Crowdfunding is a great way to kick start a new product or a new company. Here are some simple tips of dos and don’ts for those new companies.
DO - conduct market research. By doing this you can build an audience that you want to target. If your audience is excited about the product they are far more likely to invest big amounts as they will care for this product. If you design something to a very limited audience you will not receive the same amount of backing.
DO - connect with the younger audiences: the millennials make very attractive donors as they have a more direct connection to the causes and people they support. They can follow your company on social media sites and connect with you digitally. So by connecting with them you are likely to have a direct connection to younger donors.
DON’T - make your time constraint for your campaign too short. By doing this you limit the amount of updates you can send to your backers. It is proven that campaigns that have a time constraint do better than those that don’t, but by this constraint I mean 4 weeks not 4 months. 4 days would be too short. By having a campaign that runs for 4 weeks means you can send updates to your subscribers and potential backers probably twice a week. This means you send them 8 updates in the 4 week campaign. In order to fulfil this update quota in subscribers and put them off investing with you. So you have a time constraint, but do not make it too short.
DO - ask for the minimum amount possible. If you do not reach your target on some crowdfunding websites, any money donated goes back to the backer. Some sites allow you to take home the amount you have raised regardless of if you reach your target. So if you set your target to be the minimum you need you will have more chance of reaching it, and it also looks more successful to have achieved your target than have missed it because you were being greedy or over ambitious.
DON’T - have similar rewards for different prices. Crowdfunding works on the basis that you give a little and you get a little. So if someone gets the same for donating £10 and donating £20, then they will always donate the smaller amount. By ensuring there are sufficient rewards for giving a lot of money, then often you will get a lot of money as it encourages higher donation. You need to incite people into paying that little bit more than they would have liked too, by offering sufficient rewards.
DO - get friends and family on board. They can help out with menial tasks as they want to help you succeed. The sense of family spirit will often insight people into investing with you.
DON’T - be too closed. You need to be open with your subscribers and potential backers. They want to know more about you when they invest. They don’t just want a name and a product; they want to know about you, about your journey, about how you got to be to where they are. People buy into companies on personality not just fact. BUT don’t be too open; no one wants to know what you had for breakfast.
DO - have the product ready: and if not, ready by the end of the campaign. You could have the world’s most successful campaign and raise 500% more than you had hoped, but you will end up having an unsuccessful business if your product is not ready to be delivered to your backers. They have invested x amount of their hard earned cash to receive your product before anyone else does, and if the product is not ready you are not delivering what you promised. You must have the product part way to development and ready to be sent out. It cannot be only part developed, as you will lose any good credibility with other potential backers if you let your customers down.
And finally DO Crowdfund!