Avoid These 5 Crowdfunding Mistakes
Raking in $102,824 on Indiegogo in a campaign that ended July 3, the start-up Ambronite, maker of a drinkable organic "supermeal," achieved a goal that most crowdfunders would envy: It exceeded its $50,000 target by more than 100 percent.
"It was really exciting to see so many people around the world fund our product," said CEO Simo Suoheimo, one of five co-founders at the start-up, which has offices in San Francisco and in Helsinki, Finland, where the young entrepreneurs developed the natural food product in a business accelerator.
Most start-ups that try to raise money on crowdfunding sites are just as pumped about their start-ups as Ambronite's team. Unfortunately, many end up with a goose egg when it comes to money raised. On Kickstarter, 43 percent of campaigns hit their funding goal, and successful campaigns have collectively raised $1 billion.However, the other side of that equation is the 57 percent of campaigns that fall short of their funding goal or simply flop.
How do you make sure your crowdfunding campaign isn't a dud? Here are five mistakes to avoid.
Mistake No. 1: Starting off slow
"Nothing attracts a crowd more than a crowd," said Alon Goren, CEO and co-founder of Invested.in, who created a white label fundraising portal for individuals and businesses hoping to crowdfund ventures independently of major platforms. If you want to hit your fundraising goal by the end of the campaign, he recommends focusing on raising 30 percent of it in the first two or three days. That's what research shows successful campaigns tend to do, he said.
To make sure donors flock, get your inner circle of supporters—friends, parents, siblings and other die-hard fans—to contribute immediately upon the launch, experts say. "You don't want to be publicly sharing a campaign that has zero amount of money in it," said Goren. "You have to show there is some traction."
Ambronite did exactly that. By doing a private beta test of its product from June 2013 until it launched its campaign in April, the start-up developed a deep pool of supporters before its fundraising appeal ever hit Indiegogo. By the time the company let these fans know about its crowdfunding campaign, many beta testers had shared their feedback and, as fans of the product, had developed an emotional stake in the company's success. As such, said Suoheimo, they were eager to back the campaign.
Mistake No. 2: Assuming supporters are altruistic
Your mom may donate because she loves you. Backers who don't know you may be motivated by something else: The desire to get the gift you're promising in exchange for their support.
Crowdfunders need to offer attractive rewards to supporters to encourage them to tap into your idea, say experts. "They kind of have to think the person contributing is going to be selfish," said Goren. "If people are going to give you money, you want to give them something in return that they really, really want."
Some of the most successful crowdfunding campaigns have functioned almost like an e-commerce store, taking preorders—though Kickstarter has discouraged this: When the Pebble E-Paper Watch for the iPhone and Android phone raised $10.2 million in a campaign that ended in May 2012, one reward for donors was the actual watch—and donors groused publicly when its delivery was delayed.
One good way to revive a campaign that's slowing is to add some new perks instead of hammering your supporters with the same old campaign materials. "Make it interesting again," said crowdfunding expert Richard Swart, director of research at the Program for Innovation in Entrepreneurial and Social Finance at the Coleman Fung Institute for Engineering Leadership at UC Berkeley.
Any rewards you offer should underline the image of your brand that you want to create. "Make sure what you're doing is consistent with your brand experience," Swart said.
Mistake No. 3: Putting the campaign on autopilot
Many entrepreneurs think that viral crowdfunding campaigns happen on their own. Not so, say experts. Many of the most successful crowdfunders made all-out effort by a start-up's founders or hired professional marketers to do outreach. "You have to give it time," said Goren. "You have to think of it as part of running your business."
Don't expect to mobilize bloggers to spread the word on one day's notice if you have not taken the time to cultivate their interest ahead of time. Many crowdfunders list influential bloggers to contact when their campaign starts and assume that simply pinging these writers is enough to get publicity. "They forget these bloggers get hit up constantly," said Swart.
Read More: Funded! The top Kickstarter campaigns
Before you even launch a campaign, get active in social communities and figure out how to use public relations, search engine optimization and other outreach so you capture the attention of bloggers and other influencers. "To make a very successful crowdfunding project, you have to figure out in advance who is going to spread the message," Swart said.
Mistake No. 4: Thinking everything happens online
Not every campaign has the mass appeal of the Coolest Cooler, which at press time had raised more than $7.5 million on Kickstarter—well past its $50,000 goal—with 31 days to go on its campaign. The cooler's inventor, Ryan Grepper, bills it as "a party disguised as a cooler, bringing blended drinks, music and fun to any outdoor occasion."
That doesn't mean you can't host a party to spark that same kind of interest. Whether you hold a backyard barbecue or movie screening—or your public relations firm organizes an attention-grabbing press event—it will give you exposure, said Swart, adding, "Event-driven marketing still works."
The key is identifying your "community of interest" and figuring out how to attract those who have a natural affinity for your project. "You have to figure out how that community likes to come together," Swart said.
MIstake No. 5: Forgetting to ask for a donation
Many crowdfunders put so much time into creating campaign materials, like videos, that they neglect to do something crucial: "They forget to ask people for a donation," said Swart.
Passing around a virtual hat to collect from friends can feel awkward, so focus on explaining why your project is important and how financial support will help toward that goal. Backing a campaign, said Swart, "is an emotional decision."
Successful crowdfunders tap into people's desire to do philanthropic giving—even if those givers are motivated, in part, by the T-shirt they'll get for supporting you. You don't have to be deadly serious to tap into their emotions or to focus only on building excitement around your monetary goal. "People get too focused on dollars," said Swart. The Coolest Cooler's campaign simply says, "Your help at any level brings the coolest one step closer to a beach near you."
Communicating with early supporters of your product regularly—and long before you hit them up for money—can make it easier to ask for donations when the time comes. Figure out which social media they like, and build a presence there. "They will make a decision to back you based on if they like you and care about your information," said Swart.