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You’ve most likely heard the term “crowdfunding” before (some refer to it as crowdsourcing). It’s been around for the past few years, so if you spend any amount of time on social media, you’ve probably seen a crowdfunding video at some point. In short, crowdfunding is a concept that allows inventors, artists, and anyone with an idea to get funding from ordinary people to complete their project. In today’s blog, we’ll be looking at what goes into a crowdfunding project to see if it is right for you.
What is crowdfunding?
Crowdfunding has been made famous by websites such as Kickstarter and Indiegogo. These sites seemed liked a god-send to poor inventors when they first came out. Finally, a place for inventors to show off their ideas and get people to invest in production without having to give up huge chunks of profits or company shares to investors.
The most famous crowdfunding website, Kickstarter, lets inventors post their projects online as long as they fulfil certain requirements. They also provide “creators” with a handbook on best practices, which includes information on producing a video, sharing your plan, etc.
Kickstarter projects all contain a video, which usually shows the inventor explaining their idea, along with some kind of prototype. The page also contains the total amount of money they aim to reach, along with an explanation of their work process and schedule.
Perhaps, most interesting for investors, is that Kickstarter wants creators to offer “rewards” for donations. These rewards range from 5$ donations up until thousands of dollars, depending on the project. At some point, the value of the donation will get investors the actual product once it’s produced.
Source: shutterstock.com/Prostock-studio
As I mentioned before, some people refer to this entire concept as crowdsourcing. However, this has a definition slightly different than crowdfunding.
The concept of crowdsourcing basically means that you are getting resources from the “crowd” (or general public). This means you might get your logo designed by a few artists (like our friends at 99Designs). Another example of crowdsourcing is Wikipedia. The general public contributes to the maintenance and content shown on the website.
Crowdfunding on the other hand is strictly about getting money investments, while basically everything else the public could provide (services, information, ideas) falls under crowdsourcing.
Can crowdfunding projects really work?
Source: shutterstock.com/Olga Visavi
Crowdfunding projects have been very popular for the past few years. For starters, it allows anyone with an idea to get funding without giving up primary ownership of their idea. From a consumer perspective, it’s fascinating because you get to see the ideas out there that haven’t been produced yet. If you, as a consumer, find an idea you can really be passionate about, you can invest/donate and help get these inventions into the real world. In my opinion, these are the two biggest reasons for their popularity.
Some of the projects have become so popular that you may have even heard of them. Some of them include the Pebble smartwatch, the Coolest Cooler, Oculus Rift, the Flow Hive, and even a sequel to the cult classic, Super Troopers. Check out their pages to see what made them successful.
What makes a crowdfunding project successful?
So, you’ve got a great idea, but unfortunately, you’re lacking the funds. Perhaps, crowdfunding might be worth your time and effort. But for every success story, there are 10 failures. So what makes for a successful crowdfunding project?
Have a plan!
Though it might sound obvious, you’ll want to have a detailed plan. This, of course, will help you stay organised during your journey towards creating the next great idea. However, I’m actually talking about having a plan to show your prospective donors.
If you expect average people to donate any amount of money to you, no matter how big or small, they want to know that you are serious about following through with your idea. After all, there have been more than a few fails and scams in the world of crowdfunding, so the general public has become more sceptical than before. A well thought out plan can build trust, so don’t hesitate to give as many details as possible.
Source: Kickstarter, Product: Retrostone
Expand your voice beyond crowdfunding sites
Sure, those looking to invest donations of £5 probably won’t be doing tons of research on your project, but they might. And you can surely bet that those willing to invest hundreds (or even thousands), will look into your business more. That’s why you’ll want to strengthen your brand’s voice online before you even present your idea on a crowdsourcing website.
Make sure you create your own website and get yourself a presence on social media as well. The more channels you have for investors to interact with you, the more likely they are to trust you and invest in your idea.
Not only that, but it’s important to be proactive about promoting your idea. Most of these crowdfunding sites will not promote your idea for you, so getting people aware of your idea will be mostly up to you.
Entice voters with a valuable offer
Most of these crowdfunding projects use a similar formula. In order to entice people to donate, you’ll offer them either small gifts or big gifts. Some small donations don’t offer any rewards. They are intended to reach those who are simply passionate about the project.
However, once we get into substantial donations, it’s time to get creative. The list of this handheld retro-gaming device starts off small with donations under €69 simply getting a big thanks. After that point, anyone donating can get early bird prices, exclusive prices, models, multiple models, and even prototypes sent to them.
An image of a prototype along with the rewards for different pledge amounts
Source: Retrostone
It’s all in the presentation
Getting perfect strangers to invest money in your idea is probably not the easiest task out there. You’ve got an amazing idea, a well thought out plan, and some great rewards for donors. However, as any 5-star chef will tell you, presentation counts.
Make sure you know your target audience and appeal to them in your presentation. Create high-quality images and videos to get them not only interested, but excited about your idea. If it’s a brand new idea, empathise with your audience and tell them that you have the same frustrations as them. That’s why you invented the fill-in-the-blank machine! Show the product in use and show how your great idea solves those problems.
Extra tips
You might be worried about intellectual properties and the risk of sharing your idea with perfect strangers online. That is a valid concern. If you really believe in your idea, you should think about filing for a patent. Check out the UK government’s guide to patenting to get a better understanding of what you can patent and how to go about it.
Many of these crowdfunding sites let you choose “stretch goals”. The idea is that some of these projects are so popular that they can earn more money than necessary. You should have a plan to let donors know what you would do with “extra” money.
If you’re creating a video game, you might offer to create extra levels. For a movie, you might get some better special effects. And for physical products, you might be able to use a stronger or more aesthetic material than originally planned.
Conclusion
Crowdfunding has become an incredible way for average people to get their great ideas out there. With deep planning, creativity, and a little bit of marketing, you can get the general public excited about your idea before it has even been invented yet. Not only will they invest their emotions in your product, but hopefully also some capital.
