Crowdfunding has had its share of success stories. Fundraisers have secured millions to develop everything from hotels and electric cars, to devices that track lost wallets to creative film projects. Along with offering a chance to bypass the loan process, crowdfunding presents an opportunity to interface directly with your customer base and offer advanced previews or other goods in exchange for a monetary donation.
There are rewards-based crowdfunding sites—like GoFundMe, RocketHub, and KickStarter—that enable you to give perks to donors, like t-shirts or first dibs on the up-and-coming product. There’s also equity crowdfunding portals, in which you not only offer perks, but give company shares in exchange for capital. The popular fundraising site IndieGoGo recently partnered with Micro Ventures, an online venture capital platform, to offer equity-based crowdfunding.
While crowdfunding can be a viable option for raising funds for your business or launching a new product, in order to achieve success with this process, you need to familiarize yourself with some facts about crowdfunding and learn some of the best practices utilized to operate this type of funding medium.
This 30-day challenge to help you launch a successful, reward-based crowdfunding campaign. Over the next four weeks, we will post content that will outline some steps you can to take to reach your goal and raise much needed capital for your venture.
Week #1: Pre-Planning is VERY Important
1. Do Some Research
Look at similar campaigns to get ideas about what your campaign will look like and determine your timeline.
2. Cultivate Donors
Don’t count on large donations from strangers. Taking into account your current network, make a list of who your donors might be and how much they can contribute.
Create a spreadsheet with everyone that you will contact. Then, reach out to them to let them know that you will be running an online campaign soon, and that you would like for them to contribute. Give them your desired donation amount, launch date, and closing date.
3. Set a Realistic Goal
You should also calculate how many people need to give. Some online funding platforms will only award money if the funding goal is met. Additionally, they may take a penalty when goals are not met. This is done to encourage active solicitation of donors. If you only need $15,000, don’t set a funding goal for $25,000.
Also, calculate how many people need to give at a specific amount to achieve your goal. For example, a goal of $10,000 would require 200 people to give $50.
4. Schedule Your Big Donors
For potential new donors to have the confidence to invest in your company, you need to have at least 30% of the money you are seeking already raised before you go to the crowd. This is where your list of donors comes in.
Have a few donors contribute to your campaign as soon as you go live, one or two to donate in the middle of the campaign, and one large donation toward the end of your campaign. Being strategic about larger donations from your network will build momentum and make others more enthusiastic about donating.
5. Be Totally Active Online
How much money you raise depends on how many potential donors you can reach. Make sure you have a social media calendar from start to finish. Build out your Facebook fans, your LinkedIn connections, your Twitter followers, and your email list. You need social currency, first.