4 Tips to Use Crowdfunding to Make Startup Dreams a Reality Like any fundraising campaign, using these platforms requires much thought and effort.
By Zach Cutler •
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Crowdfunding is becoming a more popular and conventional route for startups to procure early rounds of funding. Crowdfunding platforms are convenient, simple to use and reach a wide audience of investors at a low cost.
After President Barack Obama signed the Jumpstart Our Business Startups (JOBS) Act into law in 2012, non-SEC registered individuals could invest in companies with a greater percentage of their income. The world of crowdfunding was opened to startups, allowing new companies to grow faster earlier in their lifecycles and founders to value their ventures at a later date by raising funds through convertible debt.
Related: Raising Millions With Equity Crowdfunding Will Cost You, But How Much?
Although crowdfunding may seem like an easy way to raise the capital needed for a startup, like any fundraising campaign, it requires much thought and effort. Here are some tips for a successful crowdfunding campaign:
1. Strategically choose the platform.
Before choosing a platform, decide what type of crowdfunding will best fit the project. Rewards based? Donation based? Equity based? Then weigh the pros and cons of each platform to determine which one best matches the campaign's goals. Research similar projects and what platforms they did well on.
When fundraising for Giveafish, the first global wish list site, I chose to host the project on Kickstarter because it seemed our target audience is already on the platform and it fit my goals.
Kickstarter is the most well-known crowdfunding site, but there are some drawbacks to using it. The site gives individuals a nice space to put their campaigns, but they provide no marketing help, and individuals must promote their projects to find backers.
But Kickstarter isn't right for every startup. For example, YourNeighborhood, a hyperlocal real estate-information platform, recently launched a crowdfunding campaign on Fundable.
Fundable is an invite-only platform for businesses that charges a flat fee and helps guide early-stage companies through the crowdfunding process with profile creation, PR leads, investor contacts and other advice. The platform has 23,000 active angel investors, and hosts a maximum of 200 companies at one time.
This more hands-on approach was the right fit for YourNeighborhood. The startup received its first contribution of $25,000 within the first two weeks of the campaign's launch.
2. Prepare before the campaign launch.
Before launching the Giveafish campaign, my co-founder and I spent four months organizing the project. We hired a company to produce a professional video, set up social channels, developed the message and wrote copy. When the campaign was ready to launch, everything was prepared and professional.
Related: Before You Launch Your Kickstarter Campaign Do These 6 Things
Set the campaign up for success before launch. Create a professional video, fine-tune the messaging and ask friends and family for their feedback and support on the launch day. The page needs to look professional and well thought out to bring in funding.
Also, it is key to line up some pledges before the campaign goes live so the project shows momentum from the very first day.
3. Market after launch.
Once the campaign is live, share it with everyone to get the word out. For Giveafish, we did a big push on Twitter and Facebook and reached out to our friends and family. We monitored social media closely to find new potential backers. YourNeighborhood similarly promoted its campaign on social networks and across personal networks. Regardless of the platform chosen, effectively market the campaign.
Doing so may require professional help. Go to the experts to learn the ins and outs of crowdfunding marketing. Properly vet professionals and be careful about who is brought on to the project.
4. Get savvy about analytics.
Numbers are the proof. It doesn't matter if the campaign has 10,000 followers and 20,000 likes on Facebook if they don't convert to pledges. Learn how to track the numbers to see how the campaign is doing and how it can be improved.
On Kickstarter, for example, founders can access native analytics and use a Google Analytics tracking code. When using Twitter or Facebook ads, learn how to read and understand the sophisticated analytics dashboards. Know where pledges are coming from and how they can be increased.
Crowdfunding opens up a new world of opportunity to startups. A crowdfunding campaign is convenient and has the potential to reach a wider range of investors, but it's not easy. With a little preparation and analytic work, a successful campaign can make startup dreams a reality.
Related: 7 Tips on How to Do Accounting For a Kickstarter Campaign
