Some of the best inventions our species have a privilege to enjoy started as partially developed projects and then evolved over the course of time – many of which by becoming a money magnetcrowdfunding idea. No reason why your creation wouldn’t evolve the same way.

Like one of the most popular crowdfunding projects to this day: Coolest Cooler, which managed to raise, through smart and persuasive crowdfunding campaign, an astonishing $13,285,226, with only $50,000 set as a campaign goal.

This is a quick guide to crowdfunding or as it is also known: peer to peer lending, and it will serve you as a great starting point, along with the instructions in Part 1.

 

 

what is crowdfunding website

What is the Crowdfunding Website?

 

It’s a central place for online fundraising that connects a fundraiser and a crowdfunder to create anonline money pool. Fundraiser being a person or a group with a need for small business grants and Crowdfunder being a person or a group that recognizes the potential of an idea and decides to support it.

Crowdfunding sites are the new approach to business loans and small business grants. Avoiding the painful and slow bureaucracy and over-caution often present at venture capital offices and banks,online fundraising is gaining a momentum.

 

 

how crowdfunding works

How Does Crowdfunding Work?

 

  1. Formatting the funding plan

 

You work out the precise funding goal: a defined value you need in order to develop your project entirely or to cover a segment. Keep in mind that the online fundraising falls into the same group with other small business grants and therefore you need to set the margins and strategy straight. Otherwise no one will take you seriously and you will fail to raise funds.

For instance, if you’re about to make a documentary about the koalas, you might want to collect enough funds just to cover your travel expenses or to fund A-Z.

Or maybe even a better example is the ambitious project of developing an electric car where campaigners decided to break their monetization plan into small pieces and run the first crowdfunding campaign to only finance the necessary tools. As they were progressing with their project, they initiated and executed additional campaigns.

 

  1. Crowdfunding Campaign Preparation

 

Once you’ve dissected your funding plan, it’s time to prepare the campaign.

You’ll sign up for a free account on one of the crowdfunding sites and provide additional details about your identity and go through the bank credentials check. Simple and easy-to-use interface of your project’s page, found on most crowdfunding websites, allows you to add critical details about your project: description, purpose and nature of it, crew and every other related piece of data you find important.

You’ll introduce yourself and the crew if any and explain why should someone support your endeavor. Keep in mind that you are raising capital for your project. You need to pitch your idea efficiently. This means you’ll have to create a short presentation of your agenda – a pitch, either written or a video. But do consider the fact that campaigns without video presentation hardly ever reach their target. People just love to see the movie, that’s all.

One note though. Don’t exceed 2,5 minutes.

 

  1. Run the campaign.

 

This is the most critical part of the entire process after the pitch.

You are spreading the word by any means necessary and keep the constant communication with your current and potential supporters – crowdfunders. Always think about the fact that some people need an extra nudge to support your crowdfunding idea and you never know what that might be so explore and exploit every possibility.

Your best approach is to offer your crowdfunders some kind of reward for their financial participation in your project. It can be anything from T-shirt to special mentioning of the supporter in your project. But what proved itself as the most efficient is pre-order. In other words, offer a widely discount and make sure to show the retail price so the supporter can “see” how much he or she will save by supporting and pre-ordering.

This is the stage where your supporters “invest” in your dream. Everything comes up to this.

As a part of your campaign you want to keep your current and potential supporters up to date by providing them with the visual insights of development and even the events you organized in order to gather more fans.

 

OK, this is a theory. In reality, things work slightly different.

 

One of the reasons why only 8% of all campaigns manage to raise funds is their belief that it’s enough to fire few messages to their closest friends and family.

As you could see in the Part 1, it doesn’t work like that. You are asking people to give you money for something that doesn’t even exist. And, your “list” of friends is fairly short.

You need smart native and marketing strategy because it all comes down to these two factors:

  1. Reach
  2. Precise calibration of your brand positioning to ensure precise targeting and cut on costs.

 

 

  1. Aftermath

 

4 things left for you to do:

  • Collect your funds;
  • Ship your rewards;
  • Follow your dream – you’ve earned it!
  • Keep your supporters updated with the progress. Nurture the relationship. You might need an additional fundraising campaign if your project evolves into something even bigger!

 

 

crowdfunding trust and safety features

Trust & Safety at the Largest Crowdfunding Platforms

 

Crowdfunding in its nature involves 3 different parties to create that online money pool:

  1. Crowdfunding Platform Team
  2. Fundraiser (Person or a group raising the funds)
  3. Crowdfunder (Person or a group investing in project, supporting the campaigner)

It’s critical to establish a high level of trust between the parties in a process. Therefore many of them (crowdfunding platforms) have developed simple guidelines which will point you in a right direction no matter if you’re a fundraiser or a crowdfunder. And you’ll be able to see what they do from their behalf to make this a fun, safe and exciting journey for all.

 

If You Want To Support the Crowdfunding Idea

 

  • Go over the campaign presentation and any other relative details campaigner’s provided and learn more about the project you’re about to endorse.
  • If you think you need more info don’t be afraid to ask the campaigner directly – there is a button just for that purpose.
  • Surf the web and try to find campaigner’s homepage or social page and explore some more.
  • Listen to the feedback. Nothing beats word-of-mouth and it’s usually a good indicator whether the campaigner and his idea are something close to your aspirations.

 

If You Want To Run a Crowdfunding Campaign

 

Every type of the relationship is based on a principle where each party benefits on some level. It’s a two-way road.

  • Make sure you clearly introduce yourself and present your creative idea (agenda) honestly and in a precise manner.
  • Stay on top of your game and provide feedback whenever needed. This means to keep the communication channels open at all times and respond as fastest as you can.
  • Nurture the relationship with your supporters even after your campaign is over.

 

crowdfunding platform people

Where Do Crowdfunding Platform People Fit In

 

Indiegogo or Kickstarter, or Crowdrise – (3  largest crowdfunding platforms) are communication channels and liaison officers. It’s those crowdfunding platforms what connects you the fundraiser with you the crowdfunder.

To keep the confidence level of their communities, fundraising websites are constantly upgrading their systems and monitor everything that has been happening on the platform. This includes a high-tech early warning system if someone is trying to abuse the platform. Have no doubts – each of them will suspend the offender at the speed of the light. It’s the way to ensure that honesty and trust between the parties are on a highest possible level.

One of the critical features of every crowdfunding platform is most certainly a payment gateway(s) and personal data.Most of the platforms take no chances and use the latest security systems to protect your data and your privacy.

 

While crowdfunding is a great way to raise capital for your creative idea, it’s by no means a magic stick. There are some things prerequisite to execute a successful fundraising campaign. The most important one – know your business; know your niche. This means that you need to be on top of your game. If you are developing a service or a product you need to know exactly what it is good for. In addition, you need to know your market; your niche.

 

You might have the best possible idea (at least in your head), but if you don’t have the market for it, everything is in vain.

 

 

crowdfunding needs a great pitch

Preparations prior to launch

 

85% of every success is a thorough planning and detailed preparations.

 

Your best approach is to think about the fundraising as the attempt to close the financial structure of your business project by searching for investors who offer a venture capital or asking a loan from the bank. That way you’ll ensure that your project’s blueprint is developed to the smallest detail. This includes, but it is not limited to:

  • Full description of the product or service,  or any other type of a creative “more-social” idea (campaigning to send your folks on cruising or to build a shelter for lost cats);
  • Definition of the problem your creative idea is about to solve. Even if the niche is too crowded you will still be able to catalyze the narrow segment and land your product or service – you just need to break through the noise;
  • A classical market analyses which will later help you to construct a compelling pitch – the critical component of every campaign.
  • Detailed financial plan including overall cost of your project and possible potential revenue (ROI), once the blueprint is transformed into a live service or fully operational product.

When you have all of that in your pocket, it’s time to develop a PITCH.

 

Whatever we do in our lives, we pitch. We pitch to push our point of view when discussing an issue. We pitch to push our agenda. We pitch to push our product or service.

 

Crafting a compelling pitch can be somewhat difficult for many because your pitch should sum every benefit of your idea in a short, meaningful and decisive manner, making it irresistible for your potential supporters.

The practice has shown that the best results are achieved with the 2-3 minute video pitch.

While the video is an optimal way to pitch your idea, you still need to transfer it into the words and you need three (3) different types:

  • 300-500 words pitch for your campaign page;
  • 15 seconds pitch suitable for the header of the page and for the email campaign – known as the “Elevator Pitch”;
  • 5 seconds pitch suitable for social networks; Twitter in particular.

Crafting a successful and compelling pitch is almost a science. Think of it this way: if anyone would be capable to develop a good pitch then marketers and copywriters wouldn’t even exist.

Mastering the craft of the great pitch includes great knowledge about human behavioral psychology among everything else. The pitch must be optimized in a way that it will influence the cognitive behavior of the one who’s been pitched. Words, images, videos – all the same; your message must change the way the prospect thinks.

To make this critical element easy for you so you would be able to focus on other segments, let the professional sales writer handle it. Direct benefits for you are:

  • Time saving

Focus on other segments of your campaign such as communications and development and greatly improve the performance of your campaign;

  • Increased Effectiveness

Greater brand awareness derived from the professionally composed pitch which communicates your message with additional power;

  • More Funds For Your Project

Your ultimate goal is to collect as much capital as possible for your creative idea. Professionally designed pitch will yield far better results than the one developed by someone not so well versed or with the lack of knowledge and experience.

 

After the pitch had been developed, it’s time to think about the rewards for your supporters.

 

 

reward-based crowdfunding as step 1

 

Reward-based crowdfunding

 

Reward-based crowdfunding is the most effective way to collect your funds. It’s a relatively small “perk” you’re offering to your potential supporters in exchange to their participation. Depending of your project, you’ll adjust the rewards span.

The analyses show that the most usual amount of money, supporters will invest in you and your idea, is $25. So you need to define 5-7 rewards with the value ranging anywhere from $10 to $1000-$5000.

For $10 you may reward your supporter with the “Thank You” card or with the name engraved somewhere on the wall of your project or with the campaign T-shirt as a memorabilia.

$25 will most likely include a pre-order of your service or product, or maybe even a private dinner. More money you ask for; more you will have to be willing to give. You need to find the most suitable model for your particular campaign.

More money you ask for; more you will have to be willing to give. You need to find the most suitable model for your particular campaign. The best way to get the ideas is to go through successful campaigns and see how they did it. Again, a bit of good old intelligence efforts will come a long way.

 

While reward-based campaign is a neat way to raise funds, you may raise even more through equity crowdfunding.

 

Equity crowdfunding

 

Every “funder” earns a cut in revenue your business makes proportionally to the invested amount relative to the value of the project. Funder has no executive rights nor is able to influence decision making. Funder simply waits for his money to be paid on his account. It is an investment similar to stocks and bonds.

Since this type of fundraising is gaining on the momentum and becoming the new way to invest money, more people are swiping through equity based crowdfunding campaigns trying to find a hidden gem to invest some money in it. Some groups and even venture capitals are investing millions in projects they find interesting and lucrative. As we said, money is flowing like a river. You only need to dig a canal and redirect some of it to your business.

 

This is only a short overview of crowdfunding and its principles. If you are willing to raise funds using the crowdfunding as a method, we suggest that you go over hand-books provided by the specific crowdfunding platform to set up everything and then come back to work out the deal with us. We are delivering supporters and money, ensuring that overshoot your campaign’s financial goal.