If you don’t know already, crowdfunding is a powerful method for raising capital from a group of people (it’s in the name). There are plenty of good resources that describe the in’s and out’s of what crowdfunding is, so in this article we will discuss whether it’s the right approach for you.
Rule no.1 - Don’t believe the hype
It’s easy to be star-struck at the campaigns that have raised $2,000,000 for a reusable toothpick (fictional example). But know that behind these seemingly simple products there’s an army of people with enormous marketing budgets. So if you’re just starting out with your toothpick that’s also a fingernail cleaner, don’t expect the same success. Largely because you don’t have 100k set aside for promotion, plus that’s also a pretty gross idea.
What platforms are out there?
For typical consumer products, the most common platforms (excluding equity crowdfunding) are undoubtedly Kickstarter and Indiegogo. But that doesn’t mean they are the best options! New platforms arise everyday, often in niche categories like by location or product category. Do your homework before choosing one, because a niche platform may suit your needs better and give you a more focused market.
Do I need to acquire an audience?
Besides raising cash, another great purpose of crowdfunding is to create an audience. This could a genuine reason for you to create a campaign. Many successful businesses have created tight-knit communities around their product, who are actively engaged. They are the early-adopters, they are your most valuable customers. They are the ones who are going to overpay, for an almost-functional product, that took too long to develop – and still come running with valuable feedback on how they would like to see improvements on the second version. So recognise this value in helping to develop your product!
My campaign is live, where are the sales?
If you were to publish a project without any prior marketing efforts, you can expect to raise very little money. Unfortunately, I found this out the hard way in 2015, when I created my first crowdfunding campaign. While I had a basic promotion strategy and devoted some time into it, I came to realise it was far from sufficient! To get maximum exposure and to generate a lot of eyeballs you need to invest a significant amount of resources on promotion – that is time, money and skills. I would advise taking this into consideration months before you plan to launch, while reading tactics online and speaking to experienced digital marketers. This is arguably one of the most critical aspects to any campaign!
What am I creating?
The nature of your product will somewhat dictate the suitability for crowdfunding hosting. If you are developing a solution for the schooling system or for local restaurants then you are better off approaching these markets directly. Conversely, if your product is a consumer good, technology, game, furniture, fashion or similar then crowdfunding could be a great marketplace to try. Beware that platforms also have restrictions on the type of products that can be hosted to ensure laws, safety and moral good are complied with. So attempts at publishing your human cannon contraption will probably get rejected.
Is my idea safe once I publish it?
Absolutely not! Once your project goes live within the public domain, your product/idea will be open to interpretation by anyone (unless you have IP rights). There are even ‘businesses’ within the crowdfunding scene that will scour for newly published projects, directly imitate and post a competing project within weeks. But fear not - what they can’t compete on is originality, trust or reputation - so when building your brand, factor in how you will deliver a meaningful service to your backers beyond the physical item. Besides product innovation, this will be your most powerful way to differentiate.
So, should I use crowdfunding or not?
When executed properly, a crowdfunding campaign can add immense value to your business. There are many considerations as to whether it’s a good fit for your product or business model though. Hopefully this article has provided some insights, to evaluate whether its a good match for your project. One great way to gather more intel, can be to reach out to former campaigns in your product category - both successes and failures - to ask the founders for advice. You would be surprised how willing most people are to sharing their strategies and ideas. Remember the timing of launch is important too and the preparation for a campaign does not happen without a lot of input!
If you're still scratching your head, you can always schedule a call with me.