to be word for word but you ought to have points you intend to make and not prattle.

Create a script and stick to it. This is not the time to wing it.

Show Proof of Concept

If you have tangible substantiation of your project, then show it in your campaign video presentation and on your campaign webpage. This means a picture of your health spa’s sign or a short video recording of your prototype robot.

A number of people are understandably skeptical about crowdfunding. A picture and a substantial thing will go a long way to assuring them that your project isn’t vaporware.

Demolish your funding problems with 27 killer ways to get cash for your business.

Your Mother was Right

Good manners matter. Say please, thank you, and you’re welcome to everyone. Use these magic words in your pitch and in your interactions with your donors, and even in the cover letters you deliver with your perks. This is because even online perks can come with a cover email.

You don’t need to grovel, but you certainly must be diplomatic.

There’s No Need to be a Pig About Things

Don’t be greedy! If you need $250,000 for your campaign, but call for $1,000,000, that won’t do anyone any good. You’ll just look like you wish to bum off other peoples’ generosity.

Instead, account for your overhead as clearly and transparently as you can. And by the way, if you misuse your funds, you may find yourself in an uncomfortable meeting with your state’s attorney general. So be honest!

S-t-r-e-t-c-h!

Your stretch goals should be a combination of easily attainable and pie in the sky. If you are crowdfunding for $100,000, a fairly easy to achieve stretch goal is $125,000. Pie in the sky money is more like $300,000.

Make it abundantly clear what you will do with any additional cash if you are fortunate enough to receive it. Will you acquire the building your startup is in? Employ five more people? Replace aging equipment? Open up a brand new market on another continent? Let your donors know what you are striving for, so they can dream with you.

Your Mother is Still Right

Be gracious if your campaign falls short. You may not receive enough to make a significant dent in your funding needs. If you wanted $100,000 and you just got $500, your best option is to simply return the cash. If you nearly got there with $95,000, then see if you can make up the shortfall another way – because Kickstarter will make you give it all back otherwise.

And say thanks to every person who donated and see what you can possibly do, although there’s a deficiency. And let them know what you’re doing!

Maybe you’ll buy your building next year, or hire four people instead of five. Once more; give your donors a stake in and an inside look at your startup. This will help them to feel invested.

And they might just decide to make up the shortfall themselves. Even if your crowdfunding campaign concludes doesn’t mean a donor can’t write a check or buy additional goods or services. If that comes about, then politeness is crucial.

Get Your Ducks in a Row Early

Line up the most significant and most trustworthy donors you can before you get started. Tell them to hold back on handing over their donation until you start your campaign. And ask them (nicely!) to pledge their donation at a very precise time. Which time? It’s the first or final day of the campaign. Divide the expected funding as well as you are able; if the division isn’t close to half and half then request the larger amount of donations to come on the final day of the campaign.

Take advantage of the novelty factor of the very first day of the campaign, or the urgency factor of the very last. Much like a busker with a few of her own bucks in her hat, to urge people to throw a few bucks for a song, you want your biggest donors to show other donors that they have confidence in you and in your project. And you also want them to suggest your other donors that they had best get in on investing before the opportunity ends.

Demolish your funding problems with 27 killer ways to get cash for your business.

Sharing is Caring

Share your campaign on social media sites and ask your family and friends to do so, too. Tweet the link. Add it as a Facebook status. Turn it into a Tumblr blog post or a snap on Snapchat or write a blog post about it.

Ask your network to spread the link. The best means to get your network to help you out is by helping them in return. Be a collaborative member of your very own personal network, and your network will be more likely to help you out when you ask.

And repeat these social media postings. Take into consideration time zones and our all-too busy lives. People might not notice your message the very first time around. Mix it up and deliver it at odd hours (you can usually use scheduling software like HootSuite for this), including what is the middle of the night where you live.

Use Kickstarter to Fund Your Small Business: Takeaways

Lastly, if your startup crowdfunding campaign succeeds, think about donating a couple of dollars to other peoples’ campaigns, or at the very least to charity – because business goodwill and a good reputation are invaluable. Discover this new way to use Kickstarter to fund your small business.

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