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Three Tips For Navigating the Crowdfunding Economy

posted Jun 20, 2014, 2:22 AM by Siamak Ebarhimi

It’s hard to imagine that just two years ago, the Oculus Rift—a virtual reality device that’s been called “the future of gaming“—was just an idea in its founders’ minds. But after raising $2.4 million on crowdfunding platform Kickstarter in September 2012, tech startup Oculus VR was able to launch its vision in earnest. That funding was a critical step in the development of the Oculus Rift and a major step toward the company’s $2 billion acquisition by Facebook. This story and others like it are precisely why the crowdfunding landscape has become—well, crowded.CrowdFunding advertizing


Given the hundreds of different funding platforms that now dot the internet, it’s no surprise that the crowdfunding economy has more than tripled since 2011, totaling an estimated $5.1 billion in 2013. With so many entrepreneurs vying for funding, creating a successful crowdfunding campaign is more challenging than ever.CrowdFunding marketing

“There are many entrepreneurs who consider crowdfunding a route for free money that doesn’t require preparation,” says Sang Lee, CEO and founder of Return on Change, a platform for accredited investors to engage in equity-based transactions. “However, like any other capital raise, there needs to be a lot of ground work done before launching a campaign.”Kickstarter Marketing

Before you venture into the crowdfunding marketplace, make sure you’re prepared to compete. Here’s how:

1. Determine the business fit

“Crowdfunding is a great option when you have a great idea for a product and are without a lot of working capital,” says Diana House, co-founder at Cole + Parker, a company that makes bright, colorful socks and uses the proceeds to support entrepreneurs in the developing world.Indiegogo Marketing  

House and her co-founder—a husband and wife team—relied on crowdfunding to get their business off the ground.

“When we started Cole + Parker, we needed to generate funds for our first production run, as well as show pre-sales for our Dragon’s Den [a television series in which entrepreneurs compete for funding] appearance,” House said.crowdfunding websites

By using the crowdfunding platform IndieGogo, House and her husband were able to pre-sell more than 42,000 pairs of socks within a few weeks of finalizing their concept— but still months before they had a physical product.

Crowdfunding helped House and her partner establish proof of concept and validate their business idea. It also offered a way to build awareness about Cole + Parker—a critical step in establishing a pre-launch customer base.

“It’s a great way to test an idea before losing your shirt by going to production and then realizing that no one wants your product,” House said.crowdfunding marketing

2. Be realistic about your product and your business

“Crowdfunding isn’t a great option if you have a very expensive product with a very small niche market,” House said. “It’s also not a good idea if you don’t have the time and resources to set up and manage a crowdfunding campaign.”
While many entrepreneurs have found success through crowdfunding, it isn’t right for every venture.

House emphasized that crowdfunding campaigns require significant PR muscle.crowdfunding advertising

“They are very time consuming and take way more energy than often thought,” she said. “Before you launch, you need to create a public relations strategy, as well as set up your campaign and video.”

3. Use your network

While a strong PR strategy is key to a successful launch, it’s only one part of a larger undertaking.

According to House, gaining momentum early on is a must for a successful crowdfunding campaign. “Before you launch, talk to friends, family and peers ahead of time and see if you can get their commitment to support your campaign,” House said.indiegogo marketing

Sang Lee also stressed the value of starting offline. “Business owners should always have started an offline campaign before launching an online campaign,” he said. “The earliest commitments to a campaign are always within the first degree of networks. This early form of support can help inspire additional investment.”

Success in crowdfunding requires more than an interesting product or a great story. You need to have a mature business plan in place, and you must be ready to commit the time, energy and resources necessary to build a thriving business.kickstarter marketing

“A crowdsourcing campaign is a great experience,” House said. “It can be exciting—even exhilarating. It can lead to a lot of new connections and hopefully some decent pre-sales. That said, it is a lot of work, and you need to go into it with some skepticism and low expectations.”

Ritika Puri specializes in business, marketing, entrepreneurship and tech. She writes for American Express OPEN Forum, Forbes, Investopedia, Business Insider, CMO, the SAP Innovation Blog, and others.kickstarter project


 By David Khorram