Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. – Wikipedia
There are plenty of Crowdfunding platforms around and I am sure you have heard of at least one. Platforms such as Kickstarter and Crowdcube are quite well known but they were not the first to adopt the crowdfunding model.
The first crowdfunding platform was ArtistShare in 2003 which allowed fans to fund their favourite bands. Utilizing a “fan-funding” model, it gave them the chance to watch the creative process of the recording and gain access to extra material from the artist. Through it’s popularity, many more crowdfunding websites followed such as ChipIn and EquityNet.
It was reported that $89 million was raised in investment back in 2010 across various business and projects but its rapid growth can be seen in the results from 2014 – in March of last year, over $60,000 dollars was raised every hour.
Now, at the start of 2015, the big platforms are boasting some amazing statistics.
Kickstarter has raised $1,493,733,944 across 77,612 different projects to date and Crowdcube has 126,781 investors registered on their platform. Indiegogo’s campaigns are located in 224 countries and it boasts the first ‘crowdfunded baby‘.
The various platforms have different benefits so it is best to scout around first. For example, Kickstarter has an all-or-nothing funding system but on Indiegogo you have a donations model where any money you raise, you are given.
When Crowdfunding, people will not just give you money. It would be great if they did but even if your idea is totally revolutionary, funders need something in return. Once again, platforms differ.
On Crowdcube, investors buy shares (equity) in return for investment while on KickStarter and Indiegogo you have perks or pledges which offer products for certain levels of investment. The higher the investment the better the bonus.
Michele Cuccovillo, Co-Founder of Netberg, who recently received 150% of their original funding goal on crowdfunding, had this to say:
“Initially, we were a bit sceptical about crowdfunding because we would have to manage a very high number of stakeholders and the fear of making that task so time consuming that we could not focus on the business. However, we were also aware that equity crowdfunding gave us two fantastic opportunities: efficiency and market validation. Crowdfunding is a great market test: do a crowd larger than a handful of investors like it?”
Setting rewards is important, but you need to focus on your pitch. Your pitch should be a short video which will appear at the top of your project page and will be the first thing people see. This has to be eye-catching and informative and needs to include everything the investor needs to know. They are not going to give you money if they don’t know what your product is!
Paul Gill, Chief Design Engineer / Technical at Orsto Ltd, who has been involved with crowdfunding in the past, had this to say: “Especially in the tech industry, if your product is poorly made, more money isn’t going to solve its problems“.
The more creative you are with the pitch, the more investment you are going to get (as long as you have a strong idea of course).
One of the most funded campaigns on Kickstarter is the COOLEST COOLER.
The strength of both the video and idea really shows why its been over funded by 26,570%. It also boils down to how lucky you are as well. If your idea is innovative and there is a demand for it, you will see a massive increase in investment much like the Coolest Cooler.
Here are some extra tips to help you with your crowdfunding campaign:
Paul Gill gave us this tip: “Before starting a campaign, make sure you can produce and supply your product because people will find out and word will spread across social media if you’re not fulfilling your promises”.
Michele Cuccovillo: “It’s very easy to get diluted in many activities and therefore there is one key learning point: you need to be pro-active. You need to plan carefully who you are going to see before the launch, just after the launch and right before the end of the campaign: that is key to get the bar moving constantly from day one.
You need to have your pipeline of events and leads to work on ready, the support of your family and friends, and you ideally need a community to support you. You also need to make your ideas very clear.”
If you want a great example of a campaign in action, one of our Start Up Loan recipients is in the process of crowdfunding a new semi-portable fish bar in Tynemouth and he needs £20,000 to build it.
Riley’s Fish Shack have created the Tackle Box! which is built out of shipping containers, giving them a permanent base to trade more frequently. It will also include a wood-fire oven to cook freshly-cooked lobster and tasty flat-breads. ng capacity too and allow them to open in more extreme weathers.
The pledges include a free wrap all the way up to free meals for life! They are a quarter of the way towards their target with their campaign ending on 4th of March.
A penultimate point that’s important to remember is, you are also getting valuable feedback from your fan base and the community.
Michele Cuccovillo: “It was an amazing learning experience as we had the chance to get many eyes on our campaign, get feedback about our ideas and goals, speak with people that were very enthusiastic about our vision and mission.”
Paul Gill: “Equity Crowdfunding is a great idea that helps businesses develop and expand, but also equally important is that the investors who have taken the risk to back your business model will hopefully get a big thank you in the form of a substantially higher than normal return on investment.”
When I asked Netberg if they would do another crowdfunding campaign, they had this to say: “Absolutely, we would and we will do it again.”
You can also find some more crowdfunding tips on this infographic:
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