Crowdfunding helps entrepreneurs raise money to fund startup businesses, launch new products, or cover the costs of projects. A successful crowdfunding campaign will convey the right message and convince backers that your idea is worth funding. We gathered expert crowdfunding tips for small businesses to ensure your crowdfunding campaign takes flight.
Below are the top 20 crowdfunding tips for small businesses:
1. Understand the Difference Between Rewards or Equity Crowdfunding
Deborah Sweeney, CEO, MyCorporation.com
Before you decide to use crowdfunding as a financing option for your business, you must decide if you will use rewards or equity crowdfunding. Rewards crowdfunding is typically conducted through platforms like Kickstarter, where donors will receive a reward in return for their financial contribution. Generally, the larger the donation is, the more personalized the reward becomes. These types of incentives encourage donors to give a little more to the campaign. Equity crowdfunding does not provide personalized rewards to its donors, nor does it use rewards platforms to host its campaigns. Equity crowdfunding donors receive shares within the business as a thank-you for their financial contributions. As such, these donors become investors in your business.
2. Have a Game Plan Before You Start the Campaign
Nick Le, Founder, Gridfiti
You need to have a game plan before you start your campaign. Everything should be mapped out beforehand and you should have an exact mock-up of how things should proceed. A product road map is essential so backers know exactly what they can expect when they put their money down to support you. Also, set out a budget for marketing. Press is important, so as a budget for proper marketing material such as a professional video, well-made graphics, professional photos, and exceptional copywriting.
3. Follow Other Crowdfunding Companies’ Models
David Mitroff, Ph.D, Founder, Piedmont Avenue Consulting, Inc.
Work with several different companies that have launched crowdfunding campaigns. To make a successful crowdfunding campaign, a business needs three core things: a strong social media presence, a stellar video, and several buying packages and incentives. A company that is interested in crowdfunding should look to other successful crowdfunding companies and follow a similar model.
4. Be Patient
Dr. Roshawnna Novellus, CEO & Founder, EnrichHER
Crowdfunding takes work. You can’t build the campaign and expect people to come right away. You have to gain support before you go live. Also, people forget that there is a tax bill due on the revenue made. When the campaign is live, usually founders will find out that the first 10%-20% amount will be the hardest to raise as many people are more comfortable to invest once they see the campaign is starting to get some momentum. So whenever possible, try to get people you know (friends and family) to get your campaign funded 10% to 20% before you reach out to the general public.
5. Keep Pushing Right to the End
Fab Giovanetti, Mentor, Startup Owner, Published Author & Speaker, FabGiovanetti.com
Those are the most crucial days. This is the time to go all-in, as people will be willing to support. Make your calls to action inventive, creative, and unique. Maybe share a testimonial from someone who loves your company, or a story linked to your crowdfunding. Most crowdfunding campaigns end up being funded during the last 48h of the campaign, so make sure those are the days you are banking on the most.
To learn more, read our article about how to crowdfund your small business.
6. Build a Loyal Community & Prepare Them for Your Launch
Theo Lee, CEO & Co-Founder, KPOP Foods
If you cannot afford a PR firm or acquire email lists or run paid ads, you can focus on using your capital to build a community of followers by sharing small samples of your products, including a small card that tells your story. Start giving the samples to your friends and then send them all over the country to friends of friends and more. Ask people to follow you on social media (Facebook and Instagram) and make sure to keep everyone in the loop on how things were progressing. Through this, you can build a very strong community and once your Kickstarter campaign is live, they will most likely support you and share your campaign with their friends and network.
7. Consider Hiring a PR Agency With Crowdfunding Experience
Colin Trethewey, Co-Owner & Principal, PRmediaNow
Consider hiring a PR agency with crowdfunding PR experience to promote your crowdfunding campaign through relevant media outlets/blogs. Objective testimonials from reputable media sources drives traffic to your campaign page, gives your campaign validation, and can lead to better conversion when potential backers land on your page after seeing your product in a media story. Your pre-launch and marketing success also depends on your ability to convey your story in a compelling manner to get potential backers as excited about your product and vision as you are. Your campaign page content, videos, and photos must be professional. You must present the product as a premium brand on your crowdfunding site even before it succeeds and becomes a retail product post crowdfunding.
8. Build Your Social Media Following
Reuben Kats, COO, GrabResults, LLC
Another great crowdfunding tip is to develop a following on social media. You should definitely advertise on as many platforms as possible. Try to have a budget on marketing and advertising online. Getting an idea funded can be a mission and could take some time before one collects the funding for their idea. Never ask for money off the bat. Also, remember that when people give you money to start your business, they are expecting to receive something in exchange.
9. Raise a Realistic Amount of Money
Julie Austin, Author, Speaker, & CEO, Creative Innovation Group
Be realistic about the amount of money you’re raising. A realistic amount will somehow assure the people who would fund it that you would make it. If you ask for way too much than what is realistically feasible, people will look at an unrealistic number and not donate because they either think you’re being greedy or that you’ll never hit that number. Yes, it all depends on what your project is ― but start small. You can always do more crowdfunding, especially if you’re successful the first time.
10. Consider Bootstrapping Instead of Crowdfunding
Marty Schultz, Founder, Blindfold Games
If you are in need of funding for your startup, consider bootstrapping instead of crowdfunding. Bootstrapping is starting a business without external help in financing. Startups fund the development of the company through internal cash flow and minimize their expenses. Bootstrapping appears to be the far superior option because crowdfunding is impersonal, only a fraction of crowdfunding projects gets funded, and the cost to get crowdfunding is high.
11. Know Your Investors
Matthew Gillman, CEO, SMB Compass
When crowdfunding equity, it’s important to remember that you’re partnering with the people who are providing funding for your business. While money is important, it’s crucial that you understand who your partner is and make sure they’re the right fit for you and your company. It’s key that your equity investors have aligned goals and can provide value in addition to their money. Look for investors that have industry experience and can help with strategic decisions as you build your company.
12. Know the Types of Crowdfunding Platforms
Marwan Forzley CEO, Veem
There are three main types of crowdfunding platforms you can choose from and knowing the difference of each will help you decide which type is best for your project. Reward-based platforms allow you to give incentive to your donors in exchange for their donations. Loan-based platforms is a peer-to-peer loans from individuals, other businesses, or anybody who believes in your project. Equity crowdfunding is where you give donors a share or equity of your business in exchange for their investments.
13. Know When to Use Crowdfunding
Ryan Sim, Co-founder Managing Director, We The People
Emotionally, for most of creators, it’s really hard to watch a campaign pick up and take off ― sometimes slowly, sometimes very slowly. Only a quarter or so of campaigns reach their goal. You need to put a lot of effort into advertising and getting the word about the campaign. Also, crowdfunding is a strategy for creators who have patience. You will likely not get a quick response and decision like from other types of investors.
14. Don’t Forget the Cost of Rewards
Dennis Shirshikov, Small Business Finance Writer, Fit Small Business
If you are crowdfunding with rewards, it’s important to factor in the cost of those rewards into your campaign. The last thing you want is to raise the capital you need and have to spend most of it on rewards with very little left over for your project.
15. Set a Clear Goal
Alberto Navarrete, General Manager, Emily’s Maids
You need to have a clear goal to set up crowdfunding. You can’t just use it for investments if you don’t offer something in return. Check for your taxes so you don’t have surprises when you have to make them. Use social media as a trampoline to reach out to more people. Platforms like Twitter could be valuable assets to make your campaign viral.
If your campaign promotion is just like everyone else’s, then it would be difficult for your network to determine why they would support yours from the dozens of other campaigns that are likely floating through their social media feeds. Fundly recommends modifying that general copy to fit your crowdfunding campaign. Tell your story and keep it short, state where the funds will go, tell your past experience and accomplishments, and talk about how much you’ve raised so far and how much you still need.
According to USA Today, you can give additional incentives to those who will give donations at the beginning of your campaign period. After all, the sooner your campaign can get traction, the easier it will be to get more backers and press. You can give discounts, bonuses, or faster delivery to make sure your campaign gets moving as fast as possible.
Aside from your business idea, your potential donors will also be interested to see how the funds are going to be spent. This is the reason why Cox Blue recommends that you include a detailed budget on your campaign page, showing your donors how much you need and how you intend to send the money. This will show your backers that you really know your project and you’ve done your research on how to make it successful.
According to IgnitionDeck, it’s best to always keep your backers in the loop, no matter how good or bad the news is. You should post regular updates on your crowdfunding page even until after the campaign has ended. Backers would want to get updated especially after the campaigns to ensure everyone gets what they are pledged.
Learn from the experience of others who launched crowdfunding campaigns before you and examine both successful and failed campaigns. Know how they shot their crowdfunding pitch videos and how they wrote crowdfunding profiles. Find out what perks sold the best/worst and how were they worded and priced. Foundr suggests to search for companies that failed on their first campaigns and then raised millions of dollars on their second campaigns, and find out what changed between the first and second tries. This is a great way to learn.
It takes patience, careful planning, and hard work to raise or surpass your target amount through crowdfunding. Aside from doing a lot of research and perfecting your business plan, it’s important to build your network of followers to make a successful crowdfunding campaign. Also, make sure to use the above expert crowdfunding tips for small businesses before you launch your campaign.