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How to Save (or Fuel) Your Business With Crowdfunding Sites
The COVID-19 crisis has taught the world one important lesson: we can’t thrive unless we back each other up. This humane truth is something we’re rapidly re-learning at the moment. Many of us have seen the social media campaigns asking to support local businesses by donating the amount we’d normally spend at the local bakery, hair salon, or deli. In other words, now is the peak time for crowdfunding small businesses that are stuck in a dire situation.
Despite the upward trend in crowdfunding, many entrepreneurs still have a “grey-area” relationship with it. However, as small businesses across the world face the “new normal” of the pandemic and its aftermath, many are turning to the previously uncultivated ground of crowdfunding websites.
For novices in crowdfunding, there are many questions and misconceptions that need to be cleared in order to do crowdfunding right. In this thorough guide, we’ll cover insights from experts who’ve successfully crowdfunded projects from individual to startup. We’ll also answer the most pressing questions about crowdfunding and bust quite a few myths in the process.
Meet our crowdfunding experts from 5 diverse industries:
- Sukhi Jutla — Raised £439,840. Co-founder of MarketOrders, an award-winning blockchain-based platform for the gold and diamond jewelry industry.
- Sean Valencourt – On track to provide over 750 American jobs by 2022. EVP of Information Systems at Polywood, a plastic lumber company first to create outdoor furniture from recycled plastic materials.
- Lisa Kipps-Brown — Raised over $200k for a client. Business Reimagineer and Opportunity Miner with 30 years of entrepreneurial experience. President of Glerin Business Resources.
- Bri Castellini — Crowdfunding specialist and independent filmmaker. Film Community Manager, Seed&Spark
- Jeremy Harrison — Experienced crowdfunder. Founder of digital company Hustle Life Media, Inc.
… and scroll down for their insights into crowdfunding your business with ease.
1: Choose a crowdfunding site that backs your values
As soon as you consider crowdfunding, you’ll discover a bunch of crowdfunding sites vying for your attention. It may be tempting to go for the first crowdfunding platform you see, but a lot of your success will depend on being in the right place, with the right tools.
When Lisa Kipps-Brown, President of Glerin Business Resources and entrepreneur with 30 years of experience decided to move her client’s crowdfunding campaign to a different platform, it was a move that mirrored her client’s values.
“Fundrazr’s founder, Daryl Hatton, emphasizes that the future of fundraising is in micro-sponsorships that combine cause, corporations, and consumer. Our campaign happens to be a perfect reflection of his philosophy, one more reason that Fundrazr is the right move for us.”
When choosing a crowdfunding site, look into a) the specialty/philosophy of the platform b) project deadline rules c) Rules for keeping the money if you fall short of the goal. Here’s a quick overview of the different crowdfunding platforms.
- Indiegogo — Accepts all pitches, including business-related. Deadlines up to 120 days. You get to keep the money raised, even if it falls short of your goal.
- GoFundMe — No project deadlines. You get to keep all the money raised. Currently has a special program for COVID-19 related fundraising. The GoFundMe Small Business Relief Initiative is a dedicated place for helping America’s small business survive the pandemic through crowdfunding. Over 9K businesses have joined already.
- iFundWomen — Startup funding site for women entrepreneurs. Includes coaching, access to grants, crowdfunding, and a collaborative femalepreneur community.
- Fundrazr — For individuals, businesses, and NPOs. Two fundraising options available: “Keep it all”, and “All or nothing”. Different rules apply.
- Seed&Spark — A crowdfunding site for the film industry and storytelling of all kinds. Includes free classes, project review, and personalized feedback.
- Kickstarter — The platform is geared towards creative/art projects and has a review process. Deadlines up to 60 days to crowdfund projects. If you fall short of reaching your goal, all the fundraised money drops back to $0.
- Crowdcube — This site is best for startups and business founders. Raised amounts reach up to millions.
2: Follow the 80/20 rule to pave your way before launch
If you think of crowdfunding as an instant deal — you set up your profile on a crowdfunding site, post your cause, and voila! the money starts ticking in — think again. The difference between crowdfunding success and crowdfunding failure usually comes down to one thing: thorough preparation.
Don’t expect the money to start pouring in unless you’ve done the prep work, says award-winning entrepreneur, book author, and MarketOrders co-founder, Sukhi Jutla.
“The official launch of your campaign should just be 20% of the work, the remaining 80% of the work really needs to be done … prior to the launch and this includes building your potential investor base and making progress on your product so you can show investors what you are building.”
The recommended prep time for crowdfunding startups is 6 months. For small projects and anything COVID-19 related, a week’s planning ahead is fine.
3. Don’t make assumptions about ‘likely’ sponsors
Crowdfunding looks like it’s money raised by strangers on the internet. In reality, this is far from true. Entrepreneurs who’ve raised hundreds of thousands of dollars via crowdfunding say that networking is key to their successful online campaigns.
Sukhi Jutla, who raised £439,840 for her startup, talks about one of the most frequent pitfalls of crowdfunding.
“Don’t make assumptions about whether people have money to invest! I learnt quickly that there were many people who were willing to invest large amounts but I hadn’t been telling them I was raising so I assumed they were not likely to invest.”
Instead of focusing on the big investments, your communication agenda should consider no amount too small. As Sukhi points out.
“Anyone you know, ask them if you can add them to your email list. This includes ex-colleagues, family and friends […] When I was telling my local barista about my upcoming launch, though they did not invest, the lady behind me waiting for her coffee eavesdropped into my conversation and later asked me for more details about my crowdfunding launch and went on to invest a small amount!”
4. Make your pitch interactive & captivating
Whether you’re looking to crowdfunding as a temporary relief during the COVID-19 crisis or a way to fuel your business to the next stage once this is over, your pitch is the first thing people see. But since crowdfunding is a lot about ‘regular’ people (think your friends, neighbors, contacts)– not investors or financiers who’ll be researching your business carefully– you need to make your idea clear and captivating off the bat.
“People will not be engaged with something half-baked. You must show that your idea is great and that you have plans in place to get it working,” says Jeremy Harrison, Founder of Hustle Life Media, Inc. “Once people understand what your campaign is all about, then the money will start coming in.”
Since 65% of people are visual learners, don’t start your crowdfunding campaign without an HD presentation video. Remember that you’re projecting your vision. This means telling about the process you’ve already achieved and demonstrating that you have all the potential to ace the project (not send people’s money down the drain!) Learn more about designing great videos for crowdfunding projects here.
5. Set realistic goals and several tiers of rewards
A lot of smaller businesses hear about huge amounts being raised by startups or film projects and make the mistake of setting grandiose goals. When those goals fail, it usually means you haven’t done the math right and forgot to take into account the size of your audience and its involvement in your cause.
“When setting up your project, don’t be aspirational with your funding goal,” says Sean Valencourt, EVP of Information Systems at POLYWOOD. “Set it to what you need to have the project succeed – don’t underestimate your legitimate costs, but also don’t set the target higher than it needs to be.”
According to Fundable statistics, the “average successful crowdfunding campaign is around $7,000” and “campaigns that can gain 30% of their goal within the first week are more likely to succeed.” So remember to keep your goal to the point.
As to rewards, plan several tiers of rewards for different contribution amounts. Rewards are usually product samples given to sponsors for free. If applicable, another great reward is to sign sponsors up for a free version of the product you’re raising money for.
6. Prioritize personal communication
In the times of social media, it’s incredibly tempting to think you can post on Facebook or Twitter, get reshares, and save yourself the trouble of emailing all contacts individually. With crowdfunding, though, social media marketing doesn’t bring in the best results.
Investors will want the personal touch if they’re going to bring their individual funds into your project, says Bri Castellini, independent filmmaker and crowdfunding specialist at crowdfunding site Seed&Spark.
“In my last crowdfunding campaign that ended last week, personalized emails were 186% more effective than social media posts when it came to actually leading to pledges, even though I posted far more often on social media to an audience that was 167% larger…Directness takes more work, but is far more effective and allows you to craft a more long-lasting relationship with your audience.”
As Bri points out, doing the math helped her understand a lot about where crowdfunding success was coming from. “I converted 20% of the people I sent emails to, and only .7% of the people who saw a post on social media.”
7. Promote each other’s causes
Crowdfunding newbies often concentrate on themselves and their campaign a lot more than necessary. After all, you need to convince people to invest, so you’ve got to explain to them ‘why’ again and again, right? Well, not exactly!
“Help other people succeed in their crowdfunding launch by sharing and supporting their campaigns,” says Sukhi Jutla. “Social karma is important and it’s likely that when you need help spreading the word about your campaign you will have an army of people ready to help because you helped them too.”
For individuals and non-profit organizations, consider featuring businesses that are sponsoring you in special posts. “We feature each military family-owned business that backs our team,” says Lisa Kipps-Brown. “[We] share the story of their business, their connection to the military, and why they joined the team. It gives them great exposure, helps others find out about their business, and is content their friends love to share.”
8. Make your campaign transparent and entertaining
Having a transparent campaign is a vital part of crowdfunding. It lets sponsors see that you’re putting their money to good use and their investments are creating actual change. In this light, progress-tracking is incredibly important. But don’t make it mere “homework” that’s boring for everyone.
“Crowdfunding… needs to be just as much about entertaining and including your audience as it is about sharing with the world how great your idea is,” says Bri Castellini. “Plan something engaging [like] a video you’ll only release when you hit 50% funded, interviews with teammates about their work on the project, behind-the-scenes content (a mixture of photos and videos) of what you’re building together.”
A lot depends on the speed of your progress, but you should be definitely notifying your sponsors of milestones. This will keep them in the loop and give a sense of involvement and transparency that is vital to successful crowdfunding.
Crowdfunding is about communication — lots and lots of it. The crowdfunding site itself is what a canvas is to an artist: a necessary medium to project your vision. The success of the project will depend on your passion, perseverance, and an outstanding desire to turn your vision into reality.
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