The odds of crowdfunding success are great when compared to the slim chances of successfully raising money from angel investors or venture capitalists.
So how can you guarantee a successful crowdfunding campaign? Although there are no guarantees, what you can do is follow the blueprint of what has been successful many times over and avoid the pitfalls of the unsuccessful campaigns.
While an unsuccessful campaign doesn’t necessarily spell ultimate failure of the idea or business, a successful campaign is a strong indicator of the potential success and benefits the future of the business or project.
In this chapter, we cover how to crowdfund successfully through both rewards-based and equity-based crowdfunding campaigns.
Can You Use More Than One Crowdfunding Site?
Can you? In most cases, yes. Should you? It depends on the type of crowdfunding project.
Theoretically, you could run two different rewards-based campaigns or one equity-based campaign and one rewards-based campaign, but as with anything, there are advantages and disadvantages of doing this.
The obvious advantage is the additional exposure your project, product, or company can gain from listing with another platform and therefore another audience to discover you. A possible downside, however, is that splitting focus and promotion between the two campaigns could make it more difficult to be successful on either platform.
If you plan to raise capital from two different types of crowdfunding campaigns (refer to chapter one for the various types) or two equity crowdfunding campaigns, you should consult an attorney beforehand.
If you were to simply split your campaign between two rewards-based crowdfunding platforms, it would likely cause confusion among the public, press, and prospective backers. It would also double your budget, efforts, and attention span for promoting and managing both campaigns. Instead of running simultaneously, consider running campaigns using two or more crowdfunding sites sequentially.
How to Start a Crowdfunding Campaign
A crowdfunding campaign is very similar to a campaign for political office because most of the work takes place before election day, or in this case, before the crowdfunding even begins.
In other words, it’s a lot of planning and preparation to start a crowdfunding campaign. It might feel like the work doesn’t start until your campaign is fully funded, but that’s pretty far from the truth. We like to think of crowdfunding in three distinct phases: pre-launch, campaign, and post-campaign.
Phase 1: Pre-Launch
We believe this is the most important phase of the entire process. If your campaign was an iceberg, phase one would be the massive portion below the water.
In chapter two, we discussed the benefit crowdfunding can bring to idea validation, but idea validation should start before you even consider a crowdfunding campaign. The idea might seem brilliant but until the concept is brought to market, we won’t know whether customers agree.
One way to validate your idea is to run a survey (like on Google Surveys) asking whether the respondent has the problem you aim to solve and is willing to pay for a solution.
Another method for idea validation is to allocate a small ad budget and run Google search or social media advertisements as if your product, service, or project already exists and see how many people are interested. When they click on the ad, be transparent about the purpose of the advertisement, your plan to crowdfund the idea, and an email capture form to update these early interested parties when the campaign is live.
Establish a Playbook
Whether conducting an equity-based or rewards-based campaign, having a plan in place is essential. Much like we aim to set SMART goals (specific, measurable, attainable, realistic, and time-sensitive) for ourselves, we must also set SMART goals for our crowdfunding campaign.
Traditional business plans, and even the more recent lean startup business model canvas, are useful tools for communicating to yourselves, your team, and potential investors, how you plan to reach and serve your target market.
Marketing plans for crowdfunding campaigns are possibly the most vital to get right when considering time-sensitivity. In traditional marketing, if a channel, message, or combination is not working, you can test, pivot, and recalibrate. With the deadline of a crowdfunding campaign’s end approaching rapidly, it can be difficult to test, pivot, and perform in the allotted time period.
Tips for a successful marketing plan:
- Have multiple distinct promotional channels, whether social media advertising, press releases, podcast interviews, etc.
- Have backup plans (hence the playbook metaphor) to pivot when something doesn’t perform.
Community and Contact Building
Although it’s logical to make a plan before the campaign goes live, it might feel counterintuitive to build your audience well in advance of your campaign, but that’s exactly what you must do.
This doesn’t mean you need to disclose every detail of your product, and quite the contrary, you should build suspense among people in your target industry. Capture email addresses, nurture early social media followers, and keep these early fans intrigued as you make progress towards your campaign, and especially when the campaign is live.
This is equally as important if you are equity crowdfunding — a blossoming community of fans and users could be a positive signal to potential investors and could allow super fans to invest.
Regarding equity crowdfunding, having a network of colleagues, mentors, and supporters will be important to get the word out about your financing opportunity.
Preparing for Launch
Depending on the type of crowdfunding channel you choose, whether rewards-based, equity-based, or otherwise, preparing for your campaign’s launch will look very different.
If you’re pursuing non-accredited investors to crowdfund your idea, an engaging video will be of the utmost importance. It will also be important to have design assets in place to inform, engage, and incentivize potential backers and supporters.
If you decide to raise equity crowdfunding from accredited investors like those on EquityNet, having a buttoned-up profile with accurate financial data such as recent and projected revenues, pre-money valuation, investor ownership, and more is vital to have prepared. One of the most important aspects of the campaign is your business plan projections, which is why EquityNet’s patented EnterpriseAnalyzer tool is important to utilize before your campaign is live.
Phase 2: Launch and Campaign
The moment of truth: Will all of your planning and preparation pay off? This phase of crowdfunding is all about the execution.
Commence Campaign to Great Acclaim
Will the crowd go wild when you come on stage? Will the launch of your campaign be met with click hits or crickets?
Launch day is where all the community building before the campaign should be in place to pay off. When you inform your healthy list of email subscribers and social media followers of your campaign’s debut, the moment they’ve been waiting for (hopefully) since signing up is finally here and you should see an immediate bump in funding.
It’s also important to further incentivize your audience to share your campaign within their network. Whether it’s a formal refer-a-friend to receive something of value or simply a genuine request, that extra care goes a long way.
Promoting a Crowdfunding Campaign
Funding for most campaigns follows an inverted bell curve as support is usually higher in the early and later stages of the campaign, while the middle is like the crowdfunding doldrums.
Let’s use a failed campaign as a template to learn how important promotion is to a successful campaign — we’ll discuss PodCase. Launched on the back of some of the most successful campaigns in Kickstarter history, the Pebble team brought forth a new project to build an iPhone and AirPod charging case.
Eric Migicovsky, the founder of Pebble Technologies, discounted the need for leveraging traditional PR in the PodCase campaign and attributes the team’s nonchalance as a factor in their ultimate failure.
This is why you must have a steady and omnipresent advertising, marketing, and PR strategy if you plan to keep engagement up during the immobile middle.
- Engage in press interviews
- Submit guest articles
- Promote social media content
If you are equity crowdfunding, you can leverage any influential angel investors and venture capitalists in your network to share your campaign on their social media channels. Otherwise, spend time manually engaging with the community you’ve built before the campaign.
How to Successfully Crowdfund
Whether you are raising funds on a rewards-based, equity-based, or donations-based crowdfunding site, to be successful you must tell a convincing story about how you will use the money to create a better solution, outcome, and future.
How to measure the effectiveness of your story is something we’ve already mentioned in passing but we’ll discuss more with the viral coefficient.
The viral coefficient is a score that you assign to your customers expressing how they have spread your message through their network. If your viral coefficient is two, this means that for every supporter you gain, they bring two more supporters with them. Any viral coefficient above one is a net positive and will likely garner you success.
Phase 3: After the Campaign Ends
Assuming your campaign is successful, you will need to get to work on fulfilling your obligations to your supporters, shareholders, or debt collectors. Just because your campaign is over doesn’t mean your crowdfunding journey is over.
Your project hit some red tape and delayed delivery? Congratulations, you’ve encountered the inevitable.
This isn’t the time to go dark on your biggest fans. They’ll understand if you explain the situation and harness the power of transparency. If you lie and cover up the problems, it will only make matters worse, but if you keep customers in the loop, it may even serve to strengthen their affinity towards your company.
Some strategies for maintaining transparency include:
- Send email updates at a regular cadence (weekly, bi-weekly, etc.)
- Create production video-diaries explaining progress and delays
- Send prototypes or early beta versions to fans
- Explain how proceeds are being used
Waiting Lists and Pre-orders
Chances are, when it came time to truly show support, some of your waitlisters got cold feet. Now that your campaign is over, you can segment out those that did contribute to your campaign and continue to nurture the remaining prospects.
It’s also possible those that backed out of contributing were worried whether your promises would be fulfilled or not, but now that the project is funded, the chances of successful delivery are higher. You can offer pre-orders through your website to bring in more revenue, keep the momentum building, and maintain connections with your audience.
In addition to pre-orders, you should continue to build upon your email list. Once your obligations to your crowdfunders have been met, you can move on to serve newer members of the audience.