Crowdfunding has become a significant right of passage for small businesses seeking investment. When executed correctly, this route to raising funds can provide your business with the necessary tools to grow, as well as gain significant exposure along the way. Alternative loans, such as bank loans and grants from friends/family have serious limitations, which is where crowdfunding comes in. Crowdfunding offers an exciting opportunity to fundraise a larger sum of money, as well as engage with a ‘crowd’.
So what actually is crowdfunding?
Crowdfunding campaigns intend to pitch your business to a crowd of potential investors, most commonly via the Internet. It’s an opportunity to bring together financiers to support your new business idea. You (the inventor or business owner) pitch your idea and if a supporter sees it and likes it, they are able to make a contribution to your business directly. No meetings, no boards – just an individual who decides to take a punt on your business.
Why is crowdfunding better for my business than alternative fundraising methods?
One of the most advantageous outcomes of running a crowdfunding campaign is the market research that is a bi-product of your campaign. You’ll gain insight into your potential, passionate and loyal customers. Frankly, you’ll discover who’s prepared to pay for your product or service. Not only is this crucial information for running your business now, but these insights can also assist your efforts when securing investment at a later stage. Investors are interested in your consumers, who they are and what they like.
Crowdfunding isn’t suitable for every business. There are many stories of crowdfunding gone wrong. If you were less successful than you’d hoped, it’s important to analyse your experience and carry forward the knowledge gained from your campaign down an alternative route (you can read more about this here). Crowdfunding provides people with an opportunity to raise money for their business venture, but not without a lot of work your end. You should also ensure your campaign is exposed to the right audience, because without the right crowd, there is no crowdfunding!
So where should I begin?
Whilst the concept of crowdfunding might seem simple, don’t be fooled. Running a successful campaign to secure thousands, or millions of dollars in some cases, requires a seriously well thought out strategy. Simply put, your brilliant idea alone isn’t enough to convince ‘the crowd’ to part with their money. Here are 6 tips to help you get started with your crowdfunding venture, convince potential financiers and run a successful campaign.
1. Find your platform
First things first. It’s time to investigate which platform is most suitable for your crowdfunding venture. Each platform has its pros and cons, so thoroughly researching each of these platforms will be advantageous. Some of examples of popular crowdfunding platforms are:
2. Read the rules and regulations
Once you’ve chosen your preferred platform, make sure to read the fine print: check the minimum age requirements, resident requirements and bank account requirements.
3. Self promote
Self-promotion should feed into every part of your business, and running a crowdfunding campaign is no exception. Remember that the crowdfunding platform you choose serves as just that - a platform. Now it’s time for you to do the rest. At this stage, you should endeavour to promote your campaign in every possible way. You’ll need to prepare all of the marketing and PR material to push your campaign along.
Showcasing your campaign through various platforms will increase exposure. Try promoting via these platforms:
Newspapers, magazines, blogs, online articles
These resources can assist with creating a buzz around your new business and attracting potential investors who are interested in your idea
Having a loyal social media following prior to your crowdfunding campaign can help immensely. Your aim is to convert your social media followers into investors for your business. Use your social media platforms to spread the word about your campaign, engage with your followers, give updates, say thank you etc.
Building up a mailing list before your campaign launch is also extremely advantageous. When your crowdfunding campaign is live, inform your contact lists of your plans and progress, as they may be interested in contributing some funds.
4. Lights, camera, action
Hopefully by this point, you will have done some extensive research on different crowdfunding platforms. Your research should generate lots of ideas and provide insight into some of the creative and dynamic content that is required to run a successful crowdfunding campaign.
Content created for crowdfunding includes photo shoots and video features that attract individuals to your business. For many of the most successful crowdfunding campaigns, promotional videos have played an essential role in engaging visitors and attracting investment. Engaging video content can’t be thrown together overnight, so budget and prepare for this. Research video producers and editors who have filmed these kinds of videos before, but also keep in mind the style of production you want.
It can be a lot of work, but investing in exceptional content at this stage in your campaign should hopefully lead to a more successful campaign. This content can also be used on your social media pages, website and newsletters. The content produced for your crowdfunding campaign should reflect your beliefs and passion for the project. If you’d like to read more about the impact video can have on your e-commerce business, click here.
5. Choose your words carefully
Alongside excellent videos and imagery, the most successful crowdfunding campaigns feature strong copy to match. Copy that features keywords and relevant headings will ensure your campaign is situated near the top of any search results for your business in the future. If you think your copy is lacking, or you’d like to focus some more attention on SEO, check out this article.
6. What next?
Now that you’re prepared to launch your crowdfunding campaign, you’ll need to put in the hard yards. Once live, it’s time to engage with even more potential investors and invite them to participate in your campaign. Staggering invitations to new investors throughout the running of your campaign will give the appearance that it is running consistently, instead of plateauing. Consider what you can offer to engage with an investor – maybe a discount on your product, or an early stage prototype. Remember to continually engage with your followers on social media platforms and update your newsletter readers. Kickstarter has set up useful Youtube playlists for business owners to share their crowdfunding stories. Engaging with this and interacting with the crowdfunding community will ensure your campaign remains relevant.
Examples of some successful Crowdfunding Campaigns
Arguably one of the most successful crowdfunding campaigns in history, Oculus Rift is a virtual reality headset, which was later sold to Facebook in March 2014 for $2b. The company’s USP is the ground breaking technology behind the device, but they recognised that using tech jargon may not convince investors universally. Instead, Oculus Rift coined the tagline "step into the game’ – simply and effectively conveying exactly what the product achieves.
Pono is a music business that produces ultra high quality sound. In 2014, they raised $6m in under a week. Pono’s promotional video, shot in a casual, home-video style, features 6 minutes of interviews with some of the biggest rock stars in the industry (think Red Hot Chilli Peppers and Foo Fighters) and their reactions to the product: ‘this is what music is supposed to sound like, supposed to feel like’. Their glowing testimonials, one after another, reinforce just how radical Pono is, and their testimonials demonstrate the quality of the unique product. Pono’s crowdfunding campaign relied on the power of music and how it makes you feel, without actually playing any music out loud.
In 2013, 3Doodler launched the world’s first 3D pen with a modest, low budget video in which the simplicity of the product took centre stage. A friendly voiceover says ‘everyone knows how to use a pen, so we designed a 3D pen’. Their crowdfunding campaign featured the kind of viral content that saturates social media feeds: slow, satisfying shots of the pen in action. 3Doodler’s successful campaign allowed them to advance the product further and further (they’ve released 4 generations of the pen in 4 years). It also gave them the funds needed to scale manufacturing and further propel their business. CEO Maxwell Bogue highlights the importance of knowing what to do post crowdfunding here.
Ready to launch?
Elkfox are e-commerce website experts, meaning we can offer support and guidance on all the additional and necessary components to consider when launching your crowdfunding campaign. Get in touch with us to ensure your website is set up to attract investors through crowdfunding.