Hard Questions to Answer Before Crowdfunding Your Startup
While crowdfunding is an amazingly powerful way to raise money for a startup, idea, or project, it doesn't work for everything.
To get a crowdfunding campaign right requires a mix of luck and skill, good timing, some marketing and PR wins, and some powerful momentum.
But what if crowdfunding isn't for you? What if it's not the right financing model for your campaign?
Before you invest time, money, and resources in building out a crowdfunding campaign (make sure to check out our list of awesome crowdfunding rewards), it makes sense to sit down and determine if crowdfunding is right for you.
The following are several questions worth asking before diving in.
- Branding: What differentiates your project from existing competitors, or alternatives that have come before? Are you utilizing an existing brand, IP or personality that has a pre-existing base of fans or consumers? (Using an existing, if perhaps older, brand or IP which consumers have fond memories of can be a very effective strategy.) Source: Business Insider
- Form of crowdfunding: What form of crowdfunding works for you? Are you looking to add new people to your roster of investors -- in this case, you'd look to fish for new investors on an equity crowdfunding platform. Or, is rewards-based crowdfunding, like Kickstarter or Indiegogo, your thing? While both paths are called crowdfunding, the results can be very different.
- Budgeting: What's the fee structure for crowdfunding? Once you've paid out all your rewards, paid off credit card processing fees, shipping and handling, there's still a fee left to be paid to your platform. What looks like almost free money with crowdfunding can end in tears for entrepreneurs who haven't budgeted correctly. It's important to follow a crowdfunding budget planner.
- Marketing: How well do you know your target audience? Do you know where they hang out, what gets them excited, and how to incentivize them to back your project? Crowdfunding can be one of the most effective fundraising mechanisms out there but most campaigns don't happen magically -- they require good old marketing. So, read how to market your crowdfunding campaign on a budget.
- Effort: Do you understand all the personal and professional demands that the process of running a crowdfunding campaign demands from creators? Are you prepared to put 110% effort into making your crowdfunding project a success? Source; Business Insider
- The role of the platform: How much effort do I have to put in and how much will the crowdfunding platform do for me in my fundraising? Most crowdfunding platforms will readily admit: they're powerful tools in skilled hands. But money doesn't necessarily come flooding in, just because you launched on platform X or platform Y. Different platforms get more involved in the fundraising process -- it's best to ask yourself how that all works before you launch.
- Crowdfunding tools: Do I have the right tools at my disposal so I can be successful in my crowdfunding campaign? Can I keep track of my rewards, who gets what and when? Here's a list of powerful crowdfunding tools to make sure you can focus on what's important and let the systems handle everything else.
- Manufacturing: Do I have the in-team know how to manufacture my product once the crowdfunding campaign is over? Producing and shipping a crowdfunded product isn't trivial and it's important to understand budget requirements, timelines, and procedures to ship your product. Here are a few tips for crowdfunding a physical product.
Crowdfunding is a powerful fundraising tool that not only can finance your project but can also work to build an excited fan base supporting your project. Tread wisely and make sure you have the answers to these questions.