This post was written by Andrea Fabbiani, volunteer at Beta-i. Andrea focuses on crowdfunding and its ups and downs.
Let’s talk about crowdfunding! Nothing new for the most of you but a topic always on the edge, who doesn’t need money?
Crowdfunding comes in different shapes, reward-based or equity-based. While in the first case backers pre-order the product or make a free offer for a small reward, in equity-based the prize are unlisted shares of the company running the funding campaign.
Who has never heard of a super successful project on Kickstarter? it might appear pretty straight-forward, prepare a home-made video explaining your project, write something about your company some clicks here and there and the magic happens, money! But the truth is that is not rainbows all the time, there is much more behind.
The first issue is to find the right platform for your campaign. As of 2012, there were more than 450 crowdfunding platforms, which one fits best your needs? On the one hand there are Kickstarter and Indiegogo, both reward-based platforms, well known for their creative and innovative projects, on the other hand there are Appbackr, for new apps development and Crowdrise that is a place for donation-based funding for causes and charity that serve niche markets.
On the early stage of your campaign you have to align your big idea and prepare an outstanding video to introduce your project, here there is the need of a wow effect, there are ideas that sell by their self but the most of the projects need a good presentation to arouse curiosity and interest. However your campaign video is not enough, you have to provide your audience with a detailed business plan, goals, timeline and the rewards for each amount pledged and here is were you earn credibility.
At this stage you’re just at the very beginning of the challenge. Once your campaign is up and running you have to start moving and quick. Backers will have the most disparate questions and will pretend exhaustive answers. Within the first hours your campaign is live will move either upward or downward in a spiral and a good media coverage will make the difference between success and failure. Kickstarter for example has a strong and active community, projects can easily reach tens of thousands potential backers only within the platform and there is a lot of bloggers reporting about interesting projects.
If your project doesn’t reach the funding goal, well, is a pity but not everything is lost. What the most don’t know about the Coolest Cooler is that it didn’t reach the threshold of 125,000 US$ in 2013 and now is the most successful project ever backed with more than 13 million US$ So you might have a second chance but don’t waste your time!
Looking at those numbers increasing second by second will be amazing, the amount of people believing in your project will be just mind blowing but don’t forget to keep up with the good work, backers pay a lot of attention to your project timeline. They will require continuos updates to know what’s going on with their money and rewards.
Even after your campaign is over you will have to answer a lot of question and to solve a lot of doubts about your project until you deliver your final product and everybody is happy. Bear in mind that backers are not happy with changes and want to have the first place in your mind every time there’s something to communicate, even slight delays in your schedule.
Crowdfunding has ups and downs, like a roller coaster. On one side is easily accessible to everyone with a good idea. The process of fund raising become smooth and relatively fast but is exactly that easiness that might lower your perception of responsibility, you’re not risking your own capital. On the other side, the number of investor, compared to VC, increases exponentially and might be difficult to align all your backers with your vision. Lastly, you might have a great business idea and find a lot of support out there, but is your company ready to deal with thousands of new “customers” all in a single shot? Think about it!
Andrea.