What Makes a Great Fit?
For many startups, a crowdfunding campaign offers an outstanding way to raise growth capital that can help transform a prototype into a product and an idea into a viable business. For a new business, it can present some real advantages over traditional financing, like having a greater reach, requiring a smaller investment of time and money, and bearing a smaller barrier to entry.
But is crowdfunding right for you? In this chapter, we’ll look at some of the most important characteristics of successful crowdfunding campaigns to help you decide if your business is in the right place to look more closely at this approach to fundraising.
Characteristics of Successful Crowdfunding Campaigns
They tell a story that prompts action – One of the most powerful things about crowdfunding is its ability to tell your business’s story. So make sure you’ve got a compelling story to tell—why you invented your product, where your team came from, how your ragtag startup will one day change the world. Don’t just ask for money. Make your backers feel moved to want to become a part of your story.
Their founders have perfected their pitch – Your customers and potential investors are fickle—there are dozens of things vying for their attention and they don’t have all day to read your company history, flip through your brochures, or click through your pitch deck. Smart founders who close the most successful campaigns know that, and they approach their crowdfunding pitch with that in mind. That means touching on the points that are meaningful to their specific audience, and doing it in an easily digestible format like short videos, infographics about market size, or a list of key facts about the industry. Above all, they keep it simple—you want to make it as easy as possible for your target investor to connect with your story.
Their founders are active on social media – One of the most powerful things about crowdfunding is its ability to tap into the social web and spread faster and wider than would be possible through traditional methods like personally reaching out to investors or embarking on a road show. This rapid spread is possible because of tools like Facebook and Twitter, so it’s a given that your business needs to be active on those networks and, ideally, have an engaged following well before launching your campaign.
Their founders already have large, supportive personal networks – The greater and more engaged a business’s personal network is before starting a fundraising round, the more likely it is to meet or exceed its crowdfunding goal. Fundraising success begins with tapping into this established fan base—getting friends, family, and existing customers informed and excited about your crowdfunding campaign before it actually launches. We recommend what’s called a soft launch—at least a month before kicking off your campaign, use social media, email marketing, and old-fashioned word-of-mouth to spread the word to this base without actually asking for money. Doing this will help get the word out and make these people more likely to back you later on, lending your campaign some crucial early momentum.
Take this bit of wisdom from the prolific Seth Godin on why many crowdfunding campaigns fail. His example deals specifically with Kickstarter, but the lesson can be applied to any crowdfunding campaign.
“Kickstarter campaigns fail when the tribe of people who believe in the idea is too small…[it] appears to be a great way for fans to find your work. You put up a great video clip and a story and wait for people who will love it to find you. But that’s not what happens. What happens is that people who ALREADY have a tribe…use Kickstarter to organize and activate that tribe. [It’s] the last step, not the first one.”
They offer compelling rewards – It may seem obvious if you’re considering a rewards-based crowdfunding campaign, but it’s worth thinking long and hard about. Most backers aren’t going to decide to support your business simply out of altruism or goodwill. While a few supporters may pledge money solely to see your business succeed, most are going to be swayed by what they get out of it. Rewards come in all shapes and sizes, but are most often a pre-order or discounted first-run purchase of the product you’re raising money to create. Think carefully about your rewards tiers, always offer something at $20 or below, and be sure to encourage a larger pledge by bundling each higher tier with all the rewards that come before it.
They include a video and other shareable content – We mentioned the importance of telling a compelling story about your business, and there’s no better way to do that than with a well-produced video. By working with your audience’s short attention span instead of against it, a short video (less than 5 minutes) can make your story come alive and stick in your supporters’ minds better than any other medium. As an added bonus, it’s just the right kind of easily sharable content that the social web thrives on, and that helps give successful campaigns their reach and momentum.
Soft Launch – Getting the word out to your audience—friends, family, existing customers—about your upcoming crowdfunding campaign, usually at least a month before your actual launch. Using social media, email marketing, and word-of-mouth, this is an effective way to build awareness and make an initial pitch before actually asking for money.