You may be considering crowdfunding to seed a business you’ve always wanted to launch, test the market for your idea, or create an initial base of customers. If you’re reading this because you’re tempted to crowdfund but aren’t sure what it’s really about, the most important thing I can convey to you is that crowdfunding done right is about connecting. It is about building a relationship with other people who want to see your idea succeed. In order to do that successfully, you’ll need to compellingly explain who you are, why you’re launching this business, why you’re turning to crowdfunding and most importantly, acknowledge and validate the people who help you move your dream forward.
My goal in this article is to provide some inside know-how while shifting any presumption that crowdfunding is about a quick pickup of cash. Don’t get me wrong, it is great that crowdfunding affords an equal opportunity for anyone to access money without needing a traditional investor. It is powerful that the Internet can put an end to the concern that an entrepreneur has to face rejection if she doesn’t have enough cash or the right network. But what crowdfunding really affords an entrepreneur is, the ability to make new connections online and to see those relationships deepen during and after the standard 30 days of a crowdfunding campaign. So crowdfunding should be entered into for what it is – the beginning of a relationship.
Platforms want you to want them
You’ve got to decide which platform (Indiegogo, Kickstarter, etc.) to marry before you even begin thinking about your relationship to funders. Far too many people undervalue the competitive nature of crowdfunding platforms. There are thousands of platforms and only a handful that are meaningfully competing. That means that the big ones really want your business. Use it to your advantage. Don’t launch a campaign without getting in touch with someone directly at Indiegogo, Kickstarter, Tilt, wherever. They have staff who are trained to help you be successful. Compare platforms. Ask what product advances they’ve made, and why, within the last quarter. Ask what kind of support, in detail, you’ll receive during your campaign. Ask for review of your project page, your video, your rewards. And you can and should ask for promotion by the platform. You’ll need to do the heavy lifting described below, but if you hit 30% or more of your goal in day one, they should be helping promote you. Ask for it. Your hard work and successful campaign will make them better off, so get a hand from the people who know the game.
It’s telling your story
The first thing you’re going to do when you pull together your crowdfunding campaign is tell your story in a compelling way. You’re selling. You’re persuasively communicating your story to potential backers around the world, and a crowdfunding campaign stays online forever. A typical crowdfunding page will include a video, photos, text and rewards for backers. Each component is an opportunity to communicate your vision in a way that immediately grabs the attention of someone who cares about the same thing. So even the process of creating these elements is a remarkable opportunity to examine and perfect your story. If you do this right, in the end you’ll have a dynamic business plan that even the busiest, most impatient viewer can digest, and that person will be faced with some specific choices about how to help you, right on the spot. They’ll either choose a reward (give you money), share the page with people they know, or leave entirely. Your job is to make them do the first two things. Preferably both.
So give yourself a couple of months to nail your story, your video, your rewards, and then share a draft of your campaign page with about 10 people you trust. You’re connecting with potential backers from the beginning, and that ongoing connection is where the great stuff happens.
It’s knowing who cares and caring about them in return
A friend at Kickstarter once said to me that when someone about to launch a project asks him where to set their financial goal on the project page, he reframes the question and asks, “how many people do you want to be talking to about this project?” That’s the right approach.
Once you’re clear on your story, you need to research your broader audience, beyond friends and family. Who cares about this story? Where do they consume their information? Start segmenting your audience, be exhaustive about it, list every blog, social media account, media outlet, influencer and organization that maps topically with your idea, dump it all into a spreadsheet and find a contact everywhere possible. Email journalists who cover subjects related to your idea. Provide them with an insight and offer your information. Build these relationships far enough in advance, and don’t forget to offer something in return. If you don’t have a contact, you can take advantage of direct messaging in social media and start building relationships. Think in terms of community, not customers. Notions of brand loyalty are built early on, so communicate in a way that makes the person with whom you’re communicating feel valued and acknowledged.
Don’t forget your roots. Speaking of valued relationships, don’t make the mistake of sharing your live campaign page with people you don’t know before you share it with your actual friends and family. A rule of thumb is that campaigns that raise 20% or more in day one are over 80% more likely to meet their funding goal. So set a goal of $100,000 only if you know that your close circle will get you to $20,000 on day one. I like to hit 30% in day one and have found that campaigns we’ve run that hit 30% in day one usually over-fund within the first week. A crowdfunding campaign is like a house on the market: as days pass without buyers, other potential buyers pass because they assume something has gone wrong. So hit your funding goal quickly to avoid any misconception about the value of what you’re creating.
Keep your promises. Some people make promises they can’t keep when running a crowdfunding campaign. This happens, most times, out of carelessness. Think through the cost of each reward carefully. Research fulfillment partners to find the best quality and prices. Research sales tax per item. Add a buffer for platform fees (roughly 5%) and payment processing fees (roughly 3%). Make sure the cost of the reward is more than covered by the price of that reward so that, in the end, you’ve cleared enough funds to actually move your business forward. Wherever possible, include mostly digital rewards so that you can keep the monetary and opportunity costs of fulfillment low. For example, offer a PDF instead of shipping a poster; a digital playlist instead of your buddy’s cool idea that you send a retro mix tape in the mail; a Skype session instead of an in-person meeting. An exception to this is that the t-shirt remains a very popular crowdfunding item and plenty of companies will simply design and ship them out for you, directly to backers in some cases.
It’s checking in with those who care
My favorite part about crowdfunding is the ongoing input we get from backers during every campaign. Through analytics tools, you can see where your new customers are coming from internationally. You can see which rewards they favor. You can see how many people they’re referring to your project (depending on the platform you use). Your assumptions are challenged, and you have the opportunity to adjust. For example, when I was helping a client with a product design campaign recently, we first assumed that backers would want one product per customer. But during the campaign, schools asked for class packs. We faced the decision of making adjustments in real-time (and facing a fulfillment challenge) versus factoring the data into longer-term partnership planning (e.g. might a big brand or organizational partnership handle shipping in bulk on our behalf?). Either way, we sent videos and comments back to our community to acknowledge their needs and suggestions and created a feedback loop. On some platforms, you’re able to immediately observe customer behavior and match it with personal information like names, addresses and social profiles. As someone who used to conduct focus groups and surveys for a big brand, I’m astounded at the statistically significant data and qualitative feedback that can be gathered from a simple 30-day campaign. It’s one reason that companies like GE are testing products through crowdfunding and saving millions of dollars in the process.
Update your backers on your progress at least twice per week during your campaign, and don’t stop checking in once the campaign is finished. Stay in touch as your business develops. Share good news. Even share set-backs. People who funded your campaign are your earliest supporters and should be treated with gratitude and honor. You’re in a relationship now. Don’t leave your new friends hanging.