Crowdfunding, or convincing an audience to support your business with their own money, is frequently regarded as the ideal solution for raising money for a start-up company. The market has grown from $2.7 billion in 2013 to $16.2 billion today and is expected to generate over $100 billion by 2025. However, this does not imply success. Kickstarter, with up to half a million campaigns the biggest crowdfunding website, states that only a third of its published projects have reached their goals.
Three Ways of Crowdfunding
Donations in return for a reward (product) form a concept today, but a crowdfunding campaign can also help small business owners to organise equity or debt investment. The latter is known as peer-to-peer lending or crowd lending, while an equity-based campaign gives the entrepreneur an option to put some of their own in the company up for sale to acquire the needed funds. The very nature of campaigning for equity makes it a considerably more involved fundraising approach than any reward-based campaign; a company seeking sums higher than $50k must have achieved social proof and gained enough traction to incentive their backers with the chance to own a piece of their company as it grows.
Your Followers and You
No matter what, for attracting and intriguing donators it is essential to do the required homework. The majority of investors want to see the result of their contributions; this makes that successfully funded projects must offer a tangible end product (in technology, games or design). Remember that crowdfunding has a short window of opportunity, so creating buzz is essential. Do not expect to build momentum without your existing advocates. For instance, both rock star Amanda Palmer, as well as The American Cancer Society have done a great job of using storytelling, while campaigning allowed their peers to play a more active role in their fundraising efforts. Consequently, do not launch a campaign without planning to communicate results: Investors want to know how their contribution made an impact; this may be a great way to build brand awareness.
How to Organise Your Campaign
Those opting for crowdfunding must demonstrate a keen sense of marketing know-how since most of the relevant websites often dismiss the entire funding when the vendor fails to achieve its target. Nevertheless, reward-based fundraising is an attractive option for thousands of small businesses or creative projects. While the goal is to tell a story that resonates with their audience, every successful campaign implements three things:
— The first part of a pitch is to identify a painful problem or to address a specific and severe need.
— Once the audience acknowledges the problem, the entrepreneur can present the product or service as the one-and-only solution.
— The bigger the market, the more the potential value of the company is, and the more enticing the opportunity becomes for backers and investors.
Eat the Frog and Plan It
To increase your chances of success, you should start weeks, if not months in advance with your pre-campaign, establish your presence before you start asking for money. Author Ferdy S.G. Dumel’s Pandora’s Matryoshkas campaign established over a million Twitter views in one month still it fell short. Do not neglect any media channel, gain as large of a following, and potential backers, as possible and stay active. Engage with your audience, keep people up to date about your progress and show them what their money will get them, out of sight is out of mind so make sure to remain visible.