By Josh Ledgard
I can sum up how to make your business a success in one word: hustle.
It may sound cute, it may sound trite, but it’s definitely true. The only way you’re going to be able to turn an idea into the next great American obsession is through working your butt off to get funding and exposure.
As fate would have it, one avenue offers you both funding and exposure. It’s called crowdfunding, and it’s pretty awesome if you can get in on it. The good news is you can! The barrier for entry is low, so everyone is doing it now, and you can, too. In this guide, I’m going to explain what you need to know about crowdfunding and how to get started. Let’s go.
When it comes to crowdfunding, is this how you feel?
Here’s a quick definition:
Crowdfunding is a way to raise money from a crowd. This crowd can be your friends and family, customers, investors or complete strangers who believe in your idea.
Instead of going to the bank and applying for a traditional loan or hunting down the right investment firm that will invest big bucks into your idea, crowdfunding is a smarter option for many business. Here’s why:
You save time. You don’t have to spend months (or even years) searching for the right investor. It takes a lot of time to research investors and determine if they are the right fit for your business. Plus, just because you choose them doesn’t mean that they choose you. If they don’t choose to invest in you, then you’ll have to start over from scratch.
You extend your reach. With sites like GoFundMe, Indiegogo or Kickstarter, you have access to a wide cross-section of people. You’re not just reaching out to millionaires, you’re reaching out to the types of people who will actually purchase your product.
You can test the validity of your product or service. By going through a crowdfunding platform, you’ll find out if your idea “vibes” with your target audience. You can get important feedback on your idea that you wouldn’t have received if you went the traditional way of securing a loan through a bank.
You can tell your story with your crowdfunding. Banks aren’t moved by the emotion of your YouTube video. It’s all about dollars and what makes sense. However, when you’re appealing to a crowd, you can (and should) use emotion to get them to buy in to your idea. People expect to be moved and relate to you in some personal way.
You can market your product. You can appeal to a huge pool of potential investors. These are people who not only like your idea for a product but also want to buy that idea. Crowdfunding platforms do double duty because they also serve as a marketing tool.
You will get early adopters. Crowdfunding on a popular platform will generate people who try your product and love it. These early adopters who believe in you and fund your product can be turned into powerful brand advocates and will tell their social circles about your product.
There are three main types of crowdfunding. Let’s take a closer look at each:
The investors will receive a reward in exchange for their contribution.
Most people want something in return for their investment. Your eternal gratitude won’t move the needle. So, in order to compel people to invest in your idea, you’ve got to give them something in return.
You have options, depending on your product.
Sell pre-orders –The people who invest actually believe in your product and probably want it in their hands. So, what better way to encourage their investment than to offer them the exclusive opportunity to buy now?
Give away branded swag – Whether you’re giving away t-shirts, hats, mugs, signed books, or whatever makes sense for your brand— you’re showing your appreciation through a small but meaningful gift. T-shirts and hats are great because when your crowdfunding, investors wear them, they’re giving you free advertisement.
Unless you are running a nonprofit or are accepting donations for a charity, the donation-based crowdfunding model probably won’t work for your business. In this type of crowdfunding, you’re asking patrons to donate funds without receiving anything in return.
Donation-based crowdfunding works well for social and medical causes, such as help with medical bills or supporting education initiatives.
In this type of crowdfunding, your investors become part owners in your company. They receive a stake in your company in exchange for their funding.
You need a pitch. The best pitches identify the pain that the audience is struggling with. It can tap into their wants or needs. You’ll present your product or service as a long-lost answer to this problem.
You need several different pitches:
A handy elevator pitch – This is a 30 second spiel of what you offer. You should be able to share it with anyone on a moment’s notice. You’ll use this to communicate your idea in face-to-face meetings or chance encounters. I mean, your elevator pitch should be so ingrained in your mind, that you should be able to recite it in your sleep.
A website pitch –You’ll use this pitch on both your crowdfunding site and your own website. You need to think in terms of headline (how you grab their attention) and body (how you keep their attention).
It’s like your elevator pitch, in written form and a little more fleshed out.
On your landing page, be sure to identify:
An email pitch – You’ll be reaching out to investors left and right, so you need to be able to sum up on your plea in a few lines. In other words, if it takes me longer than two minutes to read your email, they are bored, and they are probably not going to invest in your product. It sounds too complicated, they may not get it and at this point, don’t want to get it.
However, if you can quickly get to the point and tell investors why they should care, they will be more likely to buy into your idea.
Getting started with crowdfunding is as simple as creating an account on one of the popular crowdfunding platforms, such as:
Don’t forget to download our best practices for crowdfunding so that you get started on the right foot.