In the absence of traditional bank based funding, crowdfunding has been growing as a serious alternative way of gaining finance and expertise to setup and grow your business. Here we look at what you should know before launching your crowdfunding project and give you six top tips to help ensure you get the funding.
1.) Learn from others
Crowdfunding is not new and you will not be the first to use it. Learn the lessons, good and bad, from projects that have already completed. Speak to the funders or better still the business owner and learn from their mistakes. Identify the golden nuggets that worked and incorporate them into your plans, if it worked for them why not you as well.
2.) How much do I ask for?
It is always better to meet your target than not, so it’s important to choose a goal that’s small enough that you can confidently meet and exceed, but large enough to enable you to achieve your objectives and targets. As to the amount:
- Be realistic about your actual costs as this will be the basis of what you need to raise;
- Consider how many units you need to sell to reach your target and ensure it’s achievable;
- The more people you know the greater the amount you can raise through crowdfunding;
- How many of your existing followers / contacts will contribute and how much?
By under-promising and over-delivering you will impress your funders and at the end of the day you can always come back for another round of funding later.
3.) It’s more than just funding
Although it provides much needed cash, crowdfunding gives you the chance to raise awareness and build an audience prior to, and during your project. Don’t forget that the non-cash benefits are often more valuable than the actual funding and these might include:
- Using the networks of your funders to gain entry into areas you wouldn’t be able to otherwise, ie a shop on a major high location or a nationwide supply chain;
- Building a network of supporters and followers who can then market your project to their face-to-face and social networks;
- Starting the process of getting your product into the market e.g. as a writer you could give away early copies of your book to promote it, and get some market research feedback from the general public.
4.) Be visible
It’s important that potential investors and followers see the face behind the project. Ultimately they will be buying into you as a person and not just the product. Producing an interesting and fun video will enable your passion and personality to shine through and is a great way of getting commitment from people who don’t know you.
5.) Know your audience and engage with them
It’s essential you keep your audience engaged and up to date with the development and progress of your project. This means not only during the hectic funding round but even more importantly when the finance is in place and the business grows. People who invested in you at the start will quickly lose interest if you go quiet and alienate them once it gets going. Social media is a great way to keep in contact so use Facebook “likes” and Twitter “followers” to keep everyone in the loop. Consider creating a mailing list of followers and regularly update them with progress.
6.) Get the timing right
You need to allow enough time to put a good project together, but if it takes too long your audience will get bored and lose interest. Set specific deadlines and stick to them and don’t keep them to yourself, let your audience know what’s coming. If you think going for worldwide coverage may mean the project takes too long, consider a smaller launch to a more focussed target audience. If that is successful you can always roll out further developments.
Crowdfunding has opened up many more ways to fund a start-up or early stage business and even a specific product. However, there’s no substitute for putting in the hard graft in order to make it work. You still have to convince complete strangers as well as family and friends to part with their cash and back you and your project. But with a viable proposal and your unending enthusiasm you can take your project to where you want it even in the current tough economic climate.