We already presented the concept of crowdfunding on this blog as a new way for entrepreneurs to present their business projects to a large pool of potential investors.
Today, we will discuss how you can launch your own project on one of the existing crowdfunding platforms.
Where to start?
The first step would be to decide where you should preferably submit your project: the two current main sites these days are Kickstarter and Indiegogo. Each one presents its distinctive features and benefits, which should be carefully considered before going ahead.
Kickstarter offers a greater success rate for funding your project: 44% compared to only 9% on Indiegogo. However, its rules are a lot stricter: for instance, only entrepreneurs from the US, the UK and Canada are eligible, and certain company types, such as non-profits, are excluded. Projects are submitted to a rigorous approval process, and many projects are plainly refused. Another important fact: if the funding goal of the project is not met, the entrepreneur does not receive any money.
Some interesting Kickstarter statistics: over $800 M has been pledged by investors, over 12,000 projects have been launched on the platform, including over 5,000 successful ones. The overall worth of successfully financed campaigns: $700 M. To put it in no uncertain terms, Kickstarter is the main driver in the crowdfunding movement.
Indiegogo has a much simpler submission process. In counterpart, it means that many more projects are competing against one another at any given time. After the funding campaign has ended, investors can choose to cash in the amount pledged by investors, whether or not the funding goal has been met.
The Indiegogo platform launched over 44,000 campaigns, and over $100 M were invested in successful campaigns.
In order to see your project accepted on a platform like Kickstarter, you must have a solid business plan. Your project must be very well described, and its relevance must be clearly “sold”. Another important step: establishing a funding amount, as well as a schedule to meet this funding goal. Finally, you have to come up with different financing options along with “rewards” that are proportional to the amount pledged, in order to attract investors. For instance, you could determine that for $25, an investor would obtain a t-shirt with your logo, while for $60, the investor would rather receive the finished product.
Here are a few additional tips:
Remain careful and realistic
The amount you want to attain on a crowdfunding platform has to be very carefully analyzed. It’s better to keep a realistic goal and extend it than to miss your funding goal altogether. Don’t, however, underestimate the necessary investment. Many entrepreneurs struggle to meets their commitments once the goal is attained, because they did not vigilantly assess the scope of the project, the delays, the shipping costs, etc.
Involve your network
If your company already has a social media presence, make sure to get your project known to as many people as possible, by encouraging their participation. Announce the crowdfunding campaign ahead, and assess the interest of your network. A strong network will “work” on your behalf during the campaign, for instance by talking about your project. Indeed, the underlying principle of crowdfunding sites is that the more potential investors you score, the more popular your project becomes, and the more visible it will be made on the site.
Consider the visual aspect
How can you stand out, when there are so many projects on these platforms? First by presenting an interesting and innovative product, obviously. But, in this constantly connected, image-savvy world we live in, it is not usually enough. Successful projects also all have something on common: an impeccable presentation.
It is therefore crucial to prioritize this aspect: you should produce an interesting, professional-looking overview video for instance, as well as use appealing music and several high-quality photos. If this is not your strong suit, hire people to help you. It can make a huge difference.
Crowdfunding represents a new opportunity for entrepreneurs. Even beyond the financial aspect, this new way of doing business procures a direct validation of the potential market for your product. Furthermore, since campaigns often represent pre-orders, entrepreneurs can benefit from this information in order to assess the viability of their project.
Google confirms that 2014 really was the year of crowdfunding, when it comes to the volume of searches on the topic. Indeed, the number was multiplied by 21, compared to 2013.