The harsh truth about crowdfunding

By Joel Burke, Thinking about raising money through crowdfunding? Stop. Seriously, stop.

In the last few years, the buzz around crowdfunding has grown to a roar, and many small business owners see it as the key to easy money and huge growth. Here’s the truth: crowdfunding can help you grow your business and make money, but most crowdfunding campaigns fail and there is no such thing as easy money.

5 Harsh Truths That Will Make You a Better Person in Life
Most successful crowdfunding campaigns are built off the backs of friends, family, really cool products and a cause everyone wants to support. If you can’t get 30 percent of your initial fundraising goal pre-committed to your campaign through your personal connections, don’t even bother starting, because you are most likely to fail.

Since the inception of the two big names in crowdfunding, Kickstarter and Indiegogo, there have been many projects that have started and failed because they did not understand a few simple rules.

First, identifying financial support through other resources – 30 percent of your goal is suggested – sets the stage for a successful crowdfunding effort.

Second, you need either a really cool product or an objective people are willing to help you achieve. This could mean that you are going to start selling headphones that don’t tangle or achieving world peace; either way, keep in mind there is no guarantee of success.

Third, you have to understand that sites like Kickstarter and Indiegogo have turned into pre-order engines rather than crowdfunding sites in a traditional sense. The most successful projects are the ones that are selling their own product. If you are unable to do that, think long and hard about starting a campaign.

One more bit of bad news before we get to the good stuff: Crowdfunding is really hard work. Every single day of your campaign, and some time before and after it, you will have to be working to get the word out, develop campaign materials, try to get press coverage and find donors. It will undoubtedly be a full-time job. If you think that you can just sit back after creating a campaign and watch the dollars come in, you are going to be sorely disappointed.

Now here’s the good news, you might not be able to raise money easily through crowdfunding, but there are still plenty of ways to get funding. Traditional fundraising methods will always be a small-business owners’ best bet, with getting a traditional SBA loan and using your own savings being the most prudent option. For any questions on how to go about getting a traditional loan or finding other funding options for your business, please visit the Nevada Small Business Development Center or visit nsbdc.org.

Joel Burke is a marketing intern at the Nevada Small Business Development Center in the College of Business at the University of Nevada, Reno and a small business owner.

http://www.rgj.com/story/money/business/2014/05/29/unr-business-column-harsh-truth-crowdfunding/9743067/

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