8 Smart and Easy Crowdfunding TipsRieva Lesonsky
[content field=”callout1″ format=”true” class=”calloutwide”]Are you excited about the possibilities of crowdfunding? Most Smart Hustlers are—perhaps none more than Zack Danger Brown, who, as of this writing, has raised more than $66,000 on Kickstarter to make potato salad. It may have started as a joke, but #potatomadness has gone viral and Brown has hustled his way to crowdfunding success.
Crowdfunding started taking off in 2012 when the JOBS Act expanded the kinds of money entrepreneurs can raise using it. Here are 8 smart crowdfunding tips for easy success.
1. Understand the different types of crowdfunding.
Crowdfunding as we most often hear about it on sites like Kickstarter involves soliciting donations from individuals (donation funding), usually in return for early access to a product. But the 2012 JOBS Act enabled entrepreneurs to solicit investments of up to $1 million per year in return for equity in the business (equity funding). However, SEC delays in finalizing the rules mean so far, only accredited investors (who make over $200,000 and have net worth over $1 million) can participate in equity crowdfunding. The average nonaccredited investor can’t.
2. Watch out for rip-off artists.
Because there is a lot of interest in crowdfunding, scam artists have popped up to fleece unsuspecting entrepreneurs. Be smart and don’t get hustled yourself—use well-known crowdfunding sites and watch out for anyone who says they know how to help you raise capital in return for a fee.
3. Have the right kind of product.
For donation crowdfunding, you need a product that’s easy to explain and strikes a chord in the average person. If your product is fun, exciting or fills a need many people have, crowdfunding could be for you.
4. Come up with great rewards.
Donors want desirable rewards. Early access to your product is a given, but you should also throw in “extras” for different levels of support, such as promotional products, T-shirts or tote bags, access to an event or whatever appeals to your target contributor demographic.
5. Plan your attack.
There’s a misconception that crowdfunding is easy, but it takes time both to plan and execute. Take time to craft a crowdfunding campaign that includes a well-thought-out pitch as to why people should crowdfund you and public relations, marketing and social media outreach to support your campaign. Brian Fargo, who crowdfunded nearly $3 million to create the game Wasteland 2, said, “Our software development company all but stopped for three weeks so we could get our ducks in a row.” Once your pitch goes live, expect to spend a lot of time interacting with and responding to media and contributors.
6. Use video.
A compelling video can help your company stand out from the pack, incite enthusiasm and raise emotions that make people want to contribute. Put videos on your website and YouTube as well as the crowdfunding site. For a successful video, check out musician Amanda Palmer, whose charming video helped her raise over $1 million (she only set out to raise $100K).
7. Stay in touch.
It’s important to regularly update crowdfunding donors as to how your company is progressing. Staying in touch via email, updates on the crowdfunding site and social media not only makes them feel part of your business, but can also provide a valuable source of feedback as you develop your product or service.
8. Stay informed.