Crowdfunding is a method by which entrepreneurs raise capital for their projects through the collective donations of family, friends, individual investors and any persons interested in the project.
Crowdfunding as a way to raise capital to fund projects has been in practice for some time now but in recent times, it has become one of the preferred methods for entrepreneurs to get the much-needed funds directly from the public. This entrepreneurs from having to endure the stifling protocols that they would have otherwise been subjected to if they tried a capital raise with let’s say a venture capital firm.
With that said, we are going to examine what it takes to successfully execute a crowdfunding campaign. There are websites dedicated to helping people crowd-raise funds for their projects for which they take a percentage of the final bounty.
However, simply signing up for an account and hoping the funds roll in won’t work. Crowdfunding nowadays is as much of an art as it is a science and syntaxNinjas has compiled a list of things you need to do to successfully execute a crowdfunding campaign.
1. Sign Up for An Account on A Crowdfunding Portal
There are several websites dedicated to crowdfunding and some of them include Kickstarter, Indiegogo, and GoFundMe. The premise of these websites is the same, you sign up for an account and you use the tools provided by the site to reach your intended audience who then donate some funds to ensure you can successfully bring your project to life.
There is, however, a catch for each donation received the entrepreneur usually gives the donor some sort of incentive as a way of showing their gratitude for the donation. To ensure you don’t run afoul of the rules that govern these make sure you read their operating manuals thoroughly before commencing on your crowd raise. Kickstarter, for instance, has their own creator handbook which you can access here.
2. Know Your Target Demographic
While the saying “know your demographic” might sound a little cliché. It is one of the most important aspects of crowdfunding. Knowing your demographic and how you intend to reach them helps you prepare your approach to asking them for money.
According to Funded Today’s [https://www.funded.today] Zach Smith who has helped raise close to $130,000,000 as at the time of this writing, compiling an email list as a method of reaching your intended donors can be of great help. In the case of not having a potent email list, he recommends acquiring one but not for the purpose of emailing the people on the list directly (we do not condone spamming) but instead to use a way to generate an aggregate of people for targeted advertising on a platform like Facebook.
What is even more interesting is Facebook’s ability to aggregate a lookalike audience, i.e. an audience you can broadcast your message to different that is completely different from the people on the original email list.
3. Leverage the Power of Video
People who donate to your cause or project will usually want to find out why they should part with their hard-earned money. There is no better medium to communicate this than video. It shows the emotion and passion of the person or team behind the project.
It is also a chance for the party raising the funds to convey the story behind their product or project. Also, don’t underestimate the power of playing into the emotions of your audience. Phrases like “For the same price of a cup of coffee from Starbucks, you can invest in our startup or you can help build a water well in a country in Latin America.”
4. Use the Media as A Way of Reaching Your Audience
Bloggers, Social Influencers, and traditional media will be necessary allies as you try to build up awareness about your crowdfunding campaign. Crafting a properly written press release will increase the chances of traditional media printing an article about your crowdfunding effort.
Also, reaching out to bloggers in the niche you are raising funds for would certainly help in getting the word out to their followers. To secure the loyalty of bloggers and influencers, providing an incentive for the exposure they attract to your cause might be a good idea.
5. Provide Donor Incentives
While your cause to bring a water well to an impoverished village in Somalia might be a noble proposition, we still live on planet earth where people want a return on their investment. Provide your investors with a reward for investing their hard-earned money into your idea. Most campaigns have the tiered reward format for their investors.
For instance, investors get more rewards and better access to the product depending on how much of their money they are willing to part with. Our advice is that you provide a clear and concise description of what your donors will receive in exchange for the money they donate to your project.
6. Make Your Investors Advocates for Your Product
The difference between traditional investing and crowdfunding is that people actually help bring an idea or project to life sometimes without any receiving equity in the company behind the idea itself. They turn their hard-earned money over to you usually because they are either a fan of the product or a fan of the person behind the product.
So why not leverage this and convert your donors into advocates for your product. Provide incentives and ways for them to refer your crowdfunding campaign to acquaintances, friends, and family. Ensuring your investors are your loudest advocates ensures you can reach people that you otherwise wouldn’t have been able to reach.
7. Do Not Underestimate the Power of Social Media
This point cannot be emphasized enough. Most people nowadays congregate on one social media platform or another. It is up to you to find out which social media channel produces the best results relative to the efforts you put into reaching people on each platform.
We wouldn’t recommend a blanket strategy which could be overwhelming if you try to use every social media platform there is. We recommend you find a few that are effective in communicating your intended message to your audience.
Facebook, LinkedIn, and Reddit might be better platforms for getting a serious-minded message to a certain audience than Snapchat or Instagram would be as both are geared towards a younger audience.
Crowdfunding as a method of raising capital is not going anywhere anytime soon. In fact, in the world of cryptocurrencies, a newly introduced concept called an “Initial Coin Offering” (ICO) has allowed entrepreneurs that would have been bogged down with the intricacies of an Initial public offering go direct to the investor and offer equity in their companies to investors who receive tokens as a store of value for their original investment.
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