Thursday, April 26, 2012

Crowdfunding…or how to raise money from complete strangers??

Do you need to raise funds to get your idea off the ground? Or, do you have a brilliant idea that you think will make your business more profitable, but your bank lacks your vision and refuses to give you a loan?  Perhaps you reached out to friends and family, but for whatever reason they said no. Is this the end of your business idea.  No, it doesn’t have to be.  Social media is changing more than the way we market and communicate… It’s changing the way we raise capital by doing CROWDFUNDING.
Crowdfunding pulls together a community—tightly knit or disparate—to fund a project, business or cause, usually via the Internet.  It builds upon the idea of crowdsourcing or the act of outsourcing tasks, traditionally performed by an employee or contractor, to an undefined, large group of people or community (a “crowd”), through an open call. Many crowdfunding websites are popping up that connect entrepreneurs with investors, producers with patrons, and causes with contributors.
Potential patrons can review the many pitches listed on the site and decide if there are any they’d like to support. On most crowdfunding sites, people are not investing in the project or business; rather, they are funding it. They are rewarded if the project comes to fruition, but don’t end up owning any part of the business or project.
This is in part due to U.S. regulations currently under review by the SEC so this may change in the near future. However, different sites have different rules, especially those based outside the U.S., so if you start a campaign make sure you review the terms and conditions of the site carefully!
Here’s how you start:
§  Create a pitch that clearly describes your project,
§  Specify the rewards patrons will receive if the fundraising is successful,
§  Create a funding goal and a timeline.
Each site has specific rules.  For example, there are sites (like Kickstarter) where you only get the money if you reach the goal within the timeframe you set out.  Other sites l(like IndieGogo) gives you the choice of taking the money as it comes in to use for your project or to take the money only if you reach your goal.
Also depending on the site you use, your campaign is connected to a PayPal account where the patron can make the donation.  If you are only taking pledges they are made with a credit card and the card won’t be charged until the project is successfully funded.
How do you get your projects noticed… and funded? A quick perusal of the crowdfunding website will show you that there is a lot of completion to attract people to specific campaigns.  You really have to make your campaign stand out from all the others.
Here are some tips on how to put together a successful crowdfunding campaign.
CHOOSE THE RIGHT CROWDFUNDING SITE:  Although there’s plenty of overlap in many of the crowdfunding sites out there, each caters to a specific audience.
Ø Kickstarter and IndieGogo attracts creative people who want to fund a project like a movie, a theater production or art exhibition. 
Ø ProFounder is great if you are an entrepreneur and starting a more traditional business
Ø Buzzbnk and 33needs are good if your idea has a social bent
Ø CauseVox and FirstGiving are specific for non-profits
Ø AppBackr focuses exclusively on the mobile app industry
KNOW YOUR TARGET AUDIENCE:  The key to raising money for your crowdfunding campaign is to engage your target audience to the point that they want to give to the campaign and help you make your dream a reality. This does not mean  to beat random people over the head constantly saying ‘give me, give me, give me’! That strategy doesn’t work unless you have a target audience plan.  You must have  an extensive email list of at least 1000 people, a large facebook fan base, and a long list of followers on Twitter. Your staff must also have great lists of contacts and people following them.
Many of the successful projects on crowdfunding sites target a specific, narrow audience. The target audience might be focused in a geographic area, religious in nature or share a common background.
PLAN AHEAD:  A crowdfunding campaign can go by very quickly.  Data from most sites show that the vast bulk of backers give at the very beginning and very end of a campaign.  This  makes sense…it is  exciting when it’s new and the excitement grows when it’s down to the wire.  If you have updates prepared for the campaign prior to its start all you have to do is consistently post them throughout the campaign.  Also have email responses and thank you(s) ready so that when someone contributes or pledges you can immediately send it off.  An immediate thank you goes a long way and probably will motivate the patron to tell others about your campaign.
In the future, I’ll be sure that I have emails written specifically for the beginning, middle and end of a project so that I can keep it active. When a project does take off it can be kind of overwhelming to respond to everyone quickly enough, so FAQ-type emails that are pre-written help a lot too.
CREATE A PASSIONATE PITCH:  As the saying goes, “you only get one chance to make a first impression.” It is even tougher on popular crowdfunding sites where there are 30 other projects simultaneously trying to make a first impression on the same page.  Create a compelling name, description and an image as part of your project to help you stand out. A video is critical, too.  People love to see things in action
HAVE A PLAN FOR SPENDING THE MONEY:  No matter how great your idea is, most people want to know that you’ve got a plan that will get you there.  You need to have a detailed explanation of how exactly you’ll be using their money and keep all costs transparent. This will build trust in you and credibility in your project.

LEVERAGE YOUR SOCIAL NETWORKS:  It’s important to realize that most of your audience may not be familiar with crowdfunding. Chances are you’ll need to use social media, email marketing and other communication tools to drive your community to your project at a crowdfunding site.  Having great lists and networking is essential.

BREAK BIG PROJECTS INTO SMALLER ONES:  None of your potential patrons are likely to drop $100,000 on your next big thing. Your project has a better chance of reaching its funding goal if you break the project into smaller, bite-size pieces. You might break your video into filming, editing and distribution. Rather than trying to raise enough to start a business and make payroll for two years, start by raising enough to build a prototype of that solar-powered toothbrush you’ve been dreaming about.  People like to feel like their contribution is going to make a difference. Fifty dollars makes a bigger splash when you’re raising $1,000 than when you’re raising $10,000.  Smaller requests seem more attainable, and people want to feel like they’re on a “winning team.”

CREATE COMPELLING REWARDS:  Put thought into rewards because people like to receive something.  Be creative.  If you are writing a book offer to list them in the acknowledgements if they donate a large amount.  Smaller donations could have more standard rewards.

TREAT YOUR CROWDFUNDING LIKE A CAMPAIGN:  Pitching the project is just the beginning, not the end, of the work. You need to continually drive people to your project page. Many crowdfunding sites use traffic and early success as indicators of which projects to feature. IndieGoGo states that 50% of deciding who gets featured comes down to “page views, number of funders, % of goal completed.”

TELL A STORY AND THAN ASK FOR THE SALE:  Be creative and have lots of updates.  Insert photos, blogs, videos, and testimonials.  Make sure people know who you are not just about the project.  Make sure you are visible within the campaign.

GIVE CREDIT WHERE CREDIT IS DUE:  People love to be acknowledged. Whether it’s on the liner notes, film credits or etched into the wall in your retail space. Let people know how they’ll be credited and follow through. It gives you a great story to tell and builds your base for your next crowdfunded adventure.

Successful campaigns require passion, a clear vision and a strategic plan that can be executed. You’ll get the most activity at the beginning and end of your campaigns, but you need to be working for your goals throughout.
Have you financed a project through crowdfunding, or are you planning to do so in the near future? If so, please share the details 

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