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How To Fund Your Product Idea With Crowdfunding?

posted Nov 12, 2014, 12:34 AM by J Shaw   [ updated Nov 12, 2014, 12:35 AM ]

Crowdfunding has become a popular social media and marketing strategy for small businesses across the globe. Crowdfunding allows small-business owners, innovators and inventors to raise financing from the gracious people of the Internet willing to donate to the cause. While fundraising is the greatest appeal to crowdsourcing, entrepreneurs are also able to gain insight into product development and bounce ideas off one another when appealing to an online crowd.

Crowdfunding sites like Kickstarter and IndieGoGo attract hobbyists and wannabes, but they can also net real cash for those who use them strategically. With savvy profiles and targeted campaigns, some aspiring entrepreneurs are even raising amounts in the five or six figures. Here’s how they do it.

Once you have an idea but have no money to fund it you need to create an investment plan.


Selling the masses on an idea requires a well-crafted profile and key to that is a persuasive video component. In fact, people have found that campaigns that include videos raise 114 percent more money than those without. The consensus is that showing at least one of the people shepherding the idea to creation is important, as is getting to the point quickly. It is a good idea to front-load the video with the most important points, assuming that people are going to click “stop” after about 30 seconds.

Offers in exchange for funding are also important. 93 percent of campaigns that reached or surpassed their targets included perks, such as presales of the product in development. Seventy percent of successful campaigns included between three and eight perks, most correlating to levels of funding.

Campaign Promotion

Successful campaigns typically pack heavy promotion into a short period of time – 30 days or less is the optimum campaign length. It is found that profiles with four or more external links–to Facebook, Twitter, LinkedIn, YouTube or the company’s own website, raise twice as much money as those without. Building a following and communicating via tweets, Facebook updates, e-mail and text is critical to creating momentum and keeping potential backers informed of the project’s status. Successful campaigns usually have the first 30 to 40 percent of their stated goals funded by the project owner’s personal contacts. For overachieving campaigns, bloggers and high-profile social media users have proved critical.

Investment Alert

Be aware, crowdfunding promises are raising securities concerns. Product presales and perks for funding are popular elements of many crowdfunding campaigns. But don’t offer equity or a financial return on investment in your company in exchange for donations, as this can quickly put you on the wrong side of securities laws.

Some Crowdfunding sites

Kickstarter is a user-friendly, supportive medium for those looking for financing. The website provides tutorials for users on how to craft the best proposals, how to film video pitches and what information needs to be included to make a proposal competitive. The site also brings in backers through the promise of rewards. Individuals will set up a proposal to create a product, and in exchange for funding, backers may receive a free item upon completion, regular updates, personal communications with designers, etc. That creates a loyal base of financiers who will spread the word about a project to increase the likelihood that they’ll receive their payoff.

However, with Kickstarter, if a project creator doesn’t hit their funding mark, they can’t collect. For example, if a project creator sets a goal to raise £30,000 in 30 days and by the end of the month they have raised £29,999, they won’t get anything.

Indiegogo is a flexible funding option. On Indiegogo, when a project does not meet its intended fundraising goal, the creator will still get to keep what they raised. If a designer isn’t sure how well their product will initially appeal to a large audience and is worried they may not reach their goal, Indiegogo is the perfect place to start.

While flexible funding option is a huge plus for Indiegogo, it doesn’t come cheap. Even though project-starters are able to collect on a fundraising total that falls below the target level, Indiegogo will charge a 9 percent fee, which can take a serious toll on even the largest projects.

Your own network

Also, keep your network in mind. Do you have a supportive fan base that appreciates your work? You may come up with a brilliant design for a product in the middle of the night, but it takes a community to support your ideas. Remember to consider the time and effort involved with production and fulfilling your fundraising rewards. It’s often more time consuming and costly than you think.

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