As an early-stage entrepreneur, your first instinct might be to go straight to angels or venture capital firms to help accelerate you from the idea or prototype stage to a successful launch. However, that can be a losing strategy with investors looking to see market traction of some kind and measure your product-market fit.
At the same time, if you’re in the capital-intensive hardware space or a consumer-facing industry that requires ample marketing dollars from the start, you might find getting off the ground extra tough. That’s where some alternative financing routes might end up being your best bet. Namely, rewards crowdfunding could be an especially useful avenue, with its access to a broad platform of potential customers willing to fund you from the start in exchange for a chance at the earliest possible adoption.
But just because rewards crowdfunding (think the Kickstarter or Indiegogo platforms of the world that offer backers the chance to back you in exchange for a reward) is a solid option in the early stages doesn’t mean it’s a guaranteed lock. In fact, only 38% of Kickstarter campaigns succeed. So how do you build a successful crowdfunding campaign?
1) Plan Ahead Think of a rewards crowdfunding campaign as a really specialized marketing campaign. To actually build a successful campaign, you have to have a clear communications and marketing plan, one that outlines everything from you vision and business objectives down to the individual objectives. You should put a lot of thought and time into what will likely be the most visible and trafficked representation of your brand.
There’s no question that you have to prepare for weeks ahead of time to launch a successful campaign. Specifically, you’ll need to:
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· Conduct research on your platform and talk to people who have both failed and succeeded on it
· Design an engaging and representative Kickstarter (or equivalent) page
· Determine how many and what kinds of rewards to offer
· Conduct a cost analysis to figure out how much capital you need to realize your project, factoring in distribution costs and taxes
· Script and film a meaningful video that tells a story and looks professional enough to capture a broad audience’s interest
· Develop an email list of hundreds to thousands of potential backers, including close friends and family as well as press outlets and influencers
· Build buzz for your page and your campaign long before you even launch
2) Know Your Platform
Knowing your platform is so important because appealing to the built in platform users can make or break a campaign. People already on the platform are looking to be backers and have different time expectations, as well as a different risk profile, which makes them more like to fund you more quickly. Plus, because they’re already on the platform, you do not have to work as hard to get them on the site. You should be actively looking to understand:
· How the platform’s algorithms work (i.e. how can you get featured on the main page)
· What the backing curve typically looks like (Does it spike up at the beginning and fall through the end of campaign? Does it dramatically increase when there’s only 5% left to be funded?)
· Who is actually on the platform (i.e. age, gender, interests, etc.)
· Which campaigns most often succeed and whether they follow specific patterns or fit into certain categories
· If you or anyone on your network has contacts there that may be interested in your campaign
3) Lean on Your Network
You can accomplish much of the first two steps in running a successful campaign by leveraging your network. Don’t be shy about reaching out, whether it’s asking friends and family to back you at any level they can afford or using your rolodex for potential bloggers and press partners who can co-promote your page, your network is extremely critical to the success of your campaign. In many cases, the algorithms on these platforms take into account impressions, comments, and social shares. Explain to those in your network that viewing, engaging with, or sharing your page can meaningfully impact how much in-platform promotion your campaign receives, and ask for support.
4) Transparency is Everything
There are two things you always need to remember about backers generally, regardless of the platform you use: 1) they’re taking on more risk than the average consumer and 2) they’re often doing that for emotional reasons. As a result, transparency becomes extremely important in running a successful campaign. If backers don’t feel like they can support you or that they’re sharing in your journey, they will pull their backing. And yes, most platforms allow backers to renege on their backing during the campaign.
What does transparency mean? Posting weekly updates about your progress, responding to comments and direct messages, making short videos featuring your product or giving backers a sense of how much you’re hustling, posting photos from manufacturer visits, or not just letting them know when the promised date of arrival gets pushed back but why. Backers will hold you accountable, and if you’re honest with them, they’ll accept drawbacks and changes as they come. Why? Because most backers aren’t just supporting you because they think your ideas are cool — they’re doing it because they want to be part of something greater, something that allows them to be one of the figures in the creation of a new product, market, and/or idea.
5) Don’t Put All of Your Eggs in One Basket
Never think of rewards crowdfunding as your end game. You will need capital afterwards, in some cases immediately afterwards. While you run your campaign, keep your eye out for interested angels and other sources of investment capital. But even more importantly, do not neglect your own website or potential customers outside of the platform. Make sure you have an active website where customers can make pre-orders, or eventually, simple make orders. Your goal should be to capitalize on the momentum of a successful campaign to drive new leads and incoming revenue.
Have you launched a rewards crowdfunding campaign? Did you make your funding goal? Share your insights in our comments section.
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About Hyde Park Angels
Hyde Park Angels is the largest and most active angel group in the Midwest. With a membership of over 100 successful entrepreneurs, executives, and venture capitalists, the organization prides itself on providing critical strategic expertise to entrepreneurs and the entrepreneurial community. By leveraging the members’ deep and broad knowledge of multiple industries and financial capital, Hyde Park Angels has driven multiple exits and invested millions of dollars in over 40 portfolio companies that have created over 850 jobs in the Midwest since 2006.
About the Author
Alida Miranda-Wolff
Alida Miranda-Wolff is Associate Manager at Hyde Park Angels. Her role includes creating and executing marketing and communications strategies, planning and managing events, fostering and maintaining community and industry partnerships, and managing membership. Prior to joining Hyde Park Angels, Alida served as a manager, data analyst, and publication specialist at a multibillion dollar industrial supply corporation. She has led one of the most successful Kickstarter campaigns in Chicago history and worked with half a dozen startups in various marketing, content creation, and project management roles. Alida believes in creating valuable, spreadable multimedia content, and has done so as a freelance writer for several print and online publications.
