Crowdfunding, or as I like to call it: “the business funding of the future”, is taking the startup scene by storm. Entrepreneurs seeking funds to launch their company are no longer forced to deplete personal savings, solicit investors, or negotiate with commercial lenders for interest rates that are near criminal. Instead of presenting their business plan to shrewd sharks donning impersonal suits, entrepreneurs can reach out to their community—everyday people like you and me—to invest in their promising ideas.
Through crowdfunding platforms such as Indiegogo, Kickstarter, Fundable, etc., entrepreneurs are able to request donations, exchange “perks” for funds, acquire lending, or offer equity in their startup. This community-oriented funding approach is rapidly taking the place of traditional business financing, providing entrepreneurs with a viable opportunity to not only raise startup capital, but also establish a customer base before they even open their doors. What a way to start a business!
Sound like something you could use? Here are five tips for making your crowdfunding campaign a success:
Find the Sweet Spot
I recently consulted a company that had previously sought half a million in an “all-or-nothing” crowdfunding campaign. While there is nothing wrong with shooting for the stars, their limited reach (i.e., a couple hundred social followers and e-mail list subscribers) could not support such a stretch.
Don’t set your crowdfunding campaign up for failure. Assess the reach of your current network, and commit to a reasonable campaign goal. Many businesses find the $10,000-$15,000 range to be the startup sweet spot. While such funds may not cover the entirety of your ideal launch budget, cash in hand will be helpful.
Time for Roll Call
Identify your company’s internal network—social media followers, e-mail lists, and other supporters. “Wait!” you may say, “My company’s a startup—we don’t have an established network.” Oh yes you do—you. Any experienced entrepreneur will acknowledge a startup’s personality-driven nature. While you do not have a long list of past customers, you do have the far reach of your internal network.
Consider past colleagues, fraternity brothers, mastermind members, gym buddies, neighbors, your parent’s neighbors, etc. Make a list of everyone vested in your success—don’t be bashful. Then expand the list to include your network’s network. Wow! Now we’ve got something to work with.
Savor the ‘Soft Sell’
Marketing one’s crowdfunding campaign—an opportunity for the community to empower an entrepreneur’s dream—is different than a hard sell ‘buy my product because it’s the best’ marketing strategy; it is much, much better. Company promotion that occurs thoroughout the crowdfunding process provides a unique opportunity for community engagement. These fans value the opportunity to champion your cause–rooting for the proverbial underdog–and the opportunity to play a pivotal role in a new business’ success.
Engage Your Fans
Crowdfunding is an active process. One does not simply launch the campaign, post a few social posts saying “Help me”, and wait till the deadline rolls around. Such tactics spell one nasty little word—failure. To run a successful crowdfunding campaign, one must commit to active participation throughout the process, as optimal results will only be realized if you can engage the fans.
Unlike traditional commercial lenders who mandate promising proformas, tight budgets, and often overqualified experience, the crowdfunding community desires authentic commitment. Best way to engage your campaign fans is to facilitate conversation and opportunity. Maintain two-way conversations via social media, post informal video updates addressing supporters, and provide fans with an accessible way to champion your cause. Such opportunity can come in the form of prewritten social posts, supporter contests, and special incentives. Everything doesn’t have to be perfect. Keep it real and relatable.
Capitalize on Community
My very first crowdfunding campaign was for a tech company seeking startup capital. While we succeeded with securing the necessary funds, and landing some sweet PR spots, the campaign’s biggest score was establishing a network of supporters from all around the world. Some sent money; others’ offered professional services, pro bono. The small crowdfund campaign continued to pay dividends in terms of continued community contribution.
As the newly funded startup moved toward launch, the support continued to flow in–encouraging e-mails, interview opportunities, mentoring professionals, top-talent seeking positions, additional lending options, etc. When managing a campaign, it’s easy to focus only on quantifiable results—the money. However, to truly maximize your campaign results, one must prioritize the community building aspects of the campaign. Such benefits will sustain your company long after the funds are gone. Value these connections as the crown jewel of your success.
This article has been edited and condensed.
Hannah Becker, serial entrepreneur and MBA student, is author of The Motivated Millennial: An Entrepreneurial Guidebook for Generation Y. Passionate about entrepreneurship, Hannah is committed to encouraging millennials to pursue their entrepreneurship dreams. When not rolling out a new marketing plan, or re-vamping product development, Hannah can be found training for her next race. Visit www.themotivatedmillennial.com for more information and resources to aide your entrepreneurial journey. Connect with @MotivatedGenY on Twitter.