Tuesday, February 26, 2013

Some Best Practices: Crowdfunding

I have been asked on numerous occasions now from friends and acquaintances whether or not they can leverage the power of donation based crowdfunding for their ideas and if so, how to go about doing it - sounds like that is worth a blog post. Here are my thoughts.

Choosing Crowdfunding

Some ideas are better suited for crowdfunding at this stage of the industry's development. The defining market tie is consumer focus. Products and projects that are relatively simple to understand and use work well - creative variations on familiar form. Physical, philanthropic and artistic projects have historically seen the most successful fundraising. Yes, technology/software has had the largest, most advertised wins, but they are not the current market norm.

Choosing a platform is a nuance of your product/idea. Kickstarter has the largest brand and more internet traffic, and is particularly selective and creative oriented. Indiegogo has a flexible process, an international scope and accepts a broad range of campaigns. Each has its advantages and disadvantages depending on your project. Other platforms are specialized around industry or product. No matter which one you choose, choose one platform and focus your efforts.

The business model for crowdfunding is still evolving. Make sure you read the terms, conditions and pricing parameters. Some platforms are all or nothing campaigns, others are progressive, where you  keep any portion of your raise. Also payment processing fees may be included in or in addition to platform transaction fees. These parameters are the difference between raising $100k and having up to $15k of it sliced off in total fees or all of your raise "returned" to donors. Finally, be sure that you are satisfied with all of the payment options available to potential campaign contributors.

Managing Crowdfunding

A successful campaign requires you to be ready to leverage your network - before you even add a project to a platform. Find a couple of friends or donors that will commit to your campaign in order to build momentum from day one. Organize and notify all of the people in your network and in your team's network to set up your campaign for success. In this sense, you can see how it is better when more than one person is involved.

Take the time to put together an executive summary of your idea or product, but then distill it to the key points. Use this to create a concise presentation. It should highlight the uniqueness of your idea, its funding schedule, product timing, relevance to the market, the expertise of your team, and passion. A video is a necessary media touch. It is the quickest way to inform, educate and connect with potential donors. I recommend making it about 2-3 minutes. Use it to amplify and personalize the project.

The most successful crowdfunding campaigns are donation based right now, but most offer something in return. If you choose one of these platforms, put time and effort into determining attractive rewards for potential donors. Do this before you launch your campaign. Think about your budget in terms of time and money. How much time will it cost you to organize and create these rewards and how much money will they cost? Be creative from a consumer perspective, what would you want?

Social Media
Crowdfunding works well as a social media funnel. You need to actively use it to draw attention to your campaign and keep it in front of potential contributors. Build and use connections to bloggers and journalists to help boost your signal. Entice them with stories on big wins for your campaign or project, and be sure to give your followers on Facebook, LinkedIn and Twitter updates on progress.

Choosing and managing a crowdfunding campaign takes a fair amount of work - as it should. Asking for external funding is a serious undertaking. Take the time and the effort to make sure that your product is right for the market and that you make right moves. Good luck.

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