It all started 18 months ago when I was introduced to the founder of Thin Ice—a wearable technology that helps you lose weight through cold temperature thermogenesis.
At the time, Adam Paulin wanted to raise money to develop and manufacture Thin Ice and was considering launching a crowdfunding campaign to do so.
With his innovative product and my understanding of digital marketing, we teamed up on our first-ever crowdfunding launch.
How hard could it be, right?
Well, that first campaign was a disaster. We raised only $16,710 of our original $50,000 goal and didn’t have enough money to deliver anything.
Stuck with $16,710 of customer money, we had two choices: refund the money, or relaunch the campaign and hope for the best.
We went with the second option. Once the first campaign ended, we re-strategized, changed (almost) everything, and relaunched on Indiegogo two months later.
That second campaign raised $592,253 in 42 days.
After that win, we went our separate ways and I went on to advise/manage two more campaigns: TappLock and Shock Clock, by Pavlok.
Each campaigns raised more than $300,000.
I’ve now interviewed more than 25 successfully funded crowdfunding campaigns on my podcast, and advised three mega-successful ones, and I’m now convinced that crowdfunding gives you perks no other funding route gives you.
Crowdfunding allows you to: 1) validate your idea; 2) build an audience, and; 3) get real customer feedback.
If done properly, it is the most efficient and effective way to start a business. Once each campaign I participated in was finished, each business had thousands of new customers, had discovered multiple potential partnerships and licensing deals, and had a great understanding of their customers.
This post goes deep on all that I’ve learned about how to run a successful crowdfunding campaign. It covers exactly what caused my initial failure, as well as what was done “right” in my three subsequent successes. It lays out step by step how crowdfunding works and what you need to do to increase your chances of success.
But first, why don’t we give you the 30,000-foot view of how crowdfunding works?
How Crowdfunding Works
Build it and they will come. This is the “old” approach to launching a product. Pre-Kickstarter, you’d need to raise capital to develop and manufacture your product. Now you’re able to do so directly from your customer base in the form of pre-orders.
It’s a good thing, because build it and they will come is a terrible assumption, and one that can land you heavily in debt.
When I was living in London, I met a woman who was $400,000 in debt, had remortgaged her house, and was stuck with inventory of a product she loved, but couldn’t sell.
Just because you went through the effort of creating a product you love, what’s the point if no one else will buy it?
Fortunately, Kickstarter has been a game changer in the way startups bring their products to life. Instead of going through the whole process just to realize there’s no need for your product, why don’t you validate it first?
This is where crowdfunding is so powerful. It allows you to put an idea out into the world, and if people love it, they will buy it. Once they’ve bought it, you can take the money and invest it into manufacturing and delivering beautiful products people love.
The Structure of a Crowdfunding Campaign
When you launch your product online, you set a timeframe and a financial goal around some outcome. For example, with TappLock, we had a goal to raise $40,000 in 30 days for initial tooling.
Kickstarter has an “all-or-nothing” funding model, which means that if you hit your goal, you get to keep the money. If you aren’t successful, no money changes hands. The other major platform Indiegogo has two kinds of funding models, Fixed and Flexible funding. Fixed is the same as Kickstarter’s model, while Flexible allows you to keep everything you raise, even if you aren’t successfully funded.
It may sound like crowdfunding makes money fall from the sky, but there are important nuances to how the platforms work that have a lot of influence over whether you’re successful.
Crowdfunding Does Not Provide Free Money
Early last week, I received an email at 11:32 pm from a creator who launched a campaign four days earlier.
He was like most of my leads, in that they tend to come to me after they launch—once they realize their campaign isn’t doing too well and they want help with marketing.
In short, they are hoping I will “save” their campaign.
There was a link in the email to this person’s campaign, and here’s what I saw:
He wanted help marketing the campaign and was willing to spend $5,000 to do so. I asked him not to spend a penny until we spoke.
That next morning, we got on the phone and I asked him a few questions, then told him flat out that spending $5,000 to market his campaign was suicide. I’ll explain why.
How Kickstarter Works
Sites like Kickstarter and Indiegogo are marketplaces that match creators with backers. They take 5 cents for every dollar raised on their platforms (not including the 2-3% payment processing fees).
While they have benefitted a great many, these companies are in the business of making money. When you’re doing well, they are doing well.
When you’re browsing Kickstarter or Indiegogo, you’ll notice there are the popular sections like Discover or Trending. They also feature certain successful campaigns on the front page or at the top of categories.
One thing’s for sure, the campaigns that are easy to find are doing well and making Kickstarter a lot of money. What you don’t see are the thousands of campaigns that are not doing well, and you will probably never find.
Enter the Popularity Algorithm
When a new campaign launches and raises a good chunk of their funding goal in a short period of time, has a lot of backers, and is getting a lot of traffic, Kickstarter will pick up that it’s a hot campaign.
There’s an algorithm that helps the companies identify and elevate those with early potential, boosting your rankings on the site to make your campaign easier to find. The higher it gets boosted, the more traffic you’re getting, and the more money you’re raising.
The #1 Mistake Creators Make
Here’s the one assumption that will cause your campaign to fail—just because Kickstarter and Indiegogo have their own audiences, does not mean that you don’t need your own.
In fact, because of the popularity algorithm, you need great momentum as soon as your campaign launches in order for it to start a snowball effect, and for Kickstarter to notice your campaign and boost it.
On average, expect to raise 30-40% of your funding goal in the first three days in order to have a 95% chance for your campaign to be successful.
If you rely on the crowdfunding community to just give you money when you’re live, good luck.
So, how does this relate to our friend?
Well, considering he was four days into his campaign and had only raised 5% of his goal, he had already lost his chance to grab the necessary momentum to rank on the site.
But, if he had $5K to spend, couldn’t that resurrect his campaign?
Nope. Say he drives a bunch of cold traffic (people who have never heard of his project) to his page. They are all going to see that it’s only 5% funded.
Assuming they understand what that means, that 5% number shows them that it’s not a popular campaign and it’s most likely going to fail. Worst case, if they do support it, is that the product will take longer to get manufactured and delivered than originally promised.
Herd mentality is the reason popular campaigns get more funding. A booming campaign is one of the hottest parties on the block and you want an invite.
Other people giving money to something is powerful social proof. And when your campaign doesn’t have it early on, it’s very hard to gain the trust of new backers.
For that reason, you need your own audience before you launch a crowdfunding campaign. If you ignore this, you will most likely join the other 63% of failed projects and wonder what went wrong.
The Popularity Algorithm in Action
To show why this is so important, I want to give you a side-by-side comparison of the funding on a per day basis between the first Thin Ice campaign, and the second one.
Campaign #1
Campaign #2
Looking closely, you’ll see the largest differences are in the number of backers, total visits, and amount of funds that came from Campaign #2.
You’ll also notice the large spike on Day 8 of the second campaign. On that day, we raised more than $155,000, bringing our total to over $225,000 raised.
The fundamental difference between these two is how quickly we raised our goal. Where we completely missed the mark in Campaign #1, we hit our goal of $15,000 in 20 hours during Campaign #2.
This created a snowball effect that made it the most popular campaign on Indiegogo, and eventually was featured in the newsletter, which accounted for that huge spike on Day 8.
If you pay attention to having an audience and driving initial funds from friends and family, this is how you can really take advantage of the crowdfunding community, create that snowball effect, and get your campaign successfully funded.
Now that we know what makes a hit campaign, here’s how to make it happen.
How to Run a Successful Crowdfunding Campaign
In the first part of this post, I let you in on the big crowdfunding secret—you need to have an audience before you launch. Why? Your audience will drive your initial sales and that will help you rank on the site and get more backers from the crowdfunding community.
But there are actually a few key components to creating a winning campaign:
Having a great product-market fit;
Having an audience;
Knowing how to leverage that audience around your launch.
The following is a step-by-step routine that I follow and that I tell my clients to follow to make sure all of those three pieces are firmly in place.
Create a Customer Avatar
Before you can start building your audience, you need to know who your audience is. This is what your customer avatar is: It’s creating a vision of them, writing it down, and getting as specific as possible.
If you create an avatar that just says “my ideal customer owns a tech business,” this is crap, and really doesn’t help you get into their head and understand their motivations for WHY they would love your product.
See where am I going with this?
This is an exercise that should be done first, before you even think about planning your campaign.
You’ll know you’ve done a great job with this if you’ve given your avatar a photo, a name, and have written down at least a half page on them.
Here are some questions you can ask yourself to help you create your first avatar:
What is their story?
Who are they?
Where do they live?
Where do they work?
Why do they use your product?
What problem in their world is your product solving?
Your product will most likely have different types of people and motivations for using it. Please do not try to fit them into one avatar—that will get messy. I actually recommend creating three avatars, prioritized by relevance they have to your project.
With Shock Clock by Pavlok, a wearable that helps get you out of bed in the morning from the threat of electric shock (yes, people do buy it), we had different demographics who we knew would LOVE our product: 1) students; 2) young professionals; 3) entrepreneurs who want to optimize their morning routines.
Each of these demographics has different motivations for buying the product, ergo, three different avatars.
Once you know who your audience is, you will understand them a lot better, be able to speak their language, and know where they hang out online so you can target them.
Create an Online Storefront, aka Landing Page, to Build a List
How do you build an audience, you ask?
Starting a minimum of 3-6 months before you launch (unless if you have a large marketing budget to spend on Facebook advertising a few weeks before the campaign, and really know what you’re doing), you want to start building an email list.
Let me be clear: I do mean an email list and not a social media following.
Yes, while having thousands of Twitter followers and likes on your Facebook page is great for social proof, it will not move the needle they way you need it to.
You can certainly use a social media strategy that baits people into joining your email list by offering a freebie. Just don’t rely on your social media numbers, also known as “vanity metrics,” as they will not convert well to sales early on, unless you get them onto your email list.
Having an email list gives you a medium with which to build a connection, share your story, and send specific updates to people who have shown interest in your launch.
Building your email list starts with getting yourself a web address, and creating a landing page on that URL.
A landing page is a one-page website designed for one purpose: to collect email addresses. It will involve information about your project (campaign teaser videos work really well), testimonials, how it works, a bit about the founding team, and a call to action. Here’s an example of an upcoming project launching later this year: JamStack
Using a service like Active Campaign, or MailChimp, you can build your email list and get into basic email automation.
*Protip* Building a list is a give and take. Offer something in exchange for their information. In this case, we’re offering exclusive discounts to the list and behind-the-scenes footage.
When someone joins your list, you should have a basic email sequence setup that will educate them on what your product is, why you’re so excited about it, and when you should launch.
In an attempt to keep this post relatively short, a great resource I’d recommend for learning and implementing basic email automation is Dot Com Secrets by Russell Brunson.
Quality, not Quantity
Everytime I tell people they need an email list, they ask “how big?”
It’s not about the size of the list, it’s about the quality of the list. The more people know you, have a relationship with you, and the more they trust you, the more likely it is they will buy.
When you start building your list, always start with your immediate network and fan out from there.
Imagine two scenarios:
You have a list of 100,000 emails you bought off of someone. This list has prospects who are interested in tech products.
You have a list of 2,500 emails from friends, family, and people who attended your booth at TechStars, networking events, or who have seen your content and joined from there.
Scenario 2 always wins. Although the list is smaller, they are higher quality contacts and will want to help support you. Never buy an email list. It’s super spammy, not targeted, and does not convert well.
Let’s look at realistically how big your list should be before you launch:
Considering you need to raise 30% of your goal in the first three days, if you have a goal of $10,000, you need to raise $3,000.
Say your average transaction is $100, you’d need 300 people paying $100 in the first three days.
The average email list converts at 1-2%, so this means you need approximately 3,000 people on your list (not counting any other outside sources).
Start Building Your Media List
On top of building your own audience, one of the most powerful strategies online is to build your audience by leveraging someone else’s. That’s where a media list comes in.
A media list is a list of blogs, influencers, YouTubers, journalists, and companies you want to reach out to, to cover your launch.
Building this will require a lot of research to find the key influencers or journalists who your story is relevant to. I highly recommend outsourcing this to a virtual assistant or using Upwork. Start building your media list at the same time as you’re building your audience.
Why? Well, this will give you time to get familiar with the work of each influencer, comment on their work, and get on their radar, so you’re not a new face when you go to pitch them.
Tim Ferriss wrote a great blog post, Hacking Kickstarter: How to Raise $100K in 10 days a few years back. I’m not looking to recycle what’s already out there with this post, and Tim’s is a terrific resource on this matter.
When I was first getting started with crowdfunding, I turned to that article several times, as it has priceless resources and tactics for how to determine which influencers in your niche to reach out to, how to compile that list, and how to contact them.
Your Content Plan: Keeping Your Audience Engaged Weeks Before Launch
You have an email list so you can build relationships with people. You can’t have a good relationship if you forget about them as soon as they are on your list.
Keep things interesting by sharing project updates with them every couple of weeks. A few highlights can be you conducting customer interviews with them, photos of the prototype, behind the scenes when you’re creating your crowdfunding video, or new partnerships you get. Sneak peeks are always cool.
Be sure to create 5-10 pieces of content to share through a blog and social media as a way to continue to build awareness and build your email list!
The types of content depend on your audience. We’ve tried blog posts talking about the genesis of the project, some key features, or entertaining videos or images relevant to our audience.
My favorite example was with the JamStack project, where one of the features is portability, so we created a comical video showing how easy it was to set up compared to current solutions on the market.
Native upload on Facebook, it got a couple thousand views in the first week, and helped us continue to build awareness and grow our email list!
Remember, in every piece of content you put out there, have a call to action to join your list.
But what if you don’t have a sexy prototype to show in your content?
That’s okay! Often, creators will have an ugly, proof-of-concept prototype before launch and they don’t want to show it. That’s what The Right Cup did with their Indiegogo campaign. They had a working prototype, but not the final sexy one.
So what did they do to get press and build intrigue? They created a teaser video.
A teaser video is a pre-launch, 30-second video that’s meant to quickly show how it works, and show people using it, including their reactions.
With Jamstack, we created a teaser video with the at-the-time ugly prototype, put a cardboard box over it, and used it to show how it worked. Jamstack is a portable guitar amplifier, so we only had to showcase the sound quality. Get innovative! It works! <img src="https://s.w.org/images/core/emoji/2/72x72/1f642.png" alt="