Too often, entrepreneurs launch a crowdfunding campaign on a platform and anticipate “platform traffic” to convert into “campaign customers” and by the time the campaign is over, they feel like they’ve been let down. In their defence, the major platforms have done a poor job of educating the market on crowdfunding.
The number one tip and the most important tip from us would be to treat crowdfunding like any marketing launch – if you’ve decided to take a product to market, then be prepared to put in the hours to make your business succeed. Crowdfunding is a 30-day marketing campaign, it’s as simple as that. And in order to win a marketing campaign, you need:
- A killer team: be prepared to hustle like crazy during these 30 days and for that, you need man (or woman) power! You need every single plastic hater to know you’re in town with a shiny new sustainable material to save the day!
- Set realistic and achievable targets: it’s better to get flooded with funds than to not meet your target, in all-or-nothing campaigns, you won’t walk away with a dime if the latter.
- Spend a significant time on testing your reward packages prior to launch: get feedback from potential customers and identify the market trends
- Network: without an existing community, it’s almost impossible to succeed at crowdfunding. Build incredible and durable relationships who you can rely on to push your campaign on launch.
£42 million was facilitated through rewards-based crowdfunding platforms in 2015, with a 62% year-on-year growth rate (£21m in 2014, £26m in 2014) according to the 2015 UK Alternative Finance Industry Report. This is because crowdfunding has proven to be immensely beneficial for startups:
- Market validation: Getting feedback from customers is a key component to building a successful product and company. Crowdfunding is an inexpensive way of reaching thousands of potential customers and finding out what they think. Instead of putting an order through for manufacturing your product, hiring staff, building a website or investing in other expenses, you can create a campaign page and test how many people are interested in buying your product. You’re able to go directly to your customers and sell your idea.
- Pre-orders/Sales: The success of a startup is measured by its traction. Without sales or month-on-month growth, it’s hard to sustain a company. Through crowdfunding, you have direct access to a market and are able to sell to your potential customers to secure pre-orders for your product. If you meet your goal, you have demonstrated market traction which forms the basis of any successful company. You can then use this traction to scale the business, either through further investment or sales. Crowdfunding enables you to attract buyers who are willing to pay you cash today for the promise of you and your team fulfilling it at some point in the future.
- Brand awareness: If you launch a campaign right, you build an awesome tribe that follows your journey from here onwards. These are the people that are taking the plunge despite no guarantee of you fulfilling their order, all because they believe in you. They’re giving you their money on a promise and trusting you even though the product does not exist yet. You can’t build this type of bond between a buyer and seller anywhere else. Not only that, you get to create awareness amongst customers, industry leaders, journalists, possible hires and even investors.You’re also able to create brand ambassadors as people wanting your product understand that without a successful campaign, the product will not get shipped. This results in organic growth and engagement which fosters deeper and more meaningful relationships between you and your community.
- Access to low-risk capital: The reason why alternative finance has grown so rapidly is because entrepreneurs are reluctant to give up equity or pay high interest on loans when first starting out. When you’re still deciding on the vision and direction of your company, it’s imperative that you do this on your own terms – this can only be achieved if the control stays with the founding team that conceptualised the original idea. Without investors or banks hijacking your vision, you can test the market and validate the need for your product by launching a crowdfunding campaign to collect orders. As there are no upfront costs and you only have to pay the platform if you succeed, you’re playing in the low-risk territory.
- Intros to potential investors/press/hires: Speaking to people or organisations who could put sizable sums of money towards your business is crucial for a crowdfunding campaign. This could make or break your campaign, and/or scale your business through investment. It also helps to completely hone your pitch before you start investment fundraising. If the power of crowdfunding is harnessed correctly, it can give products access to additional capital, major press or an opportunity to go ‘viral’. You’re able to be innovative and creative with your story and reach those customers big brands are unable to reach due to lack of storytelling.
Unfortunately, over 60% of crowdfunding campaigns fail. Most unsuccessful campaigns have one or more of these three problems: traffic, conversion or pricing. Some campaigns are successful in securing large volumes of traffic but are unable to convert their traffic into customers due to a poor pricing/reward structure. Other campaigns have a high conversion rate but not enough people landing on their crowdfunding page. Make sure you prioritise all three.
A few additional things to keep in mind:
Your crowdfunding video is the first thing users will look at, it’s your number one asset. After this, they will browse through the number of backers and funds you have already secured.
The magic in successful campaign videos is rooted in storytelling. Keep it under 3 minutes. Talk about: 1. Why you are here on UpEffect 2. Where is the money going? 3. Key steps that you took 4. Founders 5. The story – why does the world need this product or why is the world bad without it 6. Make the ask
- The second thing users look at after your video are your rewards. If these aren’t priced correctly, you can lose out on customers.
- Rewards-based crowdfunding platforms are like stores, not a donation platforms. Let your potential customers know the RRP for each reward and ensure your reward price is less than RRP. You’re trying to secure pre-orders and you need to incentivise your backers with exclusive discounts that are only available through the CF campaign. Crowdfunding platforms are stores with a risk, with stores like Amazon, there is no risk of order fulfilment whereas there is always this risk with crowdfunding campaigns which is why you need to compensate backers by giving them a discount
- Your goal with every reward should be to get the reader to read the next reward. You do this by hooking them with valuable offerings. Get rid of digital high fives or ‘get your name on our website’ type rewards, it’s offensive to offer this for £5 or £10. Introduce a £1 reward and give backers a valuable digital good and then sell this to hundreds of people.
- Offer limited rewards eg) to the first 100 backers
There are not that many people in the world who reach into their wallet and say “I have £50, I’m going to check out Kickstarter or UpEffect and make a contribution to a campaign.” You have to hustle hard to reach your target.
- “Crowdfunding campaigns get funded before they launch, not during the 30 days, it’s all about the pre-work”
- You should have 90% of the funds secured before going live. The additional 10% comes from people that see you’ve already raised 90% of your goal but you have to hustle to get it.
- Have a flash page for collecting email addresses. Between now and your launch, the most important thing is collecting pledges and this can take months. Start collecting email addresses as soon as you decide you want to launch a crowdfunding campaign. You need a huge tribe to succeed. If you’re starting cold with no tribe, it can take between 3-4 months.
- Press: target smaller blogs with dedicated readers/followers. Make a list of blogs related to your market and contact all of them saying “If you write about us, you will get a free product and a giveaway for your readers”
- Find similar successful crowdfunding campaigns and figure out who wrote about them. One hack is to download their images and upload these to Google, search and see results of where the image has appeared. Contact the writers and ask them to write about you.
- One trick is to offer a valuable digital guide through a landing page in exchange for email addresses – if this guide is truly valuable, readers will feel indebted to you and will be interested in paying you for a later offering eg)crowdfunding rewards
- You don’t need to market to everybody, you need to market to targeted audiences. Focus on specific tribes eg) Mashable might have a huge following but their readership might not necessarily convert into customers for you, however, a smaller blog focused specifically on your market is more likely to convert. Don’t mistake press for marketing.