6 crowdfunding tips for startups
Financing a dream can be a stumbling block for many entrepreneurs, as a great idea can easily fall flat when your piggy bank is echoing. A brilliant way to raise enough funds for your venture, that many entrepreneurs are tapping into, is crowdfunding. It’s a great way to source finance for your product or service by relying on the public to put their money into your project. The general idea is that instead of having a select few investing in your business just to take a large stake of it (Dragon’s Den-style), a crowd of interested people can invest with their return either being a small stake in the business or a specified reward.
Various crowdfunding websites have become increasingly popular in recent years, including Kickstarter, Seedrs, Crowdcube, and Indiegogo. Most sites have similar processes, whereby you must create a campaign with all the relevant information about your company or project plus a monetary goal and timeframe. The majority will also require you to stipulate rewards for investment, for example a discounted product or a helpful e-book. These prizes serve as an incentive and they will usually go up in value depending on how much a person wants to invest.
The ease of these platforms for both entrepreneurs and investors means that they have soared in popularity and thousands of companies have lifted off the ground (note: have you seen Phoebe Waller-Bridge's Emmy Award-winning show Fleabag? This project began many moons ago on Kickstarter). So, to make it to the all-important target, there are a few steps you can take to ensure your crowdfunding campaign the best it can be:
1. Aim low
Kickstarter, the most well-known crowdfunding site, works on an all-or-nothing basis – if you don’t reach the target amount of investment, then you don’t get anything. Indiegogo on the other hand gives you the option of taking the money as it comes in, but remember and be warned, if you take the money before the full amount has been reached you'll still need to deliver on the rewards that you offered. The best way to safeguard yourself against any mishaps is to ask for the lowest number that you can reasonably aim for. Asking for hundreds of thousands might well skyrocket your startup, but then again it won’t mean a thing if you don’t get enough backing. Ask for what you need and hopefully, with enough marketing and determination, you're more likely to garner enough interest to reach the target.
2. Be strategic
Crowdfunding campaigns don’t start the moment they go live on your site of choice. They actually begin a good six months before that as you'll need to build some hype around your project. Don’t underestimate the amount of time you'll need to plan the campaign and get people excited about it – organise your time well so that when it goes live you'll be able to sit back a bit and just poke the fire. There are so many things that need to be sorted, not least simply choosing a platform to host on, and most of it will take more time than anticipated. Strategically planning your crowdfunding campaign will be what reaps the results, so put together everything that you'll need – including press kits, email campaigns, network leverages, social strategies, and more.
3. Make it compelling
There are two parts to every crowdfunding campaign that investors are buying into. The first is the product or service – the unique offering that you're preparing to unleash into the world. The second is you, your story, and how your startup came to be, plus where you see it ending up. The most successful campaigns are ones that tug on the human-interest side of things. Get yourself a professional videographer and spend some money on a captivating video that tells a compelling story. The worst mistake you can make is neglecting this fundamental part of the process!
4. Pester the press
PR is the backbone of a successful crowdfunding campaign – indeed, some companies think of the entire process as one big PR stunt. Put together a press pack as a matter of top priority and do your research into crowdfunded startups that had a lot of exposure. Seek out companies like yours and find out who wrote about them to gain a list of journalists who have an interest in your space. Find influencers and bloggers who talk about similar products and send them samples to get a sponsored post out on the web. Don’t forget to keep an eye on writers that reject you initially – as your campaign gains momentum you may get a positive response if you try again.
5. Be active on social
Social media will be your best friend during your crowdfunding campaign, so make sure you know how to use it properly. Choose your main channels after thoroughly researching your target market and think about the different ways you can use their specialist capabilities. When you launch your campaign, you'll need to be on top of social to ensure the news about your crowdfunding spreads across the world. Call upon friends and family to share your posts and engage in conversations online in your space – essentially do everything that you can to be visible. Work on an ironclad strategy for maintaining a social presence and develop alongside your audience as the timer ticks on.
6. Start strong, and end even stronger
As a rule, crowdfunding campaigns peak at the beginning and the end of their timeline. The strength of your opening and your closing could be the difference between you making your target or leaving with nothing. If you need to, aim for a soft launch 24 hours before your campaign formally begins and raise money from friends and family, so that when it comes to the big day you have already got a significant amount pinned down in investment. Similarly, when it comes to the end of your campaign, do everything you can for one big push – offers, competitions, paid social advertisements, PR stunts, anything you can to make your last effort work magic on your company bank account.
Editor's note: This blog was originally published on 5th April 2017 and has since been updated.