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Crowdfunding Tips


crowdfunding-tipsWhether equity crowdfunding via the JOBS Act or reward crowdfunding (under current law) most entrepreneurs still don’t develop a successful crowdfunding pitch. The amount of preparation and work needed to garner funding from the crowd is grossly under estimated by startups. We see projects posted without an introduction or concept video and in many cases with virtually no resources behind the startup.

In effort to combat “submission garbage” and clear the air on just want it takes to get funded, we would like to point out some crowdfunding tips by revealing the 5 deadliest sins entrepreneurs make when posting a project.

1. No Project Video

Any project that is posted without a video is dead on arrival. We are in the visual Internet age of Youtube and Pinterest and people expect to see a  high quality video that demonstrates your startup service or product. Yes, this will cost money but you will not get funded without one.  You likely need a promotional video to properly market your startup anyway so this should not be a prerequisite for just crowdfunding.

2. No Entrepreneur Profile

Transparency is the name of the game. The crowd must believe you are both credible, skilled and have what it takes to see your startup succeed.  You must personalize your startup story and explain in detail why you deserve a Backers hard earned cash.  Backers are looking to make a connection with the Entrepreneur and a good back story will pay dividends.  Be sure to include pictures, videos and supplemental documents. A quick litmus test for an entrepreneur’s credibility will be if you you even exist in social media. If you are looking to raise money through crowdfunding you should have a social media presence. If you can’t answer the basic question of “who am I” and “this is what I’m about” then a backer is already gone.

3, No marketing budget

Most entrepreneurs feel they can just post a project on a crowdfunding portal and watch the floodgates open and cash pour in from the crowd. This couldn’t be further from the truth and the traffic from a portal alone is not adequate enough to get funded. Entrepreneurs should not expect to gain more than 5 – 10% of overall funding from the portal traffic itself. Heavy traffic portals like Kickstater may have a higher percentage but the truth is most crowdfunding portals act as a facilitator and conduit between Backers and Startups. The burden of getting funded is almost entirely on the shoulders of the entrepreneur.

Developing a  marketing campaign is essential to success. A marketing budget should be a percentage  of the overall capital you a raising.  If  you’re looking for $75,000 expect to spend at least $7500 to raise it! Press releases, social media, content marketing, reaching out to to influencers and bloggers, out-bound marketing like Facebook, linked-in and adwords ads are usually in the recipe as well.

Between 60 – 70% of you will not get funded which is just the reality of the crowdfunding space, but the buzz you generate for your startup is a marketing tool in itself.  We have see many startups get funded “offline” as a result of trying to get money from an “online” crowdfunding campaign.

4. Funding Tiers are too high

The idea behind crowdfunding is to bring the power of the crowd to your startup via micro-finance. Many entrepreneurs submit crowdfunding tiers priced at $500 and $1000 thinking this will achieve success faster. The reality is most Backers invest / pledge in the lower accessible tiers like $5 and $10 dollars.  You are more likely to get 10 people at $25 than 1 person at $250. This is not to say someone will not fund at a $250 dollar price point but the reward should be commensurate with the dollar amount, which segways to one of our last crowdfunding tips.

5. Rewards Suck

Rewards should be awesome, unique and limited in number per tier to create urgency for the backer. when it comes to rewards it’s all about the Backer and what is in it for them. If a backer is going to place money in your startup you likely convinced them you are worthy as an entrepreneur and have a startup they deeply care about. Now it’s time to finish the Backer off by giving a reward that will exceed his/her expectations. Often the reward will be a discounted product or service with early delivery. Sometimes it will be tickets to a launch party or inclusion of the backer in the startup process somehow. The sky is limit when it comes to rewards just make sure it is great.

Hopefully you find these crowdfunding tips useful and you may just avoid the 5 sins of posting your startup.

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