What you should know before starting a crowdfunding campaign

Startup hubs always talk about successful projects that have raised millions for their unique idea. If you google “how to raise money for a new project”, you will be taken to an investment platform with 1000 advantages of crowdfunding over the traditional method of financing.

So, is it really? If the answer is “yes”, why do many entrepreneurs fail to go through the application, approval and publication stage? 

In this article we are going to highlight 8 important things to know before starting a crowdfunding campaign

1. Get ready to fail

According to the Сrowdfundinsider, Indiegogo failure rate is 91%! 

Look at this number, crowdfunding doesn’t seem so attractive any more. 

A successful project requires daily teamwork that creates, advertises and monitors the entire crowdfunding campaign.

If you decide to find money for your project on a crowdfunding platform, most likely you will not have time to deal with the project itself and will throw all your efforts into creating a crowdfunding campaign.

Moreover, experience has shown that crowdfunding blows up for brand-new products on the market.

So, before you hit the street, think if your idea is the exploding kittens?

2. Start with MVP

Surely you already see your project in the top of the most successful crowdfunding campaigns on Kickstarter or Indiegogo, but trust us, in order to achieve success, you have to start with a well-performing minimum viable product (MVP).

The final project with features and built-in integrations will be expensive and potential sponsors simply won’t be able to donate such amounts up front.

Let’s consider the Crystal Wash story on the Kickstarter.

The project looks like a fairy tale. Crystal Wash offers to get rid of dirty laundry forever. 2 balls with magic stones inside will wash away the dirt of any complexity. Well, well, well…

Besides a beautiful story, the Crystal Wash project does not provide any scientific research on its products and contact information about the owner. As a result, investors began to massively demand their funds back, suspecting the project of fraud.

Crystal wash investors began to massively demand their funds back, suspecting the project of fraud.
Source: Kickstarter

3. Think about yearly interest

I have already invested in Mike’s project and I recommend doing it

is a good advertisement for starting a crowdfunding campaign.

In the first 48 hours, you will need to fuel hype in the project as efficiently as possible. If at the time of launch you will have support from other sources, be sure to tell potential investors about it.

This method is called social proof. It’s easier for people to invest money when they know that their friend, boss, or even gardener do the same.

4. Prepare the presentation

A competent presentation takes you one step closer to the treasured amount. Videos, real photos, gifs, project description — all these items are important.

An experienced backer will monitor all your social networks and if there are 10k subscribers and 5 likes under the photo, even this fact can frighten them off. Who knows, maybe you are a fraud? 

We recommend that you convey to the investor not the finished product, but the idea itself. It is important to understand at what stage the project is and what is the further plan development.

5. Prepare a business plan

Be prepared for the fact that even at the registration stage, representatives of crowdfunding platforms may ask you to provide a business plan.  It can be a diagram of the further development of the project, indicating the approximate amounts. This is a common practice for Indiegogo and MicroVentures platforms.

In addition, a good business plan will help you allocate funds correctly if your campaign will be successful.

There are many examples when a company that raised the required amount to launch a product went bankrupt due to expensive logistics.

It would seem that sending a postcard as a reward is not expensive, but what if you have to send 100,000 of these postcards? Calculate such moments with an accountant, that you do not have to spend the crowd money on awards.

6. Create a marketing campaign

It’s no secret that a crowdfunding campaign needs to be promoted, but how to do it right?

You create a page on Facebook, Twitter and Instagram, just like an ordinary Internet user. Sure, you can put a tick in the social networks column on your to-do-list. A day or two later, it’s only your friends and neighbours who share your unique idea. 

Let’s figure out what was wrong?

Perhaps you don’t need an Instagram page at all, since your target audience is following the news on Twitter. The “I’ll win all hearts” plan is only good if you are selling miracles=). Unfortunately, this doesn’t work.

Every crowdfunding campaign needs the right marketing strategy. Someone really relies on social networks, someone uses YouTube advertising, and someone will suit both. Don’t do it at random, research information, and only then create a marketing strategy.

7.  Invest your money in a campaign

A painful question for many entrepreneurs “Where to get money for …” because investors will spend their money on your idea. That’s why you need to create a presentation, photos, videos, marketing strategy and more…

Also, you need to take into account the fact that you will be the first investor in your project. Therefore, you need to have a reserve of funds to pay for the services of a videographer, photographer, accountant, and possibly a marketer. Of course, you can make the video yourself, but a sophisticated audience will most likely not appreciate your efforts.

As practice shows, successful crowdfunding campaigns make professional photos and videos and Swytch is a good example. Thanks to the Swytch promo video, the campaign has amassed nearly $1,200,000 and over 10,000,000 views on YouTube.

8. Choose the right platform

For many aspiring startups, crowdfunding platforms is all about Kickstarter or Indiegogo. Believe us, there are other crowdfunding platforms that are popular among narrowly focused investors.

Before clicking the “start project” button, you need to know about different platforms. It’s easy to compare several platforms on our CrowdSpace listing section.

Also, pay your attention to the platform registration/authorization number, because without it, a website simply does not have the legal right to work.

CapitalRise registration number
Source: Capitalrise

For examples, all UK platforms must be authorization from the FCA regulator. We talk more about this in one of our articles Crowdfunding regulations in the UK and Europe.

Let’s sum up 

We hope that we have explained clearly that a crowdfunding campaign is the same work as developing your own project, which takes a lot of time and certain funds. 

Just before thinking about crowdfunding, remember that this is a big risk. Your campaign may not take off, and indignant backers once and for all  destroy your reputation.

So, if you decide that an alternative investment method is closer to you than a bureaucratic banking system, take the project seriously. No one would invest in a “brilliant idea” without proper presentation and marketing, it would just get lost among a million of the same ideas.

3 key takeaway: 

  1. Get ready to fail.
  2. Create a marketing strategy and business plan.
  3. Presentation is the first step to success.

If you want to create your own crowdfunding platform and have some ideas, give us a buzz. We will help you start your fintech business. 

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