Crowdfunding Your Business Dreams
By Bevil Wooding
In working with entrepreneurs and startups around the region, by far the main grievance aired is that they are not enough options to raise money to fund their startup dreams. Many have been burned or even given up entirely on the traditional banking avenues. That does not leave many local alternatives for someone ripe with raw creative talent, but limited in access to the capital and investment vehicles needed to translate ideas into sustainable businesses. But where local options are limited, the Internet now provides a world of possibility through crowdfunding.
The Rise of Crowdfunding
The region’s financial institutions are, typically, are not friendly to non-traditional, intangible-asset-based undertakings, like technology startups. Crowdfunding allows individuals or companies to raise money using online social media tools to connect to those who are most interested in funding their projects. The concept has been so successful that the crowdfunding phenomenon has quickly moved from techie buzzword to a mainstream fundraising model.
Kickstarter is one of the most referenced crowdfunding platforms. However, there are many other sites that perform similar functions, such as Crowdtilt, Indiegogo and RocketHub. A number of niche sites are also emerging like PubSlush, for aspiring authors, and Appbackr, which targets aspiring app developers.
In less than five years, Kickstarter has attracted more than five million contributors pledging close to $1 billion, funding more than 55,000 individual projects. Rival fundraising platform Indiegogo boasts of a campaign that single-handedly generated $12 million in pledges. Numbers like these make crowdfunding an attractive option for first-time entrepreneurs and established businesses alike.
Crowdfunding platforms can vary based on the types of projects presented, their fee structure, geographic coverage and even their approach to treating with funds raised, if you don’t meet your fund-raising goals. There is also a growing number of private equity crowdfunding websites including Crowdfunder and CircleUp. Here, rather than simply make donations, investors can buy shares in start-ups.
So whether you’re in Silicon Valley, California or Port-of-Spain, Trinidad, looking to raise a few thousand, or a few hundred thousand dollars to bring your product to market, crowdsourcing can be a practical, viable option.
Five Tips for Crowd Funding
Succeeding at crowdfunding isn’t automatic. You can’t simply raising your virtual hand and say send me your money. Crowdfunding demands strategy, planning and well-coordinated execution.
Here are five things to consider well before launching your own crowdfunding campaign.
- Solve a Real Problem. If you don’t have a good idea – a solution to a real problem – even the best crowdfunding campaign won’t succeed. You need to be able to communicate how your idea is going to solve a real problem people have. If you can’t convey the essence of your solution and how it works in a sentence or two, you’re not going to attract significant interest from backers – online or offline.
- Do your homework. Successful crowdfunding campaigns, typically 30 days long, can take months of preparation. One key element of your preparation work is building an audience you can address once the project is published. It helps to cultivate interest in your project or idea by working the social media channels such as Facebook, YouTube, LinkedIn and Twitter.
- Pitch Perfect. A succinct presentation of your idea through video, illustrations and text is essential. Imagine yourself as a would-be funder scrolling through projects, you need to stand out and make an impact. Research by Ethan Mollick, an assistant professor and crowdfunding researcher at the Wharton School of the University of Pennsylvania showed a single spelling error reduces chances of success by 13 percent. In typical Internet style, fortunately, there is a growing crowdfunding support system of video producers, editors and other consultants listed on sites like CrowdCrux to turn to if you need help.
- Set Realistic Targets. It is important not to confuse how much money you would like to raise with how much you need to fund your project. Start by setting an amount high enough to cover the costs of actually manufacturing and delivering your product. Even so, make sure your goal is one that you are confident you can reach. The initial data on funder responses confirm that people love to back a winner. This means, for example, that if set modest goals, blowing past it in the early days of your campaign can actually help attract additional backers.
- Keep your options open. Crowdsourcing done well can offer much more than money, it can also be a validation of the viability of your idea. You can use crowd-conveyed credibility to court more traditional sources of financial backing, such as banks and venture capitalists.
- Give It Your All. Very few people wake up in the morning with a plan to give over their hard-earned money to you on the top of their to-do list. Running a crowdfunding campaign is demanding. Your project will not be discovered, nor will interest in it be maintained, unless you’re prepared to put in time and effort. But if you believe in your idea, that shouldn’t discourage you.
Crowdfunding is one of the best ways to break free of the constraints of the limited local financing and use a global community to raise the funds you need to bring your idea to life. Who knows, it’s entirely possible that your idea can be the next crowdfunding success story.
Side Bar: Feel the rhythm! Feel the rhyme! Get on up, it’s crowdfunded bobsled time!
Internet donors stepped in to save the day after word went out that Jamaica’s two-man bobsled team had qualified but didn’t have money to go to Russia to compete. Thousands of people contributed to online campaigns, including one by Dogecoin, an online-only currency.
The Jamaican team of driver Winston Watts and brakeman Marvin Dixon initially hoped to raise $80,000. Donations shot past that amount, and are now well past the $180K mark, thanks to an outpouring of popular support and media coverage of this sequel to the underdog story that was the team’s Winter Olympics debut at the 1988 Calgary games.
The fan-favorite bobsledding team from the snow-less Caribbean rose to global fame when the 1993 Disney feel-good film, Cool Runnings, loosely chronicled their achievement and also popularized the team’s slogan: “Feel the rhythm! Feel the rhyme! Get on up, its bobsled time!”
As soon as the Internet got wind of a potential “Cool Runnings” 2.0, supporters flooded PayPal, Crowdtilt, Indiegogo and Reddit — using the crypto-currency Dogecoin — to make donations.
This time around, the two-man team, ever the underdog, is benefitting from that enduring popularity. Their campaign was funded in part by Dogecoin — an online–based crypto-currency similar to Bitcoin, but based on an “doge” meme, in which shiba inus, a cute Japanese dog breed, is shown in various settings. The Dogecoin effort alone produced around $30,000 for the bobsled team, after it was promoted in the currency’s Reddit community page.
As the story spread, the International Olympic Committee committed to help pay the Jamaicans’ travel costs. Now through crowdfunding the team can cover its other expenses, such as equipment and training time.
“I’m not a person who likes to quit,” Watts said in an AP report, “I put my heart into it and I know for a fact that people are going to help this team.”
Bevil Wooding is the Chief Knowledge Officer of Congress WBN (www.congresswbn.org), a values-based, international charity and the Executive Director of BrightPath Foundation, a technology education non-profit organization. Reach him on Twitter @bevilwooding or on facebook.com/bevilwooding or contact via email at firstname.lastname@example.org.