Crowdfunding, where individuals, companies or non-profit organizations raise money by aggregating the relatively small contributions of a number of people, has been gaining popularity.
For example, when Saskatchewan entrepreneur Ryan Grayston, wanted to raise $50,000 for his innovative 3D printer, instead of going to his local bank, preparing a thorough business plan and begging to qualify for a loan, he went to Kickstarter (www.kickstarter.com), one of the most well-known crowdfunding platforms. He raised $651,000, and it took just 30 days. He didn’t have to give up equity in his company to an investor; he just offered various perks to the 4,420 people who backed him.
What if my company isn’t trying to raise money?
One of the most useful aspects of crowdfunding is its marketing research insights. Instead of hiring a marketing research firm to help figure out what type of product your prospective customers want, you can test your product ideas via a crowd-funding campaign, see the success of the campaign, see which perks get the best response, get invaluable comments and feedback and engage with your target market.
Do I need to get my campaign approved?
This depends on which crowd-funding platform you go with. The two largest and most well-known platforms are Kickstarter and Indiegogo (www.indiegogo.com). The biggest difference is that Indiegogo allows anyone to launch his or her campaign. There is no approval process. Kickstarter accepts only campaigns that have a clear start and end and where something tangible is created. It vets all campaigns before approving.
Kickstarter is also “all or nothing.” Your campaign either reaches its goal and gets all raised funds or it misses the financial target and gets nothing.
With Indiegogo, campaign creators can choose either a fixed or flexible model. With the flexible model, however, all funds raised go to the campaign creator even if the financial goal is not met. The down side of this can be that there is less urgency for backers to fund a project, and the campaign becomes more like a donation. Also, the transaction fee is higher for the campaign creator if the goal is not met, but on the positive side, it’s a safer option.
Any other tips for running a successful campaign?
Here are our top tips:
- Plan ahead. Don’t just “wing” your campaign. Think carefully when setting your target goal and which crowdfunding platform is best for your needs.
- Make it personal. Establish trust that you are capable of delivering what you promise with your campaign.
- Better to aim for a lower amount and surpass your target than to aim too high and not reach it. If you want to raise $10,000, it’s usually better to go for a $5,000 campaign. If you exceed it, you will look good and have a good chance of raising your higher goal.
- Have friends and family ready to support your campaign right after it launches. Campaigns that do well quickly have a certain buzz to them and can be listed on the crowd platform’s home pages, generating even more interest and backing.
- Offer something worthwhile.
- Interact with your supporters. Promptly send thank-you comments.
- Respond to comments quickly and don’t be defensive with critiques of your project idea. Instead, treat your comments like gold to help you modify your planned offering.
- Leverage social media. Be sure to use Twitter, Facebook and LinkedIn to promote your crowdfunding campaign and encourage your supporters to spread the word. One of the easiest perks to offer is a thank-you tweet for a small contribution.
- Check out your crowdfunding platform options at the National Crowdfunding Association of Canada.•