Crowdfunding has emerged as a viable alternative for entrepreneurs to raise capital for their business, or specific products and activities. It involves reaching out to individuals and pooling all the resources for your campaign, whether the contribution is only for $5 or $5,000.
Here are 40 tips on how to use crowdfunding successfully in raising money for your small business:
Know What Crowdfunding Is
- Understand that crowdfunding takes effort; and that having a good idea is not enough
- Understand that crowdfunding is different from handouts: you need to offer something in return for people to support you.
- Know that people are not going to donate out of the goodness of their hearts. Always ask yourself: “When a prospective investor comes across your campaign, will you have a sufficient answer to the question – What’s in it for me?” because they would want to have something in return!
- Public perception is everything in crowdfunding: you need to know how to communicate your offers well and tap their emotions to compel them to reach to their wallets and give you their hard-earned cash.
- Recognize that crowdfunding is not going to work for everyone and for all types of business: a business creating a mobile game app may attract may be able to successfully raise funds through crowdfunding rather than a daycare business.
- aving a tangible end-product (e.g. film, invention, etc) can generate more excitement than services.
>> RELATED: List of Crowd Funding Sites
Preparing for Crowdfunding
- Prepare your plan for the whole project, and not just the crowdfunding aspect. Your plan should include the steps you need to take to develop the product, and timelines, among others. More importantly, you need to consider alternative source of capital in the event that crowdfunding will not work.
- Be sure to work out your budget for your project even before you start.
- Identify your target market both in terms of who will benefit from the output of your campaign to possible supporters.
- Prepare to tell your story – as your story will sell your campaign.
- Perfect your pitch to make sure it resonates with prospective investors. They need to be convinced that they are going to miss out something big if they do not donate.
- Prepare to answer potential questions from potential investors, such as how you are going to spend the money; or whether you have ensured that your invention is protected by copyrights, patents or trademarks
- Decide how much you are going to reveal in your crowdfunding pitch: you don’t want to give too much information that you are giving everything away to competitors
- Choose the best crowdfunding platform for you, as some platforms may be better for your project. Remember, the success of your campaign depends on the demand you create for it, and not necessarily putting your campaign to all platforms that you can find.
- Learn the policies and guidelines of the crowdfunding sites that you will use, particularly fees.
- Show proof of the legitimacy of your business. People don’t like to be scammed and conned, so they need to see that you are a real business with a real product.
Creating Your Crowdfunding Campaign
- Decide on the right length of time for your crowdfunding campaign: you don’t want it to be too short where you’re unable to provide updates to supporters; yet you don’t want it to be too long that everything drags too slowly. The ideal time may be 2-3 weeks with updates once or thrice a week.
- Set a realistic amount for your campaign
- Do your math: know beforehand how many people needs to support you to be able to reach your target
- Ask for minimum, not maximum, amount of money to start the project as some crowdfunding sites will not allow you to get paid if you don’t hit your target
- Offer value in your rewards and make them compelling: only your friends will donate to you if your rewards offer no value.
- Offer tangible rewards: instead of saying they’ll have your love and devotion for donating, give them a pen instead. But to the extent possible, keep your rewards related to the campaign
- Use a tier system for your rewards in terms of value: the more money they donate, the better the reward should be so give them an incentive to give you more money.
- Offer exclusivity and scarcity in terms of your highest value rewards
- Set up your campaign to cater to all types of supporters: from the low level givers to the high-giving individuals
- Wacky rewards could also work: while offering value, you make people laugh
- Be sure to factor in the cost of your rewards – as well as shipping/delivering them – in your budget
- Post campaign updates to keep your supporters abreast of your developments
>> RELATED: Directory of Using Crowd Funding Sites to Raise Money for Your Small Business
Marketing Your Crowdfunding Campaign
- Engage your network (friends, family, social media connections) early and let them know you are planning to launch a crowdfunding campaign – before you even start.
- Start with your personal network to see if they can support your campaign; or help you promote your campaign to their contacts
- Find high profile or influential individuals to endorse and talk about your campaign. You’d be surprised at the speed of how your campaign will grow if people know that someone they know and admire believe in you and in your campaign.
- Send an email to your list or newsletter subscribers and ask them to support your campaign
- Write about your campaign and why you need to raise the money: who knows, your local media might just pick it up and give free publicity to your crowdfunding aspirations
- Promote your pitch daily, both in and outside the crowdfunding platform: just because you posted your pitch on a crowdfunding site does not mean that prospective investors will see it.
- Post regular updates about how your project is coming along, and get everyone excited all over again about your campaign (who knows, those who gave earlier may increase their pledge to you).
- Find stakeholders who can help support your campaign, including bloggers and websites in the niche your project will help
- Build your social media network, and be ready to tap them for your crowdsourcing campaign
- Create a pitch video where you explain who you are and what you are trying to accomplish. Personal touch works, and videos are a powerful marketing tool for your crowdfunding campaign.
- Fulfill your promise and be sure to send out the rewards you promised your supporters.
- Be sure to express your gratitude to your supporters and those who shared your campaign.
- Stay connected with the supporters and other people you’ve “met” during your crowdfunding campaign