Crowdfunding Overview - 101

A Crowdfunding Introduction

Crowdfunding has evolved over the past several years from a place that had a perception, at least in some circles, that it was a place for starving artists to find people to donate money to help them with their artsy projects. To learn more check out FREE resources for e-commerce entrepreneurs check out www.empowery.org.

Everything from independent music, movies, photography, books and any other type of art imaginable found ways to reach new audiences through crowdfunding.

At that time crowdfunding rewards or perks were less about tangible items and more about “paying it forward” and supporting someone in return for their thanks. Many of the rewards were things like thank you emails or postcards or even the principle of the campaign would offer to host a dinner for fans. Each of these perks would be priced according to the effort and it gave people a quid pro quo feeling when they would contribute.

What’s Crowdfunding Like Now?

Today, by contrast, crowdfunding is a well respected platform for businesses and companies of all types to engage the most sophisticated early adopter audiences on the planet. Movie studios have harnessed this new medium to engage their prior audience and find new fans at the same time. The Veronica Mars Movie project raised over 5.7 million dollars with over 91,000 participating backers. https://www.kickstarter.com/projects/559914737/the-veronica-mars-movie-project?ref=most_funded Rewards for this project included everything from a bumper sticker to an invitation to the red carpet premiere event and even the chance to name a character in the movie.

Even independent movie producers have crowd funded their projects and in a number of cases raised millions of dollars from their fans. https://www.indiegogo.com/projects/super-troopers-2/x/7260196 One of the creative perks here offered to include a live bear in the movie if the fans can hit a certain fund raising target.

Game makers use crowdfunding to get their product launched and in a recent case basically just pressed different versions of the game with the option to have the game creator draw you a custom card if your backing level was high enough. https://www.kickstarter.com/projects/elanlee/exploding-kittens?ref=most_funded The explodingkittens.com campaign raised over 8.7 million dollars and put together over 215,000 individual backers. That is a stunning achievement.

One of the most famous crowdfunding campaigns is the coolest cooler. This campaign was originally launched and tried to raise $125,000. https://www.kickstarter.com/projects/ryangrepper/the-coolest-cooler-with-blender-music-and-so-much. It fell short by only getting around $102,000 worth of backers. Instead of taking this failure as a signal that the idea was stupid and by extension they are stupid and should quit the founders listened to their audience and reworked the campaign. How many people would be that resilient? Ironically when they relaunched for the second time after tweaking the campaign they lowered their goal to $50,000 since kickstarter.com operates on an all or nothing method of fundraising. It seems clear they had no intention of falling just short of their goal this time. However, the this second time around they raised over $13 million dollars leaving that fifty thousand dollar goal and the first failure far in the rearview mirror! https://www.kickstarter.com/projects/ryangrepper/coolest-cooler-21st-century-cooler-thats-actually?ref=most_funded

Here's a recent article that updates the coolest cooler story: https://www.digitaltrends.com/cool-tech/gosun-chill-cooler/

Why are people using crowdfunding instead of just launching?

Today the idea of using crowdfunding is taking hold in many companies as a proving ground for new ideas. After all, if you can’t get these sophisticated early adopters to engage with your project then what chance to do you have in the market overall?

The idea of getting 1000 or more preorders of product is also a great way to make your minimum viable product come to life. In the past years there were many cases of t-shirt makers launching their designs on kickstarter.com and if they could not pre-sell 1,000 units they didn’t go forward with that design.

That concept of testing became so popular teespring.com was born and became the de-facto standard crowdfunding platform for t-shirts. Imagine that, a specialized platform just for t-shirts. Yes - there is a crowdfunding platform just for t-shirts. And it is awesome.

Today there are tons of Made on Demand (MOD) and Print on Demand (POD) platforms including https://merch.amazon.com which has become a fast way to validate ideas and reach a massive audience.

Recently a crowdfunding pioneer came back and launched another campaign for their second generation of their product. Pebble had already become a very well known brand and used their original crowdfunding campaign as a massive brand awareness and capital generation tool. This most recent campaign was able to re-harness that prior momentum and it ultimately became the most lucrative crowdfunding campaign to date. Over 20 million dollars was raised in just 30 days with participation from over 78,000 backers on kickstarter.com. https://www.kickstarter.com/projects/597507018/pebble-time-awesome-smartwatch-no-compromises?ref=most_funded

Unfortunately having one or even more successful multi-million dollar crowdfunding campaigns does not insure your long term viability as a brand or company. Pebble may have launched the smart watch idea, but Apple came along and took it all away. To read that sad story check it out here: https://www.businessinsider.com/how-smartwatch-pioneer-pebble-lost-everything-2016-12

What does this mean to you?

If you have a unique project, product or idea that you believe has merit you should challenge yourself to see if crowdfunding is a good idea for you. Putting these campaigns together takes at least 3-5 months prior to your launch and they are a ton of work. Furthermore think about reality when considering your target amount to raise since most campaigns do not rake in millions of dollars.

It is common to see most campaigns in the ten to thirty thousand range (10,000-30,000USD) and less than half are successful. So being realistic about your goal is a good thing if you are considering crowdfunding.

Running a crowdfunding campaign is NOT as simply as posting the information. There is a lot of work to get down before hand and a lot of work during to engage your audience. Your campaign will be invisible unless you can tickle the ranking algorithm that your crowdfunding platform of choice uses.

Another thing to consider is that on some platforms there is a lot of clutter. Sites like gofundme.com and others are places that offer the freedom for anyone to place a project online. That can literally translate into people posting that they lost their iPhone and hope that people will donate to help them get a new one or even to buy them a new car or help them make their rent payments.

Those types of platforms, IMHO, are not viable for businesses to test new ideas. They are a different type of crowdfunding which is more donation based vs. a quid pro quo exchange of money for something mostly tangible with the business oriented platforms.

Where should I start my project?

At this time, in my opinion, there are only two choices for any serious artist, business or someone who is truly looking to make a real offer for something cool and unique in exchange for someone committing financially earn on.

Those two platforms are: indiegogo.com and kickstarter.com. Each of those have their own strengths and weaknesses, but that is an entirely new discussion. If you are launching a physical product I would ONLY consider one of these two platforms and carefully consider the differences.

For those entrepreneurs who are launching brands for Amazon or other e-commerce sales channels you can use crowdsourcing to validate the idea and help you gain from early sales. If your campaign gets lots of exposure and does not translate to sales, you know that you need to evaluate if your idea really resonates with the market or not.

Here are the top considerations if you are launching a physical product using crowdfunding:

1) Prepare the campaign well ahead of time.

2) Have a great video.

3) Be sure your page anticipates and overcomes objections.

4) Build a pre-launch list.

5) Within 24 hours you must get at least 25% to your goal or you will become invisible to the ranking algorithms on major crowdfunding platforms.

6) Indigogo is more flexible about the perks and offers you can make vs. Kickstarter.

7) Update often during the campaign.

8) Personalize the campaign.

My friend Mina Yoo - followed these steps and executed with excellence which resulted in this campaign: HEROCLIP CROWDFUNDING

To learn more about the differences between the platforms join other entrepreneurs at awesomers.com and opt into our VIP Entrepreneur list. Additional information about platform differences as well as the 7 secrets to running a successful crowdfunding campaign will be shared free in the upcoming weeks. We believe the world needs more Entrepreneurs!

Additional Facts and Findings:

Since I received a comment that my statements are "unsubstantiated" and that there dozens of other alternatives to the two that I think are the leaders, I am adding some additional comments here:

My statements are very qualified and are directed towards entrepreneurs who are seeking a quid pro quo type of crowdfunding(aka rewards funding). Context is very important.

I am NOT interested in a personal fund raising idea like www.gofundme.com which is absolutely credible, but absolutely not oriented towards businesses.

I am NOT interested in debt fund raising which is an entire category of it's own. Http://Moolahoop.com or https://zip.kiva.org are both credible choices for debt fund raising.

I am NOT talking about an equity fundraise which is a whole different category. https://Crowdrise.com is also credible, but is directed at charities and causes and therefore not applicable to my subject matter.

https://www.crowdfunding.com shows rankings that support my contention as well. The numbers support my opinion. 

Other sites that may exist may or may not be credible. I don’t have time to find out every single one and most entrepreneurs don't have time either. Our job is to make informed decisions quickly.

As an example the site www.fundanything.com originally started with a close association to Donald Trump as a credibility signal. That relationship appears to be over - so the question is does that change the site’s credibility or not? I honestly don't know. I am not a huge fan of Trump to begin with so it didn't make me gravitate towards the site in the first place. https://fortune.com/2014/12/04/donald-trump-bails-on-crowdfunding-site/

This site: https://www.crowdsourcing.org/directory lists 2,926 sites that are somehow crowdfunding related. I certainly haven't vetted each one. One thing I do know is that they are not all credible even if they are relevant to the rewards funding model.

Inc Magazine did a create a great Infographic Chart a couple years ago that talked about some of the niches and helped people navigate the plethora of choices. It is VERY comprehensive, but it is a bit older which has to be factored in. It is fun to take different ideas through the infographic. https://www.inc.com/magazine/201306/eric-markowitz/how-to-choose-a-crowdfunder.html 

Finally this article talks about the top 26 crowdfunding sites by niche. You'll note that my selections are validated once again in the relevant niche that I am talking about: https://www.wrike.com/blog/26-top-crowdfunding-sites-by-niche/

I still believe that my conclusion is accurate for the context I am speaking about, but I am happy to agree to disagree on this issue. Send me a link to your article so I can get schooled. :)

To learn more about me check out: stevensimonson.com