Crowdfunding Business – How to Raise Capital

by Cristian I

Crowdfunding Campaign

If crowdfunding were really that easy, then everyone would be doing it.

You must take the time to plan, prepare, and then launch a crowdfunding campaign to give it a chance at success.

Your ideas must translate into value for the people who are thinking about supporting your product, service, or idea.

Then you must make an effort to transition this effort into a business that can sustain itself.

What is Crowdfunding?

Crowdfunding is an option that businesses use to avoid seeking a large sum of money from a single investor, such as a bank or an angel.

You still reach the funding goals you have with a successful campaign, but it comes from a significantly larger group of people.

Most crowdfunding efforts require that you exchange direct rewards to those who invest in the hopes that your project will succeed.

Although this process isn’t new (Kickstarter began operations in April 2009), it is easier than ever before to start a campaign.

Many of the fees that were charged are no longer present on crowdfunding platforms either, which means you get to keep more of the cash you raise.

Those benefits also mean that you must stand out from the rest of the competition if you are going to have a successful experience.

Why Crowdfunding Works for New Businesses

A crowdfunding platform provides you with a place to host your fundraising campaign.

Most of them will provide you with hosting space, promotional services, and other benefits in exchange for a percentage of the money that you raise from backers.

You entice people to donate to your campaign by offering various levels of rewards based on the amount they choose to provide.

Companies offer promotional items, advance access to the products or services under development, and usually some type of public recognition for their support.

When more money is given to your crowdfunding campaign, then the better reward you should receive.

Some companies can even issue an equity percentage as a way to raise money.

Some platforms allow you to keep whatever funds you raise during your crowdfunding effort.

Kickstarter and a few others use an all-or-nothing model too that will return any funds raised to your backers if your goals are not met.

Outside of equity and rewards-based crowdfunding efforts, you can also opt for asking people to provide a direct donation to your new business efforts.

There are no financial rewards or incentives with this option, so it is usually reserved for non-profit organizations and charities.

What Are the Benefits of Crowdfunding?

The most apparent benefit of crowdfunding is that this campaign effort can help you to raise the money that you need for a specific purpose.

It can provide the capital you want without requiring your company to approach angel investors, banks, or other lending products.

That means you can become more productive without necessarily taking on a lot of debt during your expansion efforts.

There are some additional benefits of crowdfunding that are worth considering as well if you are thinking about starting a new campaign today.

 1. It helps you to build a following for your business.

Companies that had a substantial following before they start to ship their first products were rare before the era of crowdfunding.

Now, this platform gives you a significant advantage.

If you are successful with a campaign, then the press and social media coverage you receive can help you to build an audience that is already interested in what you intend to offer.

The goal is to keep these fans and followers around as your company grows and provides more products of services in the future.

2. You have an accessible source of capital.

Trying to secure financing or a lending product through the traditional journey is time-consuming, challenging, and costly.

Many new business owners will not receive an investment unless they can prove that their idea has merit.

Banks might even require a full business plan review before sitting down to discuss your plans.

Thanks to crowdfunding, you can let anyone review the worthiness of your idea through the content you publish on your page.

Through the use of video, images, and written content, you can communicate value to the entire world.

Although the production component of this work takes time to complete, you will not need to give up equity in your business for capital when you use the rewards-based option.

3. It can validate your idea.

When you have information about your target market for goods or services, then you can reduce the financial risks you take to bring those items to your potential customers.

Even if you do not run a successful campaign, crowdfunding is an excellent and affordable tool that helps you to research your demographics.

You can validate any creative project by running a pre-sale on your preferred crowdfunding campaign.

Not only will you be able to see if people are interested in buying what you offer, but it can also help you find a better price point that can ensure future profitability.

When you can know what people want before you start to sell, then it is much easier to be scaling your business for the future.

Qualifying Items for Crowdfunding Campaigns

Most crowdfunding platforms do not restrict the products or services that are available for campaign creation.

As long as what you offer doesn’t violate any laws or create the potential for harm, then almost any business can start this fundraising process whenever they feel like they are ready.

With that being said, there are some commonalities to find in the most successful campaigns on platforms like Kickstarter and Indiegogo that are worth considering before making yours live.

  • The best crowdfunding campaigns offer robust differentiation from other industry products. If you can advertise something innovative, then it will create a buzz that attracts backers because you have something that no one else provides.
  • You must direct your campaign to a niche audience who finds value in the problems that your goods or services sold. If you can develop a prototype that taps into the needs of your targeted demographics, then it is possible to find a market which will want your items immediately.
  • Your campaign must focus on a specific product. Backers want tangible rewards for the investment they make in your company. If you have multiple items up for sale, then seek support for your best product.

It is necessary to complete your due diligence on the competition before activating your crowdfunding campaign.

If there are other products on the market which are similar to what you offer, then claiming your stuff is a one-of-a-kind opportunity will ring hollow.

Authenticity is 100% essential to a successful experience.

This research will also help you to see if someone else has already marketed a similar idea.

You can then make adjustments to distinguish your item from the others to create the value proposition that potential backers will find intriguing.

How to Market Your Crowdfunding Campaign

Many first-time crowdfunders think that the journey stops when they launch their campaign page.

That event isn’t the end of the process – it is the beginning of it!

It helps to think of your crowdfunding efforts as an extended product launch.

If you want to have a successful experience with it, then you will need to dedicate time for public relations, marketing, and brand awareness throughout the campaign to ensure you receive the best possible response.

Marketing efforts must be present to turn your visitors into backers.

Most companies get the written content correct (proper spelling, grammar, and contextual structure), but they ignore the critical components of what their video should provide. Some campaigns don’t even submit video content!

There are four critical elements which you must cover in your video because it will become the most shareable aspect of your campaign.

  • Tell people who you are and what your experiences have been in life because this will help others begin to draw connections to you that can lead to a relationship in the future.
  • Let everyone know about the story of your product. Talk about how you came up with the design, the reason behind its name, or why it matters to you on a personal level. Then make sure to share with your audience why your idea should be relevant to them too.
  • Talk about why you need some monetary support to get this idea off of the ground. You will want to cover in detail how the funds you raise will be spent in the future. Always include a direct appeal for support to inspire a call to action.
  • The best videos also provide a review of the rewards offered as part of the campaign. You might want to talk about the most appealing or exciting opportunities that are part of the package.

You are not creating a feature-length film with your video content.

The average attention span for someone online is comparable to that of a goldfish, so keep it to 60 seconds at most whenever possible.

If you go beyond 3 minutes, then your video is too long.

You must later revisit the content to trim it.

Product Photography and Your Crowdfunding Campaign

Videos will help people to get to know you, your company, and your overall brand.

Visual content is what provides potential backers with an opportunity to see your idea, product, or service for the first time.

If your product photography does not look professional, then it cheapens the brand experience for the individual and reduces the chance of them becoming a backer.

Photographs show off more than the specifications of your product. It is a tool that you can use to help visitors get a sense of your brand concept.

You have an opportunity to show others the development process, the problems your product solves, and other relevant information that can lead to a sale.

Think about the structure of your campaign as a long-form sales page.

Your video opens the presentation, and then the visual cues verify that there is truth to your concept.

The copywriting for the page will then inspire people to take action if they have interest in what you offer.

If you can hire professional help with these critical areas, then the investment can reduce the risk of failure.

Then you must take the effort to go a step further because good PR is necessary to spread the word about your campaign.

Why PR Is Necessary When Crowdfunding?

If you have the rights to the best product ever created in the history of humanity, then how good is it if no one knows about it?

PR work is essential as part of your marketing process because it allows you to pitch the story of your idea to the rest of the world.

Whether you choose to contact large print publications, Instagram influencers, or small blogs in your industry is up to you.

You must work on reaching one (or all) of these groups to help spread the word of your campaign.

The first step of this process is to build a sizeable list of potential contacts.

It is a harsh truth, but most people will ignore you when you reach out to them about your campaign.

Bloggers, media, and reporters receive dozens of requests every day for coverage.

They cannot hear every single pitch, so they only respond to the ones that they find are interesting.

You can reduce the risk of rejection by only pitching to influencers who are familiar with your niche.

Then make sure that you start working with writers or producers who have covered crowdfunding campaigns in the past.

You can also work with the media that cover your industry.

You’ll score bonus points if your product or service can relate to the previous coverage of a publication.

Another common mistake that new business owners make is to wait until their campaign goes live to reach out to these groups.

Your crowdfunding efforts will do better if there is robust coverage and support in the days leading up to your launch.

Include the video for your campaign with every pitch – unless you receive instructions that tell you otherwise.

This content is the fastest introduction to your product and who you are as a business.

Then don’t give up. It takes time for your personal outreach to gain some traction.

Keep making rounds through your contact list after you start earning some backers to see if there is renewed interest in covering your idea.

Turning Backers into Happy Customers Through Crowdfunding

Backers are understanding people because they know that items or rewards on a crowdfunding platform are different than products which you would purchase off-the-shelf.

That doesn’t mean there are zero expectations placed on your campaign.

It just means you’ll have a little more time to recover from an unexpected event.

Before you decide to launch your campaign, work to create an informed estimate of what the production timeline will be if you don’t have the product in-hand already.

You will need to consider the number of products you intend to make, how like fulfillment needs to take on your order size, and the length of time necessary for the factory to ship the goods to you.

Don’t forget to let your potential backers know when they can expect their campaign rewards too.

Have your production or manufacturing processes finalized before taking your campaign live.

It is fine to add some extra time to your estimates so that any unforeseen delays will not adversely impact the backers’ experience.

If you do encounter some trouble, then make the announcement as soon as possible.

Remember to provide an updated estimate.

Then remember the principles of shipping and fulfillment to ensure every backer receives their reward promptly.

Is Crowdfunding Right for Your Business?

Crowdfunding can be a fast way to raise some capital for your company.

It is also a process that can leave you in a financial lurch if your goals are not met.

If you must have a specific quota met to place an order for a product, then a platform that allows you to keep whatever is raised could cause financial distress.

Do you have a valuable offer? Is there a solid plan in place?

Then you must evaluate the existing time commitments you have right now because crowdfunding is going to require a significant effort.

Success doesn’t happen magically. Only a few ideas get funded because of the strength of the concept.

You must be willing to follow the steps in this guide by putting in the time and effort necessary to reach your core audience.

If you understand your limitations and are confident in what you can do, the crowdfunding is a fantastic choice to consider because of its many benefits.



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