03Dec

8 Steps to. Crowdfunding

Great tips from a Bob Pritchard 

The first step is to pick your platform…
Decide on either a rewards-based campaign where in exchange for donations you provide gifts, or equity-based where people become shareholders in your business.
Rewards Crowdfunding
Kickstarter and Indiegogo come first to mind, but specialty platforms on specific types of projects may be preferable.  All platforms are structured differently. Kickstarter is an “all-or-none” fundraiser so if you don’t raise 100% of your funding goal, you get zip. With Indiegogo, if you choose to pay up to 9% of funds raised, you keep all funds pledged.
Equity Crowdfunding
Crowdfunder or Circle Up is where people become shareholders in your company.
Circle Up takes 7 – 10 percent of funds raised.  Crowdfunder has a relatively low monthly fee.
 

The second step is to capture attention…
Remember you are competing against tons of other opportunities.  Your initial pitch and message must be powerful enough to grab the potential investors attention.   You need to explain what you’re doing and why you’re doing it.  Ideally you should tell a terrific story about yourself and the project, or better still, relate it to your customer.
 
If you’re raising investment, tell a great story in a succinct pitch deck.   If you’re creating a rewards crowdfunding pitch, videos can double success rates .
 

The third step is what’s in it for them…

When you focus on what in it for investors, you create truly unique and compelling rewards that tie into your story and raise more dollars.  Don’t just offer “stuff”.  Ask whether you would actually buy this reward yourself?  Look at offers by previous successful campaigns.  In equity crowdfunding, focus on the terms you’re offering your investors. Check out the free Term Sheet resource in Forbes for guidelines.
 

The fourth step is fostering supporter engagement…

The most common mistake crowdfunders make in both rewards or equity crowdfunding is to not fully engage their network of friends, family, and supporters.  For rewards crowdfunding, you must have people ready to start funding on day one. Campaigns that accelerate rapidly early and attain 25 – 30% of their funding goal quickly, attract much more attention.
 

The fifth step is the power of notable investors…

The certain way to get peoples attention is to get people or organizations involved with your project who will bring credibility and trust to you and your business. For equity crowdfunding, having notable stakeholders, a quality team, advisors, board members, partners, and existing investors provides assurance to potential investors and get up to six times the response on their fundraising.
 
The most powerful step you can take is to find a lead investor before you launch the fundraising efforts. This avoids the “stigma” of $0 invested, as well as determining what terms an investor would actually invest at.   The lead investor is a critical part of launching a successful equity crowdfunding marketing plan.
 

The sixth step is planned marketing and outreach…

The results you get from crowdfunding are proportional to the effort and attention you put in and integrating it into your own online and offline fundraising efforts. Successful rewards campaigns put hundreds of hours into creative and marketing planning before launch. They then plan several “pushes” in their marketing to launch, fund, and drive funding.
 
In equity crowdfunding, the effort goes into structuring the actual investment offering, the terms and completing all the legal agreements. Investments of $10,000 to $200,000 aren’t often reached through broad marketing and PR across the web as happens in rewards crowdfunding.  Donation amounts average closer to $25.
 

The seventh step is  timing …

In the US, the best months for crowdfunding are January and February.
 

The eighth step is  timing the data perspective…

The overall crowdfunding industry is growing exponentially, from $1.2 billion in 2011 to $8 billion for rewards and 4.3 billion for equity in 2015.  In rewards crowdfunding, if you’re looking to raise $50,000, the most common contribution is $25 and with a conversion rate of 3% you need to get 66,000 qualified people to view your campaign.  That’s a lot of traffic in 45 days, and a lot of backers. Do you have the network, reach, press contacts, and marketing plan to meet these goals?
 
In equity crowdfunding, the average investment from accredited investors is approximately $25,000. It is usually easier to find many investors at $10,000 than it is to find one or two investors at $100,000 plus. The risk is just that much greater when considering investing that much money.  What entrepreneurs are finding in equity crowdfunding is that by lowering the minimum investment amount down to say $1,000, you lower the risk exposure for any single investor, and entrepreneurs often find it much easier to get the investment and support of many investors online at these amounts.
 
Crowdfunding is changing the rules of the game for fundraising and investing and it is still accelerating.
 
Life opportunities contract or expand according to ones stage
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