Ask any start up entrepreneur and they’ll tell you the same thing. It’s about money. Since the dawn of capitalism, venture capital was the only way to go for a small business in need of funds. Friends, family, savings, borrowing (and the wolf in sheep’s clothing, the angel investor) were the mainstays of raising money.
Most of these methods had more than a double-edged sword. These methods are a financial guillotine, ready to cut the equity, control and profits from any business owner who lacked the experience of managing fund raising. Enter into any venture capital deal and be prepared to give up some or most of your company. Angel investors, like venture capitalists, like to see a grand slam at the end of the game, whether it is a public offering or your business getting acquired by another company. Many passionate visionaries give up running their enterprise before they’ve seen it mature and explode.
Thanks to the advancements in technology and social media, the crowdfunding concept has become the modern version of the old fundraising model of venture capital. In fact, crowdfunding has exploded.
Figures from CF 2015-Crowdfunding Industry Report Global, showed that crowdfunding experienced accelerated growth in 2014, expanding by 167 percent to reach $16.2 billion raised, up from $6.1 billion in 2013. In 2015, the industry is set to more than double once again, on its way to raising $34.4 billion. It’s a booming industry, indeed, which also has a “war chest of money” up for the offering, but captivating the backer’s attention can be highly problematic for the inexperienced. The more money floating around in the crowdfunding world, the more competition you face. How do you stay in the game without losing everything?
Why most crowdfunding projects fail Yes, there’s a treasure trove of money out there, but before you get too excited that people are going to start throwing cash at your crowdfunding project the minute it launches, take a look at the very sobering statistics of failure. More importantly, set yourself up for success by following the precise program my mentor and hundreds of his clients have used to roll out 5, 6 and 7 figure launches on an almost routine basis. Most…without even having their own product! More about that later… According to Kickstarter’s own stats, only 44 percent of projects meet their funding goal.
Of roughly 60,000 unsuccessful projects, nearly 40,000 failed to reach even 20 percent of their goal. Indiegogo even less forthcoming about its projects’ performance, though efforts to calculate its success rate from scraped Web data peg it near 34 percent. Professor Gordon Burtch at the University of Minnesota’s Carson School of Business explains that entrepreneurs face a lot of difficulties in the crowdfunding world. “Crowdfunding can be a useful validation of whether you have a viable business,” says Burtch. As an example, Burtch cites Pebble, which wound up receiving post-crowdfunding venture capital in response to its wild success on Kickstarter. He continued, “But if your crowdfunding campaign comes up short, your prospects for convincing VCs to invest will be very, very low.” Before we outline the correct process, along with the tools and resources you need, it’s important to know what causes campaign campaign failure. Here are 4 key components and the most commonly made mistakes:
1. Bad timing A campaign can really falter if it is launched at the wrong time. You need to know your market and time zone. They are two fundamental aspects. With Day 1 being crucial, you need to get off on the right start. There’s no point launching your campaign in the middle of the night – no one is going to see it. If you are looking to attract American investment, then Intuit recommends a morning launch, Eastern Standard Time, as this is when there is the most traffic and there are more eyes on the crowdfunding site.
2. Poor video quality Let’s be honest: Who on earth is going to give you money if your video promoting your product looks like it was shot by a five-year-old on a cell phone camera? You don’t stand a chance of being taken seriously. Put passion and charisma into your video. You’ll need an external microphone, good lighting and a tripod. This is not time for selfies, so hire a local professional to help you out.
3. You’re not targeting the right crowd You need to know your “crowd” so to speak. For example, there’s no point putting your campaign for your idea of a hairbrush that also happens to double as a bottle opener on Crowdrise, as that site specializes in dealing with real world issues, like animal welfare, education and tackling diseases not creative projects. You need to pick the right platform – one that works with your great idea.
4. Your overwhelming people with information In this modern day when people’s attention span is reportedly less than a goldfish, they need their content delivered to them in the simplest of forms. Too many campaigns fail because the information is just far too complex for people to get their heads around it. If it becomes a chore to decipher through your information, you won’t get backing. Keep the content simple and digestible, because remember, content is always king. So now we know what leads to so many campaigns failing, so let’s look at the factors that drive success.
The key drivers of success; Have your product ready There’s no point pushing your campaign out there if you’re still in the “ideas’ stage. People want results – especially when there’s money at stake. A prototype, an “it could be like this” is just not going to cut it in the cutthroat world of crowdfunding.
If you don’t have a product, or want to do a test campaign, click here for more information. Most of the successful campaigns are ones where the product being pitched is well advanced in the development stage. Most of the inventors of the products have put their own time and money into creating it.
They spent years and years and poured blood, sweat in tears into getting their product to the next level, including doing logos, packing, marketing, and distribution – all the necessary elements that create a brand. Investors want to invest in a brand, something that has a clear, definable direction, not something that has yet to really form from the creators head to reality. Backers want to back something that is legible, something that has a very real chance of working and becoming a success. One of crowdfunding’s biggest success stories, Pebble, demonstrates this notion of backing the winning ticket.
Developer Eric Migicovsky spent years using venture capital money to develop prototypes and generate industry press of his smartwatch. By the time he turned to Kickstarter for funding his product was ready to go (and also surfing the wave of hype of the Apple watch). His goals of raising $100,000 were met in a mere two hours. A week later, he had raised $5 million and was etched in history as one of the most successful campaigns ever. And the success story for Pebble continues: Their watches are on store alongside Apple’s new line.
So, essentially, it doesn’t matter if you have a million-dollar idea. Without the work needed to bring it to formation, it’s not going to attract pledges. You need a business plan, marketing plan, and a fully-fledged product that’s ready to fly off the shelf.
It’s all about the video As I have previously discussed, a slick clip is going to help you stand out from the overcrowded fundraising crowd. No one wants to see a poorly put together, blurry video that has been slapped together. If you can’t invest in your product then why would anyone want to invest in it?
According to Kickstarter, one of the top 3 largest crowdfunding sites, 13 per cent of campaigns never received a single pledge. Ouch! But one thing that has defined success from failure is a well-produced video describing the project or product. Those campaigns that have professional videos tend to 50 per cent more successful than those that don't.
The wildly successful Goldiebox crowdfunding campaign is a perfect example of how a good video really helps sell your idea. Founder Debbie Sterling used a video to tell her own story of growing up surrounded by dolls and being unable to find cool construction toys. She pointed out that not enough girls were entering high-paying STEM professions and pitched her toys as part of the solution.
“Our Girls Need Goldie,” read the GoldieBlox pitch, and investors bought in. That video went viral. Videos are imperative for crowdfunding campaigns as they give backers an inside glimpse into your product or proposal, allowing them to clearly see your vision. If people can see your vision, they will buy into it. If they can’t they’ll move on to the next campaign where what is being touted is crystal clear for all to see.
Tap into your social network to build momentum fast We live in a world where social media dominates and can essentially dictate success or failure.
For business, this rings true and social media is an imperative part of marketing a brand. For crowdfunding, this is the case, too. If you don’t let people know about your project, then they can’t share it and it sits and remains relatively dormant, with no traction. The idea is to create a buzz about your product or proposal early on and as previously mentioned.
Day 1 is key as it sets the tone for your campaign. Prior to launching your campaign, share the details on your social media and have your network of friends share it too. That way, you’re starting to create a fan base of sorts for your campaign. The more shares, the more likely you are to get backers quickly because your extending your ‘fan base” early on. One of the most-backed film campaigns in Kickstarter can attribute their success to creating this early buzz.
Veronica Mars writer and creator Rob Thomas appealed to fans of the show directly on social media asking for their help to fund the movie version. And help they did! More than 90,000 responded and the campaign eventually raised $5.7 million. Thomas and the fans got the Hollywood ending they had hoped for.
You too, can have a Tinsel town ending by aggressively utilizing social media to it’s full potential early on because about 80 per cent of campaigns that attain 20 per cent of their funding goal in the first few days tend go on to meet their target, according to Kickstarter.
Be realistic about your fundraising goals We’ve all heard of those crowdfunding success stories that raise millions and millions. There’s numerous reasons why campaigns like The Coolest Cooler turned into crowdfunding fairytales, but one thing that seems to be consistence with all the success stories, is the fact that the campaigns were only asking for modest amounts.
With a goal of $50,000, The Coolest Cooler an all-in-one outdoor entertainment solution that combines a 60-quart cooler, blender, wireless speaker, USB charger, and an LED lid light, raised over $13.2 million on Kickstarter. It seems the most successful crowdfunding campaigns seek less than $10,000 and the rule of thumb when it comes to crowdfunding is the more money you seek, the less chance you will have to meet the target. It should also be worth noting, that you don’t need to raise all your funds in one campaign. As your project develops, you can launch another campaign for another round of financing.
This is exactly what made Star Citizen the biggest success story ever.
The developers have been fundraising since 2012, convincing more than 800,000 backers to pledge a staggering $82 million through several campaigns.
"The big thing is the thing that we didn't do," Chris Roberts told Wired. "Most crowdfunding campaigns engage some people, convince them to become backers, and then the campaign stops.
We didn't stop." So heed his advice and don’t stop!
Timing is everything We’ve all had experiences in life of being in the right place at the right time and the same can be said for your crowdfunding campaign. An ill-timed campaign will fall flat on its face. A well-timed one will flourish and in some, instances, defy belief. Again, using The Coolest Cooler as an example, the first time, inventor Ryan Grepper’s idea was a massive flop, failing short of his $125,000 goal. The problem? It wasn’t the right time.
Grepper explained to GeekWire of the issue with this first campaign hat he launched in November, thinking he’d appeal to football fans and holiday shoppers, not in summer when people are thinking about water coolers. “It sounds obvious now, but launching a product when backers are most likely to be receptive makes a difference,” he said. Taking this onboard, Grepper made a few tweaks to his cooler design, created a slicker video and launched another crowdfunding campaign in July.
And it worked: 62,000 backers pledged more than $13 million. So when launching your campaign think long and hard about the market and time your launch accordingly. And think about when your product or proposal will get the most traction.
Timing is the key.
Focus on incentives People want something for their money and offering up rewards is a great way to get more traction, and more importantly, backers to your campaign. Campaigns offer everything from a free T-shirt, to a discount on their first order, to free upgrades to backers who pledge funds. The list of what you can offer is endless, so be creative. Creativity helped artist and musician Amanda Palmer, who was looking to raise funds to release a new album and art book.
She not only gave out a digital copy of the album with every $1 pledge, to her bigger backers, she also promised VIP tickets to her shows, private concerts, donuts and photo shoots. Palmer even offered a private dinner and portrait painting session with anyone willing to put up $10,000. Two people took her up on that offer. And it all worked for Palmer who managed to raise $1.2 million. Her original target? $100,000. According to Elizabeth Kulik, founder of ProHatch.
Articulate: “Rewards can be a powerful incentive that convert people to fund and support your project.” So get to thinking about what people really want and set about making their dreams comes true, and in turn, they’ll make yours come true,
The following pages contain the 63 most successful crowdfunding campaigns ever that will inspire you and leave you in awe.
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