I’ve been reporting on crowdfunding since it first started to take off in the U.S., around the time crowd-lending site Prosper.com debuted here in 2006. Now, it seems every startup owner and creative artist I meet has a Kickstarter or Indiegogo campaign going on.
Unfortunately, most of these crowdfunding campaigns are doomed to fail. Why? Because the people who created them have no idea how crowdfunding works.
I know this because many of them email me, with one of two requests: They either want me to give them free consulting about how good their campaign is, or they want me to write about, tweet about, or otherwise promote their crowdfunding campaign.
None of those things are going to happen. I’m not part of your PR team. The days when sending out a press release that breathlessly announces, “I have a Kickstarter campaign!” would get you media coverage and free exposure to potential backers are long gone.
But thousands of startup entrepreneurs continue to entertain the fantasy that if they slap something up on Kickstarter, they can alert the media, quickly raise hundreds of thousands of dollars, and presto! Instant company. Or, in the case of creative artists, instant funding for their dreamed-of movie, online TV series, CD, comic, or book of photography.
Here are the mistakes I see many entrepreneurs and creative artists making, and my tips on how to save yourself a lot of wasted time and effort if you want to try crowdfunding:
For example, I got an email this morning from a would-be rapper in India who’s decided to try to raise $7,000 on Indiegogo to record an “album” about his “life, pain, and struggle.”
He knows no one. I don’t want to be the one to have to break the news to him, but his campaign is going nowhere. Guaranteed.
I know what he’s hoping — that somehow, being on Indiegogo or Kickstarter will mean thousands of moneyed people will find his project because they’re browsing the platform, and they’ll decide to give him money. Randomly. He has no portfolio, no track record, no email subscribers, no popular mentors who might tell their crowd about it.
But somehow, lightning will strike. He’s hoping to just get lucky. Him and thousands of others.
Here’s the problem: Crowdfunding platforms are not magical cash machines. They’re simply a more efficient way for you to reach many potential backers than calling them on the phone or meeting them in person, one at a time. You still have to know some people you can pitch.
Nearly 20,000 projects were funded on Kickstarter last year. Which sounds exciting! Like it’s easy to get funded.
But in reality, less than 41% of approved Kickstarter campaigns get funded — and Kickstarter tells me another 20% of projects submitted are rejected, and never see the light of day. So really, it’s closer to one-third of all attempted campaigns that get funded.
But entrepreneurs get all starry-eyed over the moonshot success stories. They read about a mega-hit Kickstarter campaign, and think they’ve discovered an easy route to massive cash. Mostly, they will be wrong.
Having covered many of the most successful crowdfunded startups over the course of eight years, I’ve noticed a pattern. All the startups that get big money from crowdfunding have five things in common:
Nearly every successful project I’ve ever seen was from an artist or startup that already had customers, fans, followers…a list of people to whom they could announce their crowdfunding campaign. Or you have mentors who have big lists they’re willing to mention it to.
Primarily, these are the people who’re going to go to the crowdfunding site and give you money.
If you have no built-in audience for your campaign, it’s not going to matter how sexy your video is, or that your idea is amazing. You are unlikely to raise the money to fund your campaign.
Or, to quote Kickstarter’s own FAQs, “In most cases, the majority of funding initially comes from the fans and friends of each project.”
For some reason, every entrepreneur thinks they will be the exception to this rule — that their project is so mind-blowing that random strangers will hop on board. But that rarely happens.
Instead, companies with an established customer base often do well funding a new product on Kickstarter or even their own site. The latter happened when hot nail-polish startup Julep recently crowdfunded a new nail-polish applicator they wanted to introduce.
Before you get excited about using crowdfunding, ask yourself how you would drive visitors to your campaign page. If the answer is, “No idea,” work on that first.
Though the founders of the company, Wobble Works, weren’t very high-profile entrepreneurs — one was an MIT inventor and the other had experience in toy manufacturing — they were able to raise $2.3 million in 2013 for the unique product, which is now for sale on Amazon and elsewhere.
Crowdfunding is not a build-it-and-they-will-come situation. Before your launch day, you should have a marketing plan in place for how you will get the word out. You should have also been preselling this — talking for months prior to your audience about what you’ll be offering and giving them updates on the progress to launch day, so that they’re already primed for interest.
Ideally, you won’t be marketing alone. You’ll create a launch team of influencers with big audiences of their own who’re willing to help you during this time. You’ll be scheduling tweets, doing guest blogging, sending out emails…anything and everything you can think of to get eyeballs to your page.
One of the most important marketing tools in an online crowdfunding campaign is the video. Yet, many entrepreneurs try to do this on a shoestring, and produce something unwatcheable that generates zero excitement. They either do it themselves, or want to pay peanuts.
Note: Your video has to be engaging enough to get people to share it with their friends, and ultimately, to put up their money. Don’t scrimp here.
One thing that’s impressed me about every successful campaign I’ve ever seen is how creative and fun the rewards are. It’s not just “get one of our new widgets.” I’ve seen donors get personal calls and emails from founders, ‘behind the scenes’ tours, special limited-edition versions of the item in question, a consulting session, steep discounts off the planned retail price, additional products in their gift bag, volume discounts for buying 10 of the item at once, and more.
Think about what you can give people that would motivate them to donate. Realize most “donors” aren’t going to give you money just because they think you’re cool. This isn’t a charity drive. They’re not getting an equity stake like they would if you went with traditional seed funders, so you’ve got to offer them something else that has real value to them.
If you can’t put at least four of these five elements in place for your campaign, your odds are long that you’ll fund even a few thousand dollars, much less enough to start a serious business. It’s worth planning carefully and asking hard questions about whether crowdfunding is a viable option for your situation before you try this.
Posted from : http://www.forbes.com/sites/caroltice/2014/10/20/the-myth-of-magical-crowdfunding-and-what-actually-works/