Crowdfunding, by many this is regarded as the ideal solution for raising money to finally be able to create your cool idea for a start-up company. We have all heard the success stories of companies making hundreds upon thousands of dollars through platforms such as Kickstarter and GoFundMe.
Successful campaigns include many different businesses and projects. From serious and innovative technologies like the Oculus Rift which was recently bought by Facebook for 2 billion dollars, to a potato salad which managed to get backed with an unbelievable 55,000 dollars.
However it is not a guaranteed success. As a matter of fact the majority of these campaigns never raise enough money to reach their goals. According to the statistics from Kickstarter, arguably the biggest crowd funding website, there are nearly 2 failed project for every success, with 14% of their projects never even receiving a single donation.
There are of course ways to increase your chances of success, and a good way to start is by avoiding these easy mistakes.
You have a limited amount of time to raise the money once you officially start your campaign so don’t waste it! To make the most out of a crowdfunding campaign you should start weeks, if not months in advance with your pre-campaign to gain as much interest and exposure as possible.
Make sure every detail of your campaign is planned out, and that you have prepared for different outcomes. Make sure you establish your presence before you start asking for money, and create high quality content for you crowdfunding campaign such as an introductory video and planned out schedule of updates.
Both during the actual campaign, but also during your pre-campaign it is essential to gain as large of a following as possible. You need to use every tool at your disposal. Think about social media, press release or guest blogging to gain followers and potential backers.
And this cannot be said enough, do not neglect your social media. Don’t just create a Facebook page and call it a day, create account on all relevant platform and stay active. Engage with your audience to show you care what they think. Keep people up to date about your progress and show them what their money will get them, out of sight is out of mind so make sure to remain visible.
Just because you believe that your idea deserves the backers’ interest and money it doesn’t mean the rest of the world agrees with you. There are hundreds upon thousands of other hopefuls out there thinking the exact same thing.
Don’t just put your product out there and hope for the best. You need to grab the potential investor’s attention. You have to convince them that they need your product. Show people that your product will be a success, by giving people a clear picture of you product and why it is better than anything else out there.
Don’t be greedy
While it may seem appealing to ask for as much money as you can, but it has been proven time and again that this is not an effective strategy. According to Kickstarter the majority of successful campaigns raise less than 10,000 dollars, and in any regard as the law is now you can only raise 1 Million dollars per 12 month period, so don’t expect to become a multi-millionaire through crowdfunding.
Before determining just how much money you want to raise with your crowdfunding campaign, you need to take into account how much money will go to third parties. Depending on the platform you use they can take a cut up to 12% of the total raised amount.
And of course don’t forget taxes, depending on your project you can be liable to pay taxes on the funds you raised form the categories sales taxes, income taxes, equity or gift.
Treat it like a job
Don’t underestimate how much work goes into it running a successful campaign. Running a successful crowdfunding campaign takes time and effort, and you should take it very seriously, and spend as much time and effort on it as you can. It is after all in most cases the main source of income for your project. It is essentially your job, so treat is as such.
It is not ‘’free money’’
Don’t forget that people expect something in return! Crowdfunding is an investment, not a donation. Depending on the amount of money a backer pledges, they expect some sort of reward in return, and this can become quite costly as well. These rewards have been known to get out of hand, with people failing to deliver due to the underestimation of the costs.
Set realistic expectations
Not just for yourself, but also when it comes to what you tell you backers. It can be tempting to exaggerate your capabilities in order to gain more attention but sooner or later you will have to deliver. And you don’t want to get stuck with a lawsuit because you failed to make good on what you promised.
A bit of luck
Unfortunately there is no way to guarantee a successful crowdfunding campaign and despite your hard work you may not find enough backers to finance your ideas. You are after all facing some daunting odds, but don’t despair, there are enough people that do succeed. And with a bit of luck and a lot of hard work you could become one of them.
By Eva Keller, a communication assistant at market-inspector.co.uk.