Thousands of great ideas flounder at the point where they need to become reality; when great thinkers and idea generators turn to the age-old problem of raising funds to kickstart their new ventures….too often they fail and give up. Getting investment is a whole different ball game to developing products and services.
So when the idea of crowdfunding first emerged, (crowdsourced fund-raising) it was embraced by entrepreneurs like sweet words of love from Juliet to her Romeo. Surely this was it, the easy answer to getting enough capital to fund your idea from like-minded individuals, without having to do all the awful bowing and scraping that raising capital normally requires. Easy? Not really, actually.
Scott Steinberg, author of the book “The Crowdfunding Bible” recently shared some of his insights into the most effective way to crowdfund with Read Write Web; insights that should be required reading for anyone looking to raise money via Web 2.0.
Steinberg begins by pointing out that the most successful examples of crowdfunding are for ideas or enterprises that people can respond to emotionally and understand. People want to invest in something they can tell their friends about, not a high-tech back-end idea that might be brilliant, but has very little ‘sex appeal’ to it. “Crowdfunding works for creative projects”, he explains, “apps, consumer products, software — stuff that resonates with average, everyday people.”
The logical follow on from that is that crowdfunding works best when the sums are not outlandishly large. An amount that feels reachable and inclusive as opposed to a huge corporate-size investment, an amount that “is relative to your industry”. That’s where the opportunities lie.
Of course, the dangers of crowdfunding are there for everyone to see. If you fail to secure the funding, you fail in public and the stigma of failure weighs heavily on your product or service. You’re going to have to work harder than ever before to convince investors that your idea has what it takes to cross-over into the big time.
Steinberg’s advice is priceless and is made for the soundbyte era. He includes other throwaway gems like:
- “This isn’t a charity fundraiser; people expect something in return for their money. Start at the impulse buy level – $5 or so – and go up to high-end, exclusive prizes.”
- “Thirty days seems to be the magic number.”
- “Talk to your backers. Get their impressions. Nobody wants to see you succeed more than they do. Remember, you have the ability to change much of it on the fly.”
When asked about his greatest examples of crowd-funding, the guru steered clear of the usual kinds of lo-fi tech start-ups and instead drew attention to the remarkable success of Amanda Palmer, a musician who set out to raise US$100 000 to pay for a new album, book and tour. The charm and simplicity of her appeal was a smash-hit and resulted in her raising over a million dollars with just over a day left of the appeal. Check it out, it’s everything you would want from crowdfunding.
The over-riding point that comes across is that crowd-funding is a wonderful development of the new age digital era but that it is much more than simple access to funds. It establishes who your target market really is, what they want out of a product, what kind of price points you can expect to charge and what kind of messaging is really effective.
Final words go to Steinberg: “The beauty of crowdfunding is it allows you to connect with your target audience from Day One, better engage them and create empathy. In many ways this is the holy grail of marketing — [customers are] emotionally invested in the outcome, personally interested and want to see you succeed. So half your branding and awareness battle has already been fought.”