If courting investors Shark Tank-style sounds too far out of your comfort zone, crowdfunding could provide the funding injection you need without the nerve-wracking television appearance. Crowdfunding is when a large number of supporters (the crowd) contribute a small amount of money each to fund your project or business idea, usually in return for a reward. There are two crowdfunding models: all-or-nothing, where you won’t receive the funds if you don’t hit your funding target, or flexible funding, where you keep whatever funds are raised during the campaign. There are pros and cons to both models, with the flexible approach usually attracting higher fees from the crowdfunding platform. More than 1200 crowdfunding platforms operate around the world, with some specialising in creative projects, others in entrepreneurial campaigns and still more for charitable fundraising. Popular platforms used by Australian crowdfunders include Kickstarter, Pozible, Indiegogo, iPledg and StartSomeGood.
Running a crowdfunding campaign
At the time of writing, Byron Bay crowdfunding project Flow Hive was approaching almost US$11 million on Indiegogo. Crowdfunder Cedar Anderson had hoped to raise US$70,000 to fund his innovative beehive invention where honey is available ‘on tap’. The phenomenal success of this campaign has been reported around the world. Multiple crowdfunding success and ABN contributor Kate Toon used Pozible to fund her poetry book, Gone Dotty, and her children’s storybook, Wobbly Jim. Setting $1000 and $8300 targets respectively, both projects exceeded their targets, allowing Kate to extend the campaigns to include book store and school visits and marketing materials. Author and ABN blogger Johanna Baker-Dowdell also used Pozible to raise the money she needed to self-publish her book Business & Baby on Board. Her first campaign was under-funded by $320 and since it was all or nothing she didn’t see the funds raised over her 60-day campaign. Johanna shortened the timeframe and revised her target down to $6000, running her successful second campaign 24 hours later over a much shorter two weeks.
Tips to succeed at crowdfunding
So how can you replicate the success experienced by these crowdfunders? There is no magic solution to running a successful crowdfunding campaign, but there are many ingredients that will ensure it is more likely to succeed. These are:
- Planning – be very clear how much money you will need to fund your project and break it down into a budget on your campaign page so supporters can see exactly where their money is going.
- Have something for everyone – offer a broad range of rewards at a number of price points to appeal to a wide selection of supporters. However, be sure you are able to fulfill those rewards otherwise your supporters may voice their unhappiness and all your hard work will be undone.
- Wear your PR hat – crowdfunding success depends on people knowing about your project, so put together a comprehensive marketing strategy that includes project updates throughout the campaign. Try alternating written updates with photos and videos to keep people interested.
- Prime your networks – without a crowd to support you financially and share your project, you will find it very difficult to crowdfund successfully. This is not the time to be shy. Remember people love to help, so ask for their support and watch what happens.
- Include a video – research shows crowdfunding projects with videos do better than those without. Crowdfund it! author Anna Maguire said, “Having a crowdfunding video increases your chance of success and the amount of money you may raise”.
The latest Massolution Crowdfunding Industry Report shows business and entrepreneurship projects are the most popular category. Such projects raised $6.7 billion worldwide in 2014, equating to 41.3 per cent of crowdfunding volume from last year, showing business projects are a great fit for crowdfunding.
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