The lure of crowdfunding is strong: have a great idea, write it up and post it on a leading crowdfunding platform, make a video, and just sit back and begin counting the money that rolls in backing your campaign.
The truth is that most campaigns fail. They fail to hit their financial targets. In fact, Kickstarter's success rate sits around 37%. That means just about 1 out of every 3 projects actually succeeds at crowdfunding. The rest lose.
While it takes a lot of work and some strokes of luck to win at crowdfunding, there are some misunderstandings about how crowdfunding works. Learn how to avoid these pitfalls on your way to crowdfunding success.
4 reasons crowdfunding campaigns don't hit their targets
Crowdfunding isn't as easy as it looks: The truth is that crowdfunding takes a lot of planning and a lot of work. Many of the top crowdfunding campaigns -- the kind you read about in the news -- use top marketing and PR agencies to run their crowdfunding campaigns. They spend time and money planning and executing their campaigns. Take your time to plan out your crowdfunding campaign and you're already well on your way.
Campaigns fail to get early traction: If crowdfunding requires attention to marketing, the fruits of good planning and execution have to come early in a campaign. The data show that the earlier a campaign can start to build momentum, the more likely it is to reach its goals. Again, according to Kickstarter, 79% of projects that raised more than 20% of their goals were successfully funded. It's much easier to launch with a bang than it is to find it later on. A lot of the early marketing should happen before you ever click 'Publish' on your crowdfunding campaign.
Here's what Alon Goren, CEO, and co-founder of Invested.in, a white label fundraising portal for individuals and businesses hoping to crowdfund ventures independently of major platforms, had to say on CNBC about early momentum:
Nothing attracts a crowd more than a crowd. If you want to hit your fundraising goal by the end of the campaign, he recommends focusing on raising 30 percent of it in the first two or three days. That's what research shows successful campaigns tend to do.
Launching with lackluster rewards programs: Don't make the assumption your backers are putting money into your campaign out of the goodness of their hearts. Sure, there's an emotional connection between crowdfunding backer and creator but backers are in it for the rewards. It's essential that you create an amazing reward program for the backers of your campaign. Incentivize them to back you for getting quality rewards in return. Good campaigns have a variety of rewards around $1, $5, and $10 to get casual supporters involved. Get a few thousands of these smaller backers and you can really create momentum. Also, think about creating stretch goals -- goals everyone can participate in when a campaign hits a certain goal. For example, unlocking a new color of your product is a common technique crowdfunding creators use to get backers excited about participating.
Not being prepared to act as a customer service desk: It's common for a campaign to launch and receive hundreds and even thousands of questions, emails, and comments about the campaign, rewards, and the end product. Creators have to be ready and have a plan to deal with the volume of communication that's required of crowdfunding. Successful communication strategies during the campaign have been shown to make a campaign more likely to succeed. Have a plan and communicate openly with your audience. The better you can incorporate your backers and get them excited about your campaign, the more likely you are to have your campaign go viral (because your audience will want to share it).
Luck Has Nothing to do With Successful Crowdfunding
Crowdfunding campaigns can fail or succeed for all sorts of reasons. Rarely is a crowdfunding campaign successful because it gets lucky. Financial goals are hit by planning and running a successful marketing campaign for a crowdfunding campaign. Don't fall for the common mistakes that cause a crowdfunding campaign to fail.