What You Need to Know Before You Start Crowdfunding
Last night was Impact Hub’s second Theory and Practice round. This time they treated us to an expert panel discussion on the pains and gains of crowdfunding and the learnings were pure gold.
On the panel were co-founder of Tollabox, Oliver Beste, Bastian Neumann from Fairnopoly, Harald Schottenloher of FundedByMe, Konrad Lauten from Indiegogo and co-founder of Orginal Unverpackt, Milena Lebowski.
We’ve put together a little roundup of the key points and learnings for those of you who missed it. And for all of you who would still like to put your skills to the test, the practice workshop is coming up on Monday, May 26th. You can sign up here.
Check if crowdfunding is even right for you. Don’t underestimate the cost of crowdfunding, both in terms of human and financial resources. You never get money for free. Crowdfunding is a lot of work and expect to invest considerable time and money into creating a successful campaign. Also, don’t use crowdfunding as a last resort. If you’re in a high-risk industry or if you’re running out of cash and haven’t been able to get investors or people you know to support your project, don’t try to squeeze your last pennies out of the crowd.
PLAN PLAN PLAN. Over plan, even though you can’t really plan. It’s hard to know what to expect and difficult to anticipate what sort of reaction your campaign might get. If you’re one of the lucky ones and your campaign does go viral, you’ll need to be prepared to handle the press attention, answer phones and respond to your growing community. That said, plan each day and make sure you have people dedicated to managing your crowdfunding campaign once it’s live. Don’t assume the work is over once you’ve kicked off your campaign.
Consider the nitty-gritty. On that note, who’s going to respond to all the incoming mails and calls? How will you handle critical questions about your business model or project? In this case time really is money and you need to be able to manage things immediately as they come up.
Choose the right platform. Spend time researching different platforms and choose the one that’s right for you. Are you doing crowdfunding or crowdinvesting? What is the main user group on the crowdfunding platform, are they your target group? Does the site specialize in a certain industry? What are the terms of the site? These are big questions you need to ask yourself before committing to a platform. Choose a site that fits your project and the industry you’re in.
Get legal. Once you’ve decided on the platform, pay attention to the deal. This is especially critical for crowdinvesting where you might be liable for paying money back in the future. What are the terms? What percent does the platform take? When do you get the money? Don’t let yourself be in for a nasty surprise down the road. Do your research now and save yourself a lot of pain down the road.
Learn from others. Take time to check out other successful campaigns and see what worked well for them. Watch their videos, pay attention to the script and let yourself get inspired. But also be realistic about what you can achieve with your resources. Adapt ideas in a way that fits your budget and your target group. And remember, it’s easier to raise money for an idea that touches a lot of people. Think about your messaging and how you can make your story relevant to as many people as possible.
Be annoying. Be prepared to remind people again and again that they want to support you. Don’t feel bad. It may feel like you’re spamming but often people forget that they wanted to make a donation, so keep asking. At least 7 times.
Build trust and transparency. People will give if they like the product, like you, and believe in the idea behind it. Being transparent and building trust with the crowd is critical for a successful campaign. People are less likely to give their money to something that seems sketchy. How will you spend the money? Who are you? This relates to the point above on being communicative and engaging with your community during the campaign. It’s important that you’re open and present during the campaign so that people trust you and your project. Here the press can be both a friend and foe. Getting positive press can boost your credibility and draw attention to what you’ve already accomplished. On the other hand, the press might jump on your weak points and can also have a damaging effect on your reputation.
Get early adopters. Get your friends and people you know to invest right away. Once others see that people are investing, they’re likely to jump on board. (This goes back to the issue of establishing trust- people will trust a campaign that seems to be doing well.) Another big point here is that investors are likely to go on the site early on and judge a campaign based on first performance. If they see the campaign is performing well, they’ll be more likely to invest since it gives the impression that this is something the public/community really wants and is interested in.
Get creative with your rewards. Don’t have a fancy product or big budget for your rewards? Invite “big givers” to a home-cooked dinner. Offer something one-of-a-kind that fits your mission or service. Also remember that the rewards can be purchased after you crowdfund, so though you don’t need this initial capital, you’ll need to factor that in in terms of what you hope to earn.
Thank you Impact Hub Berlin for another great event!