Thinking about launching a side business or getting your passion project off the ground? Consider crowdfunding—the practice of allowing your buyers or accredited investors to fund the development of your idea. Many successful initiatives including the Pebble Smartwatch and the Oculus Rift have relied on crowdfunding to bring the projects to market.
But the space is challenging to navigate—and competitive. While the success rates for the majority of crowdfunding platforms are not publicly known, Kickstarter has reported success of around 45% of the campaigns that have been run on its site.
These days, the barriers to launching a crowdfunding campaign are low, and there are numerous platforms at every aspiring founder’s fingertips. Fundable makes it possible to reach accredited investors. Meanwhile, Indiegogo and Kickstarter have opened doors for entrepreneurs to connect with potential customers.
How do you take the right steps for your venture? The following tips will get you going in the right direction:
1. Test Your Value Proposition Before Launching
After you launch your crowdfunding campaign, there’s no turning back. You need to be committed to your ideas, early customer base, and long-term positioning in your target market. While businesses often have the flexibility to pivot, crowdfunded initiatives can’t just change direction—many of your backers, especially on the consumer side, will want to receive your product.
So test your idea before you launch your crowdfunding campaign in full.
As an example, take a look at the following case study from Kittyo, a ‘kitten playtime meets tech’ company that generated 50,000 targeted visitors and gathered 13,000 email addresses shortly after launching. The company’s success, according to crowdfunding expert Clay Hebert was that they “laser-focused on the exact customers who would want to hear about their product.”
In addition to a thorough understanding of your customer base, it is important to establish a structured schedule for your campaign. Indiegogo reported that 30.5% of the campaigns run on their site that met their goals lasted between 30 and 39 days. Successful campaigns should build interest, maintain momentum and keep an audience engaged. The longer you set your campaign to run for, the greater the risk of losing your audience’s interest.
2. Focus on Your Backers
As you develop your marketing story, choose your platform, and launch your campaign, it’s easy to get caught up in all the buzz around your product.
Don’t let this buzz derail you—at the end of the day, crowdfunding is a means to reach your target customer base and audience. Take a look at Wiivv, a 3D printing company that recently ran a crowdfunding campaign to fund the development of their custom insoles product. With just 11 days left to go with its campaign, the company has raised more than $135,000 from 1,770 backers. The reason? Wiivv meets a big demand for custom insoles. Customers want to see the product launch and solve their problems.
Before launching your product or completing your campaign, it is important to keep your backers updated. Indiegogo reported that on average, successful campaigns post at least 4 updates prior to their completion. Additionally, on average, campaigns on the Indiegogo site raise 42% of their funds in the first and last three days of their duration, so it’s important to keep backers in the loop throughout the entirety of your process.
3. Always Be Persistent
Even if your crowdfunding campaign doesn’t take off, don’t give up. Consider the case of Coolest Cooler, as an example. When the company launched its first campaign on Kickstarter, it failed to reach its $125K goal.
But the founders didn’t give up. They launched a second campaign in August 2014, raising $13.3M and becoming the most successful Kickstarter project of all time.
The missing link between development and demand here?
It all came down to timing.
In mid-December, few people are thinking about their summer camping trips and the supplies that they’ll want to buy. Not to mention, consumers’ wallets are tied up with holiday spending. In the summertime, the company fared much better.
Crowdfunding successes aren’t based on luck. Companies need a well-defined plan and methodology. Test, iterate, and grow your successes—and use your crowdfunding campaigns to accelerate your product vision and strategy, too.
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