1. Tell A (Your) Story
It’s important to remember the context of crowdfunding and fundraising online. You’re vying for a persons attention while they’re online, and they have tons of other distractions and things pulling their attention away from you.
It’s for this reason that your initial pitch and messaging absolutely must grab your funders’ or lenders’ attention right away and pull them in.
Once you have their attention, the way to keep their attention and truly engage them is to engage “the tw0 brains” as I call it. This means engaging both the Rational Brain (the “what” of what you’re doing) and the Emotional Brain (the “why” of what you’re doing).
The most effective way to do this is via telling a great story – either about yourself, the story of your project or company, or the story of your customer or who your project truly has an impact on.
If you’re crowdfunding a business and raising investment than tell a great story and package it all in a succinct pitch deck.
If you’re creating a rewards crowdfunding pitch, you should know that videos often double success rates for rewards campaigns. You should also be sure to have a clear and compelling “ask” of your funders that relates to your larger story and project.
2. Focus On What’s In It For Them
It may sound counterintuitive, but while your goal in crowdfunding is to raise funding for yourself, the more you can focus on what is in it for your backers or investors the more likely you are to create a set of rewards or terms that helps you raise the dollars you’re looking for.
In rewards crowdfunding, make sure you develop truly compelling rewards for your backers that tie in to your story and aren’t just swag. As a rule of thumb, simply ask yourself, would I go through the trouble to buy this reward myself? Also think about what is truly and unique and compelling you could offer.
One of the best ways to come up with great rewards is to look at some of the big successful multi-hundred thousand or multi-million dollar campaigns. Each platform leaves the campaigns up online and you can browse through all their rewards.
While there is not “one size fits all” rule in raising investment, there are some guidelines to follow.
3. Bring Supporter Engagement
The most common mistake that first time crowdfunding campaign owners make (in both rewards or royalty crowdfunding) is to not adequately engage their first level network of friends, family, and supporters.
For rewards crowdfunding, this means having people set and ready to start funding the launch of the campaign on day one. This is important because campaigns that accelerate more rapidly early on and attain a significant percentage of their funding goal in a short span of time often attract more attention as a whole over the life of the campaign.
For royalty crowdfinancing, supporter engagement more often means having important and notable stakeholders around the company online around the campaign and represented. This includes the entire team, advisors, board members, partners, and existing investors. Lendpool.com make this easy by displaying this important ‘social proof’ of your existing investors and team right alongside your investment offering online.
4. Plan Your Marketing & Outreach
Crowdfunding platforms are not listing services. Period.
Regardless of the crowdfunding platform, the results you get from the platform are proportional to the effort and attention you put in to the platform and tying this into your own fundraising efforts both on and offline.
In rewards crowdfunding, successful campaign owners put in tens to hundreds of hours on the creative and marketing planning side of their campaign before launching. They then also have a plan for several “pushes” in their marketing to launch, fund, and push to close funding at or above their goal.
In royalty crowdfunding, a lot of the work goes into structuring the actual investment offering by first figuring out the terms and completing all the legal agreements first. While larger investors (investment amounts at $10,000 to $200,000 per investment) aren’t often effectively reached through broad marketing & PR across the web as happens in rewards crowdfunding (donation amounts average closer to $100), storytelling and engagement are still important for both crowdfunding types.
5. Use The Data Perspective
The overall crowdfunding industry is growing exponentially. In 2011 the total crowdfunding market was $1.2 billion. In 2014 crowdfunding reached nearly $10 billion in funding online.
Obviously, this means that there are lots of opportunities for those seeking funding and for those who are donating, pre-purchasing, or investing money.
But what does the data say for you as someone looking to run a crowdfunding campaign?
In rewards crowdfunding, let’s say you’re looking to raise $50,000. A leader in the space called Kickstarter shared data that the most common contribution amount is $25. Knowing this, you can do some simple math to better understand what success entails.
Here’s an example of what that looks like…
If all of your funding came at the average of $25 per, and you assumed a conversion rate of 3% of visitors who actually fund your campaign, you’d have to reach over 66,000 qualified people on the web and get them to view your campaign. At the 3% conversion rate, you’d be converting 2,000 people to fund your campaign.
For most people, that’s a lot of traffic in 45 days, and a lot of backers. Do you have the kind of existing network, reach, press contacts, and marketing plan to really meet these goals?
Adding in additional higher dollar amount rewards can help, Most campaigns thus also include several higher priced rewards between $100 up to a few thousand dollars. The point is, it is critical to ‘run the numbers’ up front for your campaign by considering the rewards you provide and how many backers you will need to get at each reward level to make your overall goal.
And what you should be considering when it comes to rewards.
If you’re raising rewards-based funding (not investment), along with Lendpool other platforms like Kickstarter and Indiegogo should be on your list, but you should also be aware that there are specialty platforms and communities as well that focus more exclusively on things like music, healthcare, or non-profits.
It’s best to pick among these rewards crowdfunding platforms based on the project types they focus on, the existing community of members already on the platform, as well as the way the platform structures their fundraising product.
What many people aren’t aware of, or are confused by, are the differing fundraising products and how they’re structured. In short, Kickstarter has a strong track record of success for creative projects, and their fundraising product has been an “all-or-none” fundraising product to date. This means that if you don’t raise 100% of your initial funding goal, you don’t keep what backers have pledged.
Lendpool has 3 different fundraising mechanisms;
A. “All-or-nothing” (similar to Kickstarter and Indiegogo) which is raising at least the full amount by the end term or walk away with nothing.
B. “Open-term” or on ongoing basis which is literally until the full amount is raised – the most used by all project owners on lendpool.com.
C. Donation on ongoing basis that is oriented mostly towards charities and social organisations.
Indiegogo has a different product in that regardless of whether you meet your funding goal, if you choose to pay more (up to 9% of funds raised) they will let you keep any of the funds pledged to your campaign. This has its drawbacks, as often times projects need some minimum funding to work, and sometimes the required goal is a good incentive that motivates both crowdfunding campaign owners and those funding the campaign.
Lendpool offers an innovative way to incentivize investors with an appetite for a return on their financing; royalty contracts. For a higher participation – usually starts from $5000 per contribution – a royalty is offered as direct reward to the willing investor. The royalty is a percentage from the gross sales of the product or the service being developed. Once the product being crowdfinanced hits the market, the investor receives regularly – usually quarterly and sometimes on monthly – a check with an amount representing his reward defined in a royalty contract. Royalties are based on the amount invested and have 2 major clauses; how long – the time period – the royalty contract is executed and what is the percentage from each unit sold (the bigger the initial contribution the higher the percentage). This type of offering on Lendpool is more suitable for “ongoing” campaigns.