Don’t be one of the 70% of campaigns that fail to reach their target. Here’s everything you need to know about crowdfunding.
Growing a new social venture takes time, effort and money. And while you may have an endless supply of passion to grow your enterprise, it’s unlikely that you’ll have an endless supply of cash.
In fact, it’s possible that at some stage you’ll need an injection of funds to get your venture off the ground.
From securing funding upfront, catapulting your visibility or testing if a social venture concept will fly, more and more change makers are turning to crowdfunding over traditional forms of finance.
In fact, in 2015, an estimated US$34 billion worldwide was raised via crowdfunding!
In this post I’ll explain what crowdfunding is and how it works. I’ll also share my top five tips on how to successfully crowdfund your new social venture and why you should consider it as an option to not just raise capital, but to grow your enterprise.
WHAT IS CROWDFUNDING?
Crowdfunding is the action of raising capital for a project or venture upfront by receiving monetary contributions from a large number of people. The supporters ‘pledge’ their monetary support for the campaign in exchange for a reward. Rewards can be a product or service, or even just a public acknowledgement of thanks.
HOW DOES CROWDFUNDING WORK?
To set up a crowdfunding campaign, you upload the story of your project and where you’ll invest the funds into an online crowdfunding platform like Kickstarter, Pozible, Chuffed or Indiegogo. Different tangible rewards are specified for different amounts of monetary pledges.
There are two types of crowdfunding campaigns – an ‘all or nothing’ campaign (where you only receive the funds if you reach your campaign target) or a ‘receive everything’ campaign (where you receive all funds regardless if you reach the target). Naturally, there are advantages and disadvantages for each campaign type.
The platform will prompt you to specify a period for the crowdfunding campaign and once you hit publish, you’re on your way!
Despite what many people believe, running a crowdfunding campaign is not a set and forget exercise. Once you’ve hit publish you’ll need to drive as much traffic as you can to your campaign to ensure you trend high in the platform and receive the financial pledges you need. Sharing your campaign in social media, traditional media, email marketing and other methods will all increase the potential of your campaign reaching, or exceeding, its target.
TOP FIVE TIPS TO SUCCESSFULLY CROWDFUND
Since a reported 70% of crowdfunding campaigns fail to reach their target, it’s wise to do your research before launching your campaign. Most campaigns fail due to lack of preparation. You can’t make improvements to your campaign or compensate for a lack of preparation after you’ve hit the launch button.
Here’s my five best tips to help your campaign succeed:
- Make it about the CAUSE – Many crowdfunding campaigns fail because the creator makes the campaign about THEM rather than the CAUSE. People love to get behind a cause so communicate yours well and you’ll be rewarded with support.
- Employ the ‘No pledger left behind’ philosophy – Make every pledger feel valued and appreciated and they will be further inspired to share your campaign. List and tag (where possible) every pledger in social media and provide regular status updates to keep your pledgers in the loop.
- Stay in the game – Almost all crowdfunding campaigns hit a slump in the middle of the campaign that can throw you off your game if you’re not careful. So many campaigns fail simply because the campaign creator gives up before the campaign is over, not realising that in many cases the bulk of support flows in during the last few hours, and in some cases (like my campaigns), the final minutes!
- Choose All Or Nothing – It’s a big leap of faith to go All or Nothing but the statistics are very clear – All or Nothing campaigns are the most likely to hit their target. This could be based on the simple principle that your campaign supporters don’t want to see you fail. They want their rewards and would hate to see the sum of cash raised go to waste if you didn’t reach your target. This contrasts to Flexible Funding campaigns when you’re basically telling pledgers that you’ll happily accept whatever funds you raise. The urgency is missing in these campaigns and there’s not the pressure for people to get behind them.
- Have a Traffic Strategy – While angel investors are indeed out there, the reality is that 9 out of 10 pledges typically come from traffic you send to the crowdfunding platform. It therefore pays to have a traffic strategy in place before you launch. In addition to regular social media, blog posts and email marketing leading up to and during the campaign, it’s smart to include guest blogging, traditional PR and paid online advertising in your crowdfunding toolkit.
Crowdfunding your new social venture has many benefits beyond simply raising money.
A successful campaign will give you the confidence that there’s a market for your product or service BEFORE you run off and create it. Better still, it will harness a group of passionate supporters who believe in your vision and will cheer you along every step of the way.
Laura Trotta is a Online Business Specialist at The Xfactor Collective.
To hear Laura speak on this topic, and other topics, jump into the links above or go to the ‘THE X-CHANGE’ YouTube channel. Laura is a Foundation Member of The Xfactor Collective, and she is one of Australia’s leading sustainable living educators. She also coaches conscious business owners to tap into the power and reach of the internet to grow their brand. You will also find many of the other specialist consultants from The Xfactor Collective community sharing their expert knowledge at THE X-CHANGE video library which now contains more than 130 helpful videos for you to advance your mission. The Xfactor Collective is a community for social change-makers and game-changers, and includes a growing group of specialist consultants, a Concierge helpdesk service and other support services.