September 29 2020 – Varun Sharma
WHAT IS CROWDFUNDING?
Crowdfunding is the process of collecting funds/money to fund a project from a large number of contributors/investors via the internet. The process usually has three components:
1. THE IDEA: There is always a central idea or motive behind a project. This motive is put forward in a coordinated manner by the promotors or owners of the project to the contributors/ investors.
2. THE CONTRIBUTORS: contributors are a group of people who come together on a unique platform to fund a project.
3. THE PLATFORM: This is the regulating mechanism that brings together the initiators and the contributors. It is usually the crowdfunding website.
REWARDS OF CROWDFUNDING
The crowdfunding process, if executed correctly, grants many benefits:
1. IT COSTS NOTHING! For talented entrepreneurs like you who cannot pay huge sums for advertising and promotion, Crowdfunding is the answer.
2. CROWDFUNDING PROVIDES AN ARRANGED source of funds or capital. It frees you from the stress of going through banks or other financial institutions and clears many complicated formalities to solicit funds.
3. IT REDUCES THE RISK OF POTENTIAL LOSSES. The losses are hedged in a crowdfunded project.
4. CROWDFUNDING WEBSITES/PLATFORMS MARKET THEMSELVES AND THEIR PROJECTS TO FUNDERS: Marketing is a crucial component /side product of Crowdfunding.
5. IT BRINGS CREDIBILITY TO THE PROJECT FROM AN EARLY STAGE. Crowdfunding being utterly transparent, allows investors to track the progress at every step of the project.
6. IT ENABLES A PRACTICALLY ENDLESS FLOW OF IDEAS FROM INVESTORS AND THE PUBLIC. Since investors have a say in every development phase, crowdfunding projects always encourage the flow of ideas and constructive inputs.
7. IT CREATES AN UNSWERVING CUSTOMER BASE. Due to the vast visibility of the crowdfunded project on the internet, the project will inevitably create a lot of enthusiasm among potential investors and potential customers.
BEST CROWDFUNDING PLATFORMS
There are many websites devoted to the cause of crowdfunding projects you can use. Some well-known sites are:
CROWDFUNDING SUCCESS STORIES
Some extremely successful crowdfunded projects are:
1. STAR CITIZEN (VIDEO GAME): Stating a requested budget of $500,000 on Kickstarter, Star Citizen succeeded in earning USD 83 million!. The game holds the Guinness World Record for being the biggest crowdfunded project across all genres and platforms. Esteemed game designer Chris Robbers originated it.
2. PEBBLE TIME (SMARTWATCH): One more successful Kickstarter project, Pebble Time, brought USD 20 million against a $500,000 campaign target.
3. ETHEREUM (CRYPTOCURRENCY): Ethereum is a type of cryptocurrency and secure contract programming language and a Bitcoin project. It earned a total of USD 18 million.
4. COOLEST COOLER (PORTABLE COOLER): This little USB-powered cooler with a target of only $50,000, brought in a humongous USD 13 million!
14 REASONS WHY CROWDFUNDING CAMPAIGNS FAIL?
Though a lot of time, effort, and money go into a project, it doesn't always return anticipated results. Frequently, the reason for the failure of a crowdfunding project is a terrible campaign.
After analyzing a whole host of fruitful and failed crowdfunding projects, we can, with ease, classify the causes for campaigns on platforms. They are as follows:
1) CAMPAIGN IS NOT UNIQUE : The lack of a competitive edge is one of the main reasons for the failure of a campaign. When the service or products offered is not outstanding, competition arises. It is a challenging proposition to sell an idea that isn't unique and can convince investors to put in their hard-earned money in a product that cannot justify its competitors' rewards.
2) POOR PREPARATION AND ORGANISATION: A lot of groundwork is essential for a successful campaign. Campaigns also demand the investment of a lot of time and effort. Several months' worth of meticulous networking is mandatory to run a successful campaign. A poorly prepared campaign is a formula for disaster. Likewise, you can never expect to launch a campaign, then sit back and try to automate it – that's never going to happen. A campaign is not just a day's work – you need to be regularly monitoring your campaign and always be available to twist it to your advantage whenever the necessity or opportunity comes.
3) TIME IS NOT INVESTED: Time is of great importance to any successful campaign. When preparing a project, you should devote enough time to plan and promote. The project will head towards failure, Without a detailed plan that looks ahead.
4) THE CAMPAIGN'S MESSAGE IS NOT CONSTANT: It would not be possible to have all the people involved on the board unless the core idea is well-defined. Investors will be in the dark about the target, without clear goals and clear-cut strategies to achieve them. Investors may bank upon impractical objectives that will lead to conflicts later on, without proper communication.
5) NO VIDEO INCLUDED: In a successful campaign, the requirement of having a video is a must. Without a meaningful video that demonstrates the vision of the entrepreneur(s), a campaign's hope to succeed cannot be realized. A well-made video describes how you aim to go about your project and exemplifies why you are going for that project out of all the other projects. The video must be convincing and shared on multiple platforms while long enough to include all core messages and short enough to retain interest. It should have clear audio and should consist of on-screen captions wherever necessary to aid in understanding
6) THE CAMPAIGN IS TOO COMPLICATED: It is the best bet to have things simple and sweet when it comes to an advertising campaign. Too many problems in the campaign will result in a radical narrowing down of the target audience, and you will lose many potential investors just because your campaign was too tricky for them to comprehend.
7) THE CAMPAIGN TARGETS THE WRONG CROWD: It is vital for you as an entrepreneur to have the support of the right audience. Aiming one and all, irrespective of the domain of interest, is a futile attempt at advertising; it never brings the right people in the loop. It would be best if you spent a lot of time studying who your target audience is and listing outsources where you will gain access to them.
8) CAMPAIGN IS NOT EMOTIONAL: The campaign must be successful, strike a chord with the investors and the general public. You can't connect on an emotional scale with investors when you are not passionate about your project. Lack of passion and self-motivation will always result in a low image of the campaign. Failing to get investors excited will lead to a low prospect of investment in the campaign.
Again, different audiences respond to other emotional stimuli. It is crucial to study an audience to understand what they connect with. Once you are able to persuade an audience to act upon their hearts over their heads, you attain a successful campaign on your hands.
9) UNREALISTIC FUNDING GOALS: Another main reason for the failure of a crowdfunding campaign is setting impractical goals as far as funding is concerned. Numerous times, a project is under-financed owing to faulty predictions about capital necessities. Countless campaigns have failed because entrepreneurs disregarded vital areas of funding while preparing plans. Only a complete plan – one that takes care of all possible situations and scenarios, however, minuscule or trivial, will be fruitful in attracting the right amount of funding.
10) LOW EXPOSURE AND POPULARITY: Among many others, one of the critical reasons for a crowdfunding venture's failure is low exposure. Putting up your project on many crowdfunding platforms is just a little step. You need to comprehend that no one will know about your project without direction just because "it is there somewhere." You will need to actively push it on all possible social media platforms to get your project's best visibility. Harness the internet's power, and your friends, family, and acquaintances, everybody you know that has a social media presence to share your campaign. There are many options for a paid campaign on social media sites like Facebook– use them to your benefit. They will support you in reaching a relevant audience.
Also, the lack of a strong PR contact base will have a negative effect on your campaign. You will need to have as many PR contacts as possible before you start campaigning your project, understanding this is very important. For example, suppose you are planning on manufacturing a fluoride-free herbal toothpaste. In that case, it is crucial to create and distribute a PR article about the ill-effects of fluoride-based toothpaste and the benefits of herbal toothpaste on all platforms at least a fortnight before the actual launch of the product.
Also, sharing on all possible platforms doesn't most certainly mean spamming. It will have an appalling effect on your standing if your PR initiative is considered spam. Share your project on relevant media only.
11) CAMPAIGN PERKS DO NOT ADD ENOUGH VALUE: The primary drive behind your campaign should be to distribute certain perquisites to your stakeholders. Without a clear-cut set of bonuses, it would be beyond the bounds of possibility to grab the attention of any funder. A funder will only invest when he feels sure about individual returns that add value to his cause.
It would be best if you assumed that your investor is going to be selfish in demanding a fair return from his investment. Inverters invest, not out of affection, but out of trust and compulsion.
12) CAMPAIGN OWNER DOES NOT HAVE SUFFICIENT EXPERIENCE: Most projects meet with failure when the project owner or the entrepreneur does not have enough practice in the field. It is not irregular for an entrepreneur to pursue a project outside the domain of his direct experience. However, such an entrepreneur must associate himself/herself with people who have the necessary expertise and experience.
13) CAMPAIGN HAS WRONG TIMING: You may have everything well planned in your campaign, but just the one factor of wrong timing is enough to mess up your project's future scope. It is essential to start the project at the right time of the day, given the target audience's geographical location. For example, you are in the United States and your target audience is in India, you will need to establish a suitable time slot in India (not in the United States) to kick off your campaign.
At this stage, it is crucial to understand that for all projects in the United States and closeby regions, Eastern Standard Time (EST) is the established standard. Morning is the best time to initiate a project/campaign anywhere in the world.
14) CAMPAIGN IS "STUCK ONLINE": Yours can be an online marketing campaign. However, if you assume that the net is the simplest way to move about your campaigning, you are not farther from reality. In the face of so many effective campaigns that have taken place offline at a tangible venue, you need to take steps to establishes that you have a feasible presence outside the internet; you cannot have your campaign stuck online. Arrange promotional parties, distributing flyers, get posters up. These are some of the quickest ways that will help your campaign, giving it its much-deserved push.
11 THINGS YOU CAN DO TO PREVENT YOUR CROWDFUNDING CAMPAIGN FROM FAILING?
Many steps/measures need to be taken to ensure that your crowdfunding campaign is successful. Although you are an established entrepreneur or a start-up, you can use Crowdfunding as a powerful tool to reach your envisioned objective. Here are a few strategies of how you can approach Crowdfunding sensibly.
1) PLAN YOUR BUDGET: It is vital to have a budget planned right from the beginning so that you can include it in your campaign. Understandably, predicting an exact budget required for a campaign is something impossible to do. However, it is always a great idea to have a rough target set. Most crowdfunding websites set a minimum funding limit to all projects, so you must reach the minimum target or stand to lose all investments pledged by your investors.
2) PREPARE A GREAT STORY: Nothing sells better than a great story. When you add your information to your campaign, you help create an appealing proposal to help you take your campaign/project to the next level. A great story never fails to absorb the investor. Your story should connect well to both your intended objective as well as with your intended audience.
Also, always speak at a personal level. Connecting personally via speech forges an intimate bond between the speaker and the audience subliminally, which can relate to the speaker's story.
It is always great to back your ideas with relevant supporting images. A great video works miracles in nurturing the trust of the audience in your proposed product. If you have created a website with details about your product or offer, that can go a long way in producing sincere interest in your campaign.
3) PROVIDE VALUE FOR VALUE: A crowdfunding campaign maintains a give and take relationship between the entrepreneur and the investors. You are, as an entrepreneur, eligible for funding opportunities from your investors. Your investors are also permitted to receive perks and incentives in return from you. It is a best practice to develop incentives that are practicable and appealing to the investors. You would do well to empathize with your investors' requirements before you chart out a reward plan.
4) MAKE YOUR PRODUCT/PERKS PERSONAL AND SCARCE: It is almost always the "limited edition" product that sells like hotcakes in any company's product portfolio. Your product or offer will do so, too, if you bring some scarcity or exclusivity to your product and the perks offered to investors. Because shortage increases demand, when you limit your investors' most prolific rewards to a little number, you are without fail, generating a lot more interest among your investors to pledge loyalty to your campaign and grab the rewards. Making the rewards personal will mean that you have raised, the most generous of your investors, to a higher personal level.
5) BUILD CREDIBILITY: You might have heard the popular axiom, "Seeing is believing." In order to establish your reliability in the eyes of your investors, your campaign has to be genuine. You can corroborate your campaign's legitimacy by backing it up with elaborate details about the core motive behind the project. You can make use of slide shows and video presentations to make your point.
6) SHOW SOCIAL PROOF: When you start building up a support base for your campaign, it is always best to target specific individuals or groups with high credibility in their fields – they can be experts, analysts, advisers, or well-known investors. Once you have such vital entities in your fold, you will be able to emphasize their contributions towards your campaign. Highlighting essential people or groups as part of your campaign /project will attract more investors into the loop. It is good to understand that many individuals join a cause because people they know or have heard of have done so.
7) COMMUNICATE WITH YOUR AUDIENCE VERY FREQUENTLY: It is fundamental to continue communication with your audience at every step of your project. You cannot afford to ignore your investors out of your campaign. You should engage your investors at each stage of the decision-making procedure. You should send regular updates to your audience on the progress made and what plans you have for future action. Another vital aspect of this communication is that it should be two-sided. The audience should also be encouraged to develop their ideas and inputs to keep them engaged.
8. SET A REALISTIC GOAL: You can only collect your funds if you surpass the goal sum of your project on Kickstarter. Do some research before launching your project to avoid wasting your backers' time and energy. Create a realistic, bare-minimum budget for what it will cost to deliver the end product, and then set out to make nothing more. If all is well, you will reach your goal and walk away with a bounty of excess funds that you get to keep!
9. SET A REALISTIC DEADLINE: Promoting your project and alluring your fans to financially back it takes time. So give yourself enough time ahead to make sure you aren't racing against the clock to drive pledges. Make sure you allocate enough time to deliver the album on its proposed delivery date, as well as honor any commitments you've made to your backers.
10. PROMOTE, PROMOTE, PROMOTE: Just like in any other endeavor in your music career, you've to hustle to make people care and make people aware. Do you try to get new content posted on blogs and featured on other sites? Do you make flyers for your shows and post-tour dates online? Do you do everything possible to get your music on the shelves of your local record stores? Well then, your Kickstarter campaign is no exception. Indorse it rigorously online and lobby your most loyal fans to follow suit.
11. MAKE A GREAT VIDEO: Video is conceivably the most decisive and instantly engaging advertising tool in the viral landscape. Make an excellent video to run as a homepage trailer on your Kickstarter project page. Next, post it on YouTube and Facebook and tweet it as much as possible without annoying your followers. This process is harder to follow if you don't make a great video, so get creative there as well.