Entrepreneurs often see crowdfunding as free money which it is not. It is however, if done right, a way to have access to funds that most often banks or more traditional investors would not extend to your company or project.
Crowdfunding, like most anything else that may reap a benefit, requires effort. The days of just writing a short text on a popular crowdfunding platform and watching the money come in are mostly gone. Even Zack Brown, aka Mr. Potato salad project man on Kickstarter, will tell you that raising over 55 000$ took significant promotional effort on his part. Entrepreneurs who try and fail at crowdfunding identify their lack of strategic planning, knowledge, and/or lack of marketing/communication experience as contributing factors.
In order to succeed, you first need to find the right platform for your specific project. Then have your financial advisors help you figure out how much money you need to raise. The amount you need to raise will determine the types of investors you go after, the amount of effort required and the time needed for the campaign. Once this is done, let your marketing team take over. Marketing you say? But it’s about funding, finance. Why should I let my marketing team run this, because successful crowdfunding is about virality.
How does one achieve virality? The following is definitely not a foolproof recipe. If it was I’d be sunning myself on a yacht in some exotic location somewhere. These elements are however essential in achieving virality.
A good story
Aside from the business plan basics, that are not to be taken lightly if you are seeking larger amounts, you need to involve your investors emotionally. Entrepreneurs who have tried their hand in crowdfunding know that you need a good story to achieve this. What most don’t realise however is that it’s not a one-time text. It’s an on-going story with new chapters released with the right timing. More than this, it’s an interactive story that you create to answer your investors or potential investors’ needs as you figure them out along the way. A very basic example of this is how Zack Brown used the FAQ function to continue his story on Kickstarter. So, what kind of talent do you need to execute this step?
- Someone who can quickly identify and research investor segments and their characteristics
- A content writer who will woo your major investor segments with his or her words.
- A planner /coordinator who has an overview of all the attention directed to your campaign and will ensure the timing of new chapter releases are optimal.
Katamaris or the nucleus, the stickiness and large amounts of potential investors
Those who played the original Katamari Damacy on PS2 know what I’m talking about. If you haven’t, a Katamari is a constantly sticky ball that rolls around, collects everything it touches and can grow to celestial proportions. There are three components of this game: the nucleus, the stickiness and lots of stuff to roll over to increase your size.
The nucleus is where your first level network comes in. Family, friends, former co-workers and anyone else who owes you a favor should be called upon insistently to participate in the funding. They will become your nucleus. If you have multiple co-founders, employees that participate in the profit sharing, all of their networks should be utilised.
Once your nucleus is formed you then need to find stickiness agents to add to your Katamari. In crowdfunding, stickiness is the ability a person, an event or an information possesses to attract and influence positively the decision making process of a new segment of potential investors to invest in your project. If you excel at it, you’ll even get new investors to bring in their own network of contacts. Creating a stickiness plan requires knowledge of the investor segments you are targeting. The talent required here is:
- A market researcher familiar with demographic databases
Once you have a nucleus (the bigger the better) and stickiness for your Katamari you now need to find stuff to roll over i.e. more potential investors. Many entrepreneurs think that the popularity of a crowdfunding platform will do this job for them. It may help but it won’t get you the number of eyeballs you need to reach your goals. This is where you need a full promotional plan to bring the right people to look at your pitch page. The required talents here are:
- An experience marketer to plan your overall campaign
- An experienced media campaign manager (preferably someone with an large network)
- An internet marketer or internet campaign manager
It’s obvious that start-ups or small companies cannot afford an entire team of experienced people. You do however, if you want results, need at least one person with some experience in all of these fields of marketing and communication.
Honour your commitments to your investors
Think of this final step as paying forward. Crowdfunding has helped out your company. Now make sure that other entrepreneurs who follow this route can also have access to your investors. When you honor your commitments to your investors you insure that they won’t feel used, betrayed or disillusioned therefore being open to subsequent investment forays.
As you can plainly see, crowdfunding is not free money. It requires a lot of efforts and a good marketing team.