- Are you sure you need funding at all?
- If you are, then test your idea with friends and relatives first
- Get them to spread the word and test it on their friends
- Is your product exciting enough?
- How do you intend to create the buzz?
- Are you ready to handle the huge volume of communication?
Understanding how suitable your project is for crowdfunding is an essential part of campaign preparations. Your project is well suited for crowdfunding if you have a clear idea for creating something that people need. A crowdfunding project must excite people and get them emotionally involved with the outcome that you want to achieve. An important thing to remember is that many investors look for interesting and relevant products – it is good to target a particular community. To a large degree, a successful crowdfunding campaign is based on the appearance of success and popularity…
Understanding how suitable your project is for crowdfunding is an essential part of campaign preparations. There may be aspects to your project that actually make it more suitable to another form of financing, e.g. bank loan. Crowdfunding is rarely the sole source of funding needed and often complements other sources of funding. Raising money in this way needs to be considered only as part of an overall business plan. You should review your funding needs with your accountant or financial/business adviser.
Your project is well suited for crowdfunding if you have a clear idea for creating something that people need. How do you know if you do? Why not test your idea with people who are close to you, who wish you well and who have your best interests at heart. Pitch your idea to your friends or relatives and see what they think. If they think there might be something in this, you then need those people to spread the word and ask their friends what they think. Getting some feedback from people who are strangers to you is also very valuable, and a good indication of the response you might get from the general public.
To take this further, you could pitch your idea to a larger audience or focus group to feel what sort of excitement you can generate. If your idea is good, you will have gained your first fans by the time you’re through, and the word will start to spread. When you have done all that, you’ll have a pretty clear idea about whether your project would fly or flop in a crowdfunding campaign.
A good crowdfunding project has a vision that excites people and gets them emotionally involved with the outcome that you want to achieve. You need to have a vision that can be defined concisely, and communicated clearly in an engaging manner. You also need to understand and communicate what you need the money for. Campaign communications need to be managed by somebody on a daily basis to create and maintain a buzz and keep your project in the consciousness of potential investors. Would that be you or someone who works for you? Crowdfunding can be risky if it means that your business has to do without your day-to-day input. You need to evaluate the possible disruption to the business and therefore the real costs of the campaign.
It is important for a good crowdfunding campaign to finish relatively soon. Ideal duration starts from a couple of months and few successful campaigns would be longer than half a year. Does that fit with your schedule? If you have a bigger project in mind, you could always trim it a bit, or split it into two.
Crowdfunding suits certain types of products and has a higher success rate within certain sectors. Really, you need something that will deeply appeal to a particular audience. You should establish if your offering is suited to crowdfunding and whether the crowdfunding platform you are considering has a track record of success with similar businesses in your sector.
Obviously, your product needs to be something that people can’t just pick up at their local supermarket, and ideally it should be something that is not easily available online. Your product needs to solve a real problem that people have that they don’t have an answer for or it has to create enough emotional appeal, so that people would be willing to contribute to something new or interesting. Think in terms of niches… some of the most successful crowdfunding campaigns have targeted specific sectors. Consumer products tend to be more attractive to the general public than Business to Business (B2B) opportunities.
Considering all of the above, are you sure you want to go the crowdfunding way? If you’re sure, and your friends and relatives are sure, and their friends and relatives seem to be sure, then your project is probably very well suited for crowdfunding. If some of the above are not, then you could also contemplate other more traditional forms of funding.
Please keep in mind that any form of funding is only a step in a large stairway. Your aim should be to build an enduring business – not just to raise ‘one-off’ money.
To a large degree, a successful crowdfunding campaign is based on the appearance of success and popularity. You need to work hard to achieve that, and in the end there are no guarantees of success. If you feel that you need extra funding, and your project is suitable for crowdfunding then, in reality, you need to have identified about one third of the funds beforehand from friends, family and investors before you commit to a public campaign. You might then expect a crowdfunding platform to provide a third, and finally your customer network to provide the rest.
If you decide to try it out, we wish you the best of luck!