The Numbers Behind Crowdfunding
Crowdfunding is democratizing the access to capital and with all the encouraging news stories, every inventor, creator, engineer, and startup would want to launch a crowdfunding campaign today to fund the next big thing since sliced bread. Kickstarter, the New York City-based crowdfunding platform saw 31 percent of its campaigns reach their fundraising goals in 2016, according to the report. That’s the highest success rate among the five crowdfunding platforms included in the study.
The High Failure Rate of Crowdfunding Campaigns
Twenty-six percent of crowdfunding campaigns on Vancouver, Canada-based FundRazr met their goals in 2016, and a dismal 13 percent fully-funded success rate for San Francisco based Indiegogo. These numbers smack in the face of what the press is reporting about the crowdfunding industry as a place to make easy money for your startup.
Crowdfunding The Real Story
This is what the press is not reporting the amount of time, energy, marketing savvy, and work it takes to build an engaged and excited crowd of backers to complete a successful crowdfunding campaign. The pre-launch, a 3-6 month preparation stage before the launch of the campaign is crucial. After years of working on crowdfunding campaigns in many different facets, I have learned this one fundamental rule: Crowdfunding is a compound word and if you don’t build an engaged and excited crowd before the launch of your campaign you will not get the funding your desire.
Implementing The Pre-Launch Strategy
There are many steps to creating a pre-launch strategy and the first step is to create a budget and a timeline. So many people head into crowdfunding campaigns with little knowledge of the cost of both time and capital that this 3-6 month process will entail. Always begin the with a timeline that realistically documents the task, the team member responsible for completing the task, and the time frame that task will be completed. This will be the driving force for staying on track while moving along this very labor and time intensive journey called a crowdfunding campaign.
These are the steps that must be completed during the pre-launch phase of the campaign.
- Create consistent messaging and branding – Every company has a brand, whether they make it a priority or not. A brand is what people think about your product and the impressions they have when hearing or seeing your name. In most cases, your brand is reflected initially in your logo, and then supported by your messaging. These experiences influence attitudes and opinions about your company, product, or service. A good brand is built over time and requires thought, strategy, and consistent implementation.
- Leverage your social capital – from the inside out to ensure 30% of the funding goal is guaranteed by friends, family and anyone else you can line up to make a financial contribution to your campaign on the day it launches. If you can raise 30% in the first couple of days of your campaign, you significantly increase your chances of reaching your goal.
- Build an email list – Your email list is the lifeblood of your crowdfunding campaign. The more emails you have the better and using social media like Twitter and Facebook ads to drive traffic to a landing page to collect email address is vital. Services like MailChimp allow you to send out emails and drive traffic to your campaign page when it launches.
- Build your crowd using Social Media – that is large enough so you can tap into not only for financial support but also to share your campaign with their followers. Twitter is the most active social network in the crowdfunding sphere. Depending on your funding goal and how many followers you currently have, this process can take several months. The goal is to identify and connect with relevant supporters and build a targeted audience.
- Run a Press Release – Create a press release through a service like Press Release distribution and high impact media lists. To make your campaign look attractive to journalists, do not send your press release or contact media before you have reached the 30% funding milestone. Journalists don’t just write about campaigns so they become successful, they write about successful campaigns in the making.