Part 1: Introduction
Recently we have received requests from you about the phenomenon of Crowdfunding. Following our earlier ARTICLE on the subject we have seen Crowdfunding being used in both the private and not for profit sectors, by individuals and organisations keen to ride the wave of this innovative fundraising method. Over the next few days, we here at EntreCity will show you how to get the best out of a Crowdfunding campaign. This will include canvassing pre-launch and post-launch strategies and ensuring that your product/service is the right fit for this type of fundraising.
Why The Fuss?
Crowdfunding has taken off in a big way in recent times with companies like Kickstarter, Indiegogo, Crowdonomic creating platforms for budding business owners to tap into large fundraising reserves by connecting them with potential customers-turned-investors. Many people are using this approach not just to fund raise but also to gain customer approval of their product/service and to pre-sell their products. You can raise funds for any project using crowdfunding – whether you are making a movie, creating photography projects, selling technology services or fashion products – the list is endless! Crowdfunding also works really well for social advocacy projects or getting not for profit and charitable initiatives off the ground.
What makes crowdfunding distinct from other types of fundraising is that you are essentially raising funds for a project that is near execution or on the verge of being executed.
Is Crowdfunding For Everyone?
In short, NO. It is important to ensure that your product/service is the right fit before using crowdfunding as a means of raising capital. Use the questions below as a guide to see if your product/service can benefit from crowdfunding or whether another type of fundraising will be better suited.
1. Is Crowdfunding the right platform for me?
With Crowdfunding you are interacting with the public and engaging with potential customers directly. Compared to having VCs or Angels as investors, this may not give you access to good advice or networks that may help you grow as a business.
There is a chance that due to the lack of right advice and backing, your campaign may not succeed or grow as big as you want it to. This may be something that could be avoided if you have access to good mentors and investors and a good network.
On the other hand a successful campaign could open the door to a plethora of investors who may line up for a product that already has many potential customers on board.
Using crowdfunding also means having a solid business plan in place. The reason behind this is that your investors and customers (from the crowd) are looking to see a product or a business ready to go. They are not there for you to use their money to figure out what you need to do. Rather, they are looking for someone who has found a solution to their problem and is ready to execute their plan.
If you do not have a proper plan in place, then maybe you are not at the right stage to use crowdfunding. Remember, you are not trying to convince just one individual to invest in and/or buy your product – you are convincing many.
2. Is my product right for this audience?
You should really know and understand your product – this necessarily involves knowing and understanding your audience. Ask yourself whether your product is something a potential crowdfunding audience would want or need.
Some products are for end-consumers and some products are for business-consumers. Where does your product fit? Will the audiences of crowdfunding sites be open to your idea? Will it benefit them?
For example, your product could have the potential to ease the lives of individuals working in the corporate sector – however is this enough? Often your crowd will consist of individuals from other sectors – will your product make the life of man on the street easier? Why would they be interested in investing in, let alone buying, your product?
Basically you need to have a product that tugs at the heartstrings of your target audience, while switching on the light bulb in their minds, interesting them to open up and support your project. You have the passion – the trick is to rub some of that passion off on them!
Crowdfunding is for me! What now?
Now that you have assessed your options and concluded that crowdfunding is suitable to raise funds for your project, you can get started on launching a crowdfunding campaign.
Stay tuned for Part 2: Crowdfunding Pre-launch Strategies where we will go through a checklist of what you should cover before launching your campaign. This includes having a clear goal in mind, researching appropriate crowdfunding campaign, understanding your target audience and setting out details of rewards to your funders.
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