The JOBS Act, passed earlier this year, eases restrictions on raising small amounts of cash from investors — meaning aspiring entrepreneurs now have access to funding without having to go through a bank or a venture capitalist. There are still some SEC issues to be worked out regarding equity, but we’re ushering in a new era of funding for startups and small businesses. Kickstarter is by far the most well-known of the crowdfunding websites, but it’s certainly not the only one. (In fact, Geben helped launch Fundable, a site that aims to be the crowdfunding site for serious startups.)
The Pebble Watch recently secured $10 million in funding, making it the most successful Kickstarter project. Raising gobs of money parlayed into major media coverage, too, helping to introduce crowdfunding to the masses. So, it’s only logical that now people are trying to figure out if/how they can make this kind of fundraising work for them. I kid you not, I’ve had multiple clients/prospects ask my thoughts on launching a Kickstarter project for the PR value. To that, I say:
A Kickstarter is not a PR tactic. But, PR is key to a successful crowdfunding campaign.
Is crowdfunding a good PR strategy? Not likely. But, in some cases, it can be a good business strategy — but only if you reach your campaign goal. You see, that’s the catch with most of these crowdfunding sites. Let’s say you need to raise $10,000 to get your idea off the ground. That means you have to raise all $10,000 by a specified deadline. If you only raise $9,000, your backers’ credit cards won’t be charged, and you won’t receive a dime. Crowdfunding is an all-or-nothing game.
Once you’ve decided crowdfunding is the best way for you to secure dollars needed to launch or scale your businesses, how can you ensure your crowdfunding campaign is successful?
- Build a network before you need it. This may be rule #1 of social networking. Time online needs to be time well spent. If you’re just talking to yourself — or broadcasting into cyberspace — you’re going to struggle to raise capital from your online connections. Instead of waiting until you need to ask people to donate, build and nurture a network ahead of time. Before coming with outstretched hands, try to help others first. Get to know them. Learn what makes your network tick. In addition to building a stronger network, this added intelligence will make your “ask” more effective.
- Swallow your pride. Asking someone for money is never easy. But, that’s exactly what crowdfunding is. You’re asking people — friends, family, strangers — to financially support you. Fundable’s Wil Scroter tells entrepreneurs to be prepared to raise 30% of the total campaign from their friends and family. This isn’t an “if you build it, they will come” situation. To be successful, you need to jump-start the momentum. Do that by asking your inner circles for money.
- Get creative. There are thousands and thousands of projects available, so what makes yours stand out? How are you going to rise above the rest to pique the attention of potential backers? This requires some creativity — whether it’s offering out-of-the-box rewards to people who pledge to support your campaign, or incorporating some “stunts” or high-visibility efforts to let people know what you’re up to. Along those lines …
- Create a marketing campaign. Start by identifying the types of people who would be most likely to buy your product/service. How can you get your campaign in front of them? For example, combine traditional media relations and blogger outreach to begin generating awareness and calls-to-action among key audiences. Don’t forget about influencers. For example, Rachel Sklar stumbled upon the Bia Watch — a GPS sports watch with a panic button made by women for women. Rachel is founder of “Change the Ratio” and all about supporting women entrepreneurs. She wrote about the product for Huffington Post and posted many updates on Twitter, asking her network to help the watch reach the finish line and raise $400,000. While this connection seemed to happen organically, be proactive to facilitate logical connections like this. When putting your marketing plan together, don’t forget low-hanging fruit, such as email marketing and contacting organizations/associations in your community or industry.
- Listen, learn, adapt. At first glance, crowdfunding seems easy, right? Post an idea, raise money. Having seen a number of companies attempt crowdfunding, I can tell you with confidence that it’s not as easy as it appears. Measure what you’re doing. Track your PR/marketing outputs and outcomes to see what’s working and what’s not. If the campaign isn’t gaining traction, ask why. Dig deep, and be open to constructive criticism. Learn from this feedback and be willing to try new ideas. If the messaging is too jargon-y, if the need for your product isn’t clear, or if people simply aren’t inspired to back it, it’s time to recalculate your approach.
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