Considering Crowd Funding?
Sites like kickstarter.com and Indiegogo.com have generated a lot of buzz and a few high profile success stories.
Crowd funding has propelled highly creative inventions such as the air powered car made from Lego (started with a tweet) and stand out commercial fund raising successes like the Pebble Watch (over $10m) as well as exciting innovations such as Seamless Toys’ Atoms ($183,232).It has also been effective in pooling backers of non profits such as the Let’s Build a Goddamn Tesla Museum.
On the other hand there are numerous failures. The NYC opera tried crowd funding to plug its funding gap but was unsuccessful. This recent, well researched blog, linked a nicely put together crowd funding campaign for a drive through pizza concept. A few hours before the close of that campaign it had raised $136 of the $450,000 target. I’ve seen many campaigns that have failed to raise a single dollar, let alone reach their targets.
The First Rule of Fundraising applies as much to crowd funding as it does to other ways of asking for other people’s money: Your product must be something that people will want to buy.
Five Common Elements of Successful Crowd Funding Campaigns
1. Cool ideas that people will want to share with their friends
2. Compelling video – also something that people will want to share
3. Effective use of the tiered reward structure to provide the right incentives for contributors at different levels
4. Realistic targets
5. A great start – using the business’s entire network to sell the idea to as many early adopters as possible
Crowd Funding is about to change when the rules allow for crowd funders to sell equity instead of or in addition to using rewards. However, bear in mind that none of the 2013 Inc 500 used crowd funding as their start up source of capital and always remember the Second Rule of Fundraising: Any time spent raising funds is time not spent developing and selling the product.
