You have a great idea for a business. You are smart, you are motivated and you are driven. But you’re only missing one thing: the money. So what do you do? Well, many fledgling businesses are now turning to crowdfunding to fill in the financial gaps.
Crowdfunding or setting up a “Kickstarter” campaign has quickly become one of the top new ways budding entrepreneurs go about starting their own company. It’s a quick (and seemingly easy) way to get the capital you need to get started – but it has become much more than that.
The name Kickstarter has recently becoming synonymous with crowdfunding, and with good reason – it’s the largest crowdfunding web platform, with others such as GoFundMe and Indiegogo hot on its heels.
This type of campaign rose to popularity as a new method of collecting charitable donations to support a cause. But it has since grown to be one of the best ways to get innovative ideas into the mainstream and small companies off the ground. According to Entrepreneur, companies and individuals across the globe raised $16.2 billion through crowdfunding in 2014. That’s a 167% increase from 2013, when $6.1 billion was raised.
Online crowdfunding works much like the hit TV sensation Shark Tank. Though the goal is to try to coax high-profile investors to hand over their cash, business owners and entrepreneurs are now using it as a marketing vehicle. By appearing on the show, they are given the opportunity to get their brand in front of several million sets of eyeballs. They flash their logo, deliver their pitch and detail their products and services. And if you are a frequent viewer, you’ll notice that a lot of entrepreneurs either turn down the offers received or they don’t seem that upset when no one chooses to invest. And the main reason – it’s huge publicity.
This show has become about more than just raising capital; it creates buzz. These appearances are as much a marketing/branding vehicle for the business as it is an actual ploy to raise money. And the same goes for online crowdfunding.
Starting a Business
Raising capital is definitely one of the key pieces of starting a new business, but it takes more than just money to get off the ground. The essentials for starting a business can be broken down to these main buckets:
- Ensuring you have a viable product
- Figuring out who your audience and customers are
- Creating a marketing plan
- Raising the money
Crowdfunding definitely makes that last goal a lot more attainable. It helps that by the time you’re ready to launch your business, the money is already there (sometimes, more than you expected). However, creating a crowdfunding campaign can actually assist in practically all of these:
Just like when launching any new product, service or business, make sure you are providing something that there is a true need or want for. It’s important to stand out from the crowd and carve out a true niche for your business. Think of crowdfunding as a (practically) free focus group. It’s an easy way to gauge your audience’s level of interest and learn their likes and dislikes. Most crowdsourcing web platforms have comments, which allows for real-time feedback. Then you can learn what is or isn’t working, tweak it as you go and make improvements.
Know (and Grow) Your Audience
Crowdfunding gives you the chance to acquire customers before you even launch the company. When kicking off the campaign, you first reach out to your existing network – personal contacts, friends and family – as well as co-workers, colleagues and professional contacts. Add in your subscribers, social media followers and fans, and you have a great starting point. Word of mouth (in this case, social media), will help that audience grow exponentially.
Like any other new business, without a marketing strategy you will fail before you even start. Consider a crowdfunding campaign a piece (a vital one, at that) of your marketing plan. But don’t rely on this as your sole marketing channel – make it part of the whole.
Due in part to shows like Shark Tank, everyday people are becoming interested in business investing and entrepreneurship. Crowdfunding allows them the same opportunity. Your investors have the chance to become part of the team. Investing money, regardless of the amount, gives them a stake in the game. They will feel like they are contributing to something larger than themselves, and they’ll become emotionally (rather than just financially) invested in the growth and success of the campaign. And it’s highly likely they’ll share it on social media. That gives you a whole marketing team at your disposal, and instead of paying them, they’re literally paying you.
So now you know how crowdfunding can be a good Launchpad for a new business. Since its recent inception, a few businesses have stood out as major successes in the crowdfunding arena. These companies are pushing the boundaries of innovation and creating new technology, and their Kickstarter campaigns have given them the avenue to do that.
Pebble E-Paper Watch – A customizable watch that allows wearers to download new watch faces, use sports and fitness apps and get notifications from their phones. Think of it as a pre-cursor to the new Apple Watch. According to Business Insider, the company raised $10,266,845 in 37 days.
FlowHive – People love a good feel-good story. A father-son team from Australia launched an Indiegogo campaign to help fund FlowHive, a device to harvest honey direct from the beehive. Entrepreneur reports that they were able to raise $12,171,097 in just 1 month.
The idea of crowdfunding has become so mainstream that it has inevitably found its way into the entertainment world. Now media personalities are using it to fund their films, TV shows and albums:
In one of the most famous crowdfunded film projects, fans helped bring back cult TV favorite “Veronica Mars” via a Kickstarter campaign. It raised a total of $5,702,153, and a film was released in 2013. Additionally, actor/filmmaker Zack Braff funded his 2014 film “Wish I Was Here” with the help of Kickstarter, raising $3,105,473.
Aside from thousands of campaigns by independent musicians looking to raise enough money to afford recording studio time, well-established artists have taken to this medium as well. In 2015, R&B group TLC announced they were going to record one final album with the help of a Kickstarter campaign. They raised $430,255 to help bring the album to life.
So why are these mainstream media campaigns working so well? That’s an easy one: they are lucky enough to have their fan base already built in. Fans are supporting these films because they want to see them, and these albums because they want to hear them. They are playing a major part in making them happen, and they have a direct connection with the results.
How to Start Your Own Campaign
Clearly, crowdfunding can help get your business going. But what do you need to know before you begin? Here’s some big picture things to keep in mind when launching a campaign of your own:
Have a business plan in place before you launch your campaign, and stick to it the best you can. That way, once fundraising is complete, you’ll be ready to go. Always keep in mind that you are starting a business. It’s not easy, no matter how you go about it. If you aren’t ready to commit, then don’t bother.
Remember that you are asking people to give you their money, and they deserve to know what you’re doing with it. Let investors know how you plan on spending it and where you are allocating the funds. If you are unprepared before launching your campaign and your idea tanks, you’re not only killing your reputation, but you’ll have to face your friends, family, community and network. So it is of utmost importance that you’re putting your best foot forward – from the very beginning.
And one more important point to make: set realistic goals. Don’t set out to make a million bucks right off the bat. Start low and gauge your progress. That way you won’t be let down and you’ll know exactly what you’re getting yourself into.
Get Your Branding Right
Know your brand and how it should appear to your audience. Your branding should be fully in place and public-facing prior to starting the fundraising process. Your business, regardless of its size, needs to appear professional and look legitimate. Branding yourself can be much more difficult than you’d think, so I’d highly recommend hiring a professional (or a team) to assist you with this.
Understand and Develop Your Audience
As previously discussed, your audience begins with the people you already know, and if you do it right, it’ll quickly grow. When launching your campaign, you must clearly communicate your idea, plan and vision to your potential investors. Explain it in terms that people can understand (remember that not everyone may be as business-savvy as you are). Be clear and concise, and hire a professional to help you develop the copy if needed. Keep it as personal as you can and appeal to your prospective contributors' interests. Your audience will invest in things they believe in, and it is your job to make them.
Develop a great sales pitch and practice your delivery. Pretend you are going into a face-to-face investor meeting – what would they want to know? What questions will they have for you? Why should they hand their hard-earned money over to you?
Spread the Word
Word-of-mouth is still the best form of advertising – we now have social media to fill that role. Use social media as much as you can, but do it wisely. Rather than blanketing every platform in high frequency, you need to be strategic. Set a very detailed social media marketing plan in place. This is going to be the most important way for you to spread the word about your fundraising campaign, so do it right. There is way more to social media than you might think, so if you don’t have the knowledge, ask for help from people who do.
Keep in touch with your investors. Remember, they want you to succeed, otherwise they would not have gotten involved. They are a part of this too, so keep them updated on your progress. Tout your successes and send frequent encouragement. You are a team, so you’ll want to rally them together as you all work towards a common goal. Think about praising your bigger backers, either through shout-outs or actually giving them something in exchange for a certain amount raised. The more you communicate with your investors, the more they’ll engage, and this means more social media posts and free publicity.
So are you ready to launch a crowdfunding campaign? If you still feel like you’re clueless, then you aren’t alone. You know your brand, your product and your skills better than anyone, but you may not have the business acumen to successfully pull it off. Don’t be afraid to ask for help. There are even businesses springing up that specialize in “crowdfunding marketing” that you can turn to. Obviously like hiring any other agency, it’s always important to do your due diligence and vet your potential clients. Since nobody really has much experience in this budding field, tread lightly around who you choose to hire.
If you feel that you are ready to get started, just remember: be smart. Be strategic. Be prepared. And don’t let this be your only hope. Many new businesses fail. But if you end up only making $100 tomorrow, let that be the first step in becoming the entrepreneur you hope to be.
Do you have any additional advice for using crowdfunding to market your new business? Let us know in the comments!