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Perhaps one of the biggest changes to happen for business in the last decade has been the rise of crowdfunding, there are headline grabbers like Oculus VR and the Veronica Mars movie for example, but the Kickstarter site is littered with projects that would just astound you. Last year, for instance a small company from Nottingham in the UK raised over $1 Million for a tabletop game. Let that sink in a minute, 1 Million US dollars in one month, for a game, and one in a very niche market as well.
So, there are plenty of examples of businesses of all types raising funds for all types of projects through crowdfunding, but there are many who fail to reach their targets, the question is, given the proven potential of the idea, how do you make sure that your business achieves its aims through crowd funding, in short, you want to know how to run successful crowdfunding campaign.
I want to take you through a few of the more effective ways to deal with a crowdfunding campaign, but perhaps it is best to start at the beginning for anyone who is not familiar with the concept and is currently asking ‘what is a crowdfunding campaign?’
A crowdfunding campaign is the process of obtaining funds for your business project via one of the many crowdfunding platforms. Crowdfunding is simply the name given to obtaining investment for your product/business/project from numerous small investors from the general public, rather than traditional investment avenues such as financial institutions or large investors looking for control or a sizable chunk of your business in return. There are many platforms, the most well-known and well established is Kickstarter, with Indiegogo amongst others rising in popularity. All platforms have pros and cons, from the charges, payment structures to the basics of the campaign itself (they can differ fundamentally in what happens if you do not reach your targets for instance).
Fig 1: You may target a specific type of person with your campaign, but the snowball effect of word of mouth on a platform can bring money in from all sorts of people
So, we now have the idea of what it is, and you have a great idea for your next business project, so let’s take a look at how to run successful crowdfunding campaign that will let you reach your goals.
1. Research – This is the number one point for any crowdfunding campaign, and there are several points of research to discuss.First is the research on project viability, you need to do some market research either through your existing customer base, or within your niche communities to see if your idea can attract enough interest. This can be difficult with your pet project, most of us do not like to hear that our idea is simply unpopular, but it is far better to find out before launching a campaign than during it.
Second here is the research on your campaign itself. You need to ascertain which platform best suits your project, are the fees and payment systems suitable? Are campaigns in the same field doing well on your chosen platform? Is there enough people on the platform for organic growth beyond the marketing you have? Choosing the platform can be as simple as picking the most used one (Kickstarter), but it is possible there is something better suited to your needs.
Third is the progress of your campaign, such the number, type and placement of stretch goals to maintain interest of your backers, your interaction with the backers and so on. To do this you can view projects in similar fields to yours, and here it is just as important to look at those that failed as it is the successful ones, knowing what to avoid is as valid an important a research as seeing what does work. Build up a picture of what does and doesn’t work during a campaign and build your plan of action around success.
Image Courtesy ::tfour.me
2.Finance – You need to have a very clear picture of the financial side of your campaign before it launches. How much you need as a goal, what you can afford as stretch goals and so on. But it is also vital to have the financial aspects of what happens after the successful campaign ends fully planned out too. What you have to remember is that people have given you money directly, and they will expect to see progress fairly quickly afterwards, depending on the project this could be product for the backers or similar, it is amazing how often a campaign ends successfully with the entrepreneur sitting with a pile of money and the project and no idea how to turn the former into the latter. Make sure you have an implementation process ready to go once you are funded, and keep the backers fully updated on all progress.
3.Presentation – Another pre-launch essential, you need a well written, clear description of the project, you don’t necessarily need to publish an FAQ, but writing one in preparation for all the questions can make it easier to respond to the common ones in a timely manner. You also need a great video. We live in a visual world, having a quality presentation video that will engage your potential backers is an important step in the process. This idea if presentation can also extend to your promotional campaign, social media is a great way to spread the video or other visual marketing tools to get your project out to your target market, a unified and professional campaign is essential to attract people prepared to give you money. One of the best tips on the structure of the campaign is to tell the story, describe the project or product fully to get the prospects interested and invested before you mention the cost part of the equation at the end. In short, tell them what it is and make them want it before you ask them for the money for it.
Fig 2. Before you start – everything needs to be in place before you launch, accurate budget, fully completed project design, marketing campaign
4.Maximizing Pledges – In tandem with the presentation is the need to ensure you get people to pledge as much money as possible. Ensuring that what they get in return for their money is clearly laid out is an important part of this, but the essential one is to carefully structure the pledge levels so that the next one up for just that bit more money seems to give greater value, all the way up the scale. You won’t get maximum pledges from all of your backers by any means, but if structured correctly, you will skew towards the middle/upper range of pledge levels rather than the lower. The same ideas can be used for stretch goals, optional purchases that seem better value than the original pledge can bring in further funds and be marketed as a thank you for the backers enabling both more funds and increased back satisfaction.
5.Communication – More than anything else during the campaign, this is the key to success. Once all the preparation work we have discussed is done and the campaign is launched, with your promotional efforts bringing people to our campaign they will either want to back it or they won’t, there is little more you can do to change this aspect by the time the campaign is live. However, lack of communication or poor communication can actually make people leave your campaign, taking their money with them, and this is something you really want to avoid, engage with your backers, keep them informed, and importantly, communicate in a friendly manner. Have your team use first names, let the backers get a feel for the personalities behind your campaign, if backers are connected to you as people, they are more likely to stick with you and even spread the word.
6.Promotion – This is something that is oddly neglected during a crowdfunding campaign, often because everyone becomes so wrapped up in the targets, stretch goals and so on they sort of take it for granted people will find them on Kickstarter or whatever platform they choose and forget they need to market the campaign as with any other aspect of your business. A unified campaign for pre-launch and a continued and strong promotional strategy during the campaign is essential for success. The nature of crowdfunding lends itself very well to all forms of social media promotional strategies, crowdfunding itself is really an offshoot of the social media trend, choose the social media that reflects your project demographic best of course, but don’t stop promoting.
7.Duration – This one is really part of the planning phase but it deserves a spot of its own. Most platforms allow you to tailor the campaign length from a few days to a couple of months and even longer. However, what we can see from analysis is that for most campaigns, 30 days should be the maximum, primarily because people get bored, or find something else to spend their money on if you go too long and you tend to see a drop off of funding as people remove their pledges as time stretches on past the 4 week mark. It may still be suitable for certain projects, but for most of us, shot and sweet is definitely the way to go.
8.Community – We touched on it earlier in the communication advice, but this is the key difference between traditional funding and the crowdfunding model, you don’t just get an investor, you create a community around your project. This may seem like a sideshow, but for long term success it is one of the most important aspects of the crowdfunding medium. Your first campaign creates a community around you as a business and your project. You keep those people happy and you deliver on your promises, making a successful project and hopefully some profits for you. What happens on your next project? A lot of those people will already be there ready to back you, why wouldn’t they if you gave them what they expected and it all went well? Now you are not starting from scratch, you have a community to help spread the word, that isn’t just free marketing, it is people paying you to market your project! Some projects can catch the imagination of a demographic and take off instantly and be a massive success (Occulus VR for instance), but most take hard work to build an audience for steady growth. The beauty of crowdfunding is that you can build an audience who will back you and promote you, and if you run your campaigns right, that audience will grow with you.
9.Staff – An odd one perhaps, but do not underestimate how many people you will need to run the campaign effectively. It does depend on the platform and field your project is in, but the crowdfunding platforms are a global thing, and as such there will be questions and comments from a variety of timezones as it progresses. If all goes well there could be a lot of backers to converse with, so making sure there are enough people to communicate effectively as well as run the marketing side of the campaign and so on is important. Getting friends and family in to help do the more menial tasks for you is a good idea if you are doing this alone or with a very small group, a pre prepared FAQ can allow people with only a rudimentary knowledge of the project to answer most questions in a personal manner that pleases the backers.
10. Finish Strongly – One of the peculiarities specific to crowdfunding is the ‘negative growth’ as the project nears the end of the campaign. What can happen is that people get cold feet, decide to go with a different campaign or simply don’t like what your stretch goals and so on offer and cancel their backing. This can be an issue towards the end of the campaign (hence the advice to keep them short) with campaigns seemingly fully funded falling below their funding requirements as they fail to deal effectively with people leaving the project. Key here is to understand why people are leaving, and taking steps to deal with it. Being proactive is essential in all aspects of managing a crowdfunding campaign, but here in particular it is vital, altering stretch goals or other enticements to keep the backers engaged can have a huge effect and is well worth doing.
So there you have a few tips for successful crowdfunding , and hopefully we have got you thinking about the possibilities for your next project, it really is the best time to be an entrepreneur, the options available to us can, with hard work and application, enable us to achieve anything.