As any good entrepreneur knows, financing is essential to the success of a business. Accordingly, one popular way to raise money for startups is through crowdfunding: a process for raising a large amount of money from small contributions, popularized over the Internet by websites like Kickstarter and GoFundMe.
Given the successes that entrepreneurs have had raising large amounts of money using crowdfunding sites, it’s no wonder that they’re so popular. Kickstarter maintains a statistics page demonstrating how projects using the platform have performed, and the results are staggering. Companies that crowdfund on Kickstarter have collectively raised more than $2.7 billion, and over 100,000 projects have been successfully funded. More impressively, 200 projects have raised more than $1 million using Kickstarter, and these numbers grow every day.
For all of Kickstarter’s successes, however, the company estimates that more than 60% of projects fail to reach their goals, and 14% of projects never receive a single pledge. How can a project avoid these pitfalls? Entrepreneurship@Dyson offers its top three tips below:
1) Leverage your network.
Before launching your crowdfunding campaign, make sure you develop a list of your contacts. It’s important to have your friends, family, and colleagues supporting you because they will become your “early backers.” Early backers help give your campaign momentum at its onset so that when new potential donors visit your campaign, they will feel more incentivized to donate. No one wants to give to a campaign they don’t believe will be fully-funded, so taking advantage of easy sells within your network will help you build the initial momentum you need to grow your campaign.
2) Plan how you’ll communicate your project ahead of time.
All communication channels you utilize in your project should make your audience feel engaged. It’s important for people to know they are a vital part of your success, so emphasize that in your communication. Another key point to emphasize when communicating to your audience is that if people don’t feel comfortable donating, they can still be a part of the project by spreading it in their circles. Beyond that, leverage your creativity to create the perfect message.
In terms of communication channels, it’s important to make a schedule for when you plan to communicate with your audience from initial contact through project updates. While you should use every channel available to you, coordinating your emails, LinkedIn posts, Facebook posts, and more will ensure that your audience gets the message without feeling spammed. Additionally, certain types of communication and media have proven to be more successful in crowdfunding campaigns than others. For example, Kickstarter campaigns that include a video are 30 to 50% more likely to receive full funding relative to campaigns that don’t.
3) Set reasonable goals for your project.
When setting your initial goal, make sure it’s based on what your actual needs are. This will help you to craft more compelling content to engage your audience, as people often look for impact levels (i.e. bronze, silver, gold) that can give them a sense of how much their contribution means to your project. Feel free to use other crowdfunding campaigns as a reference for how much is a good amount to ask for; however, the primary reasons for the goals you set should come from what you believe you need. Additionally, set goals throughout the campaign, such as achieving 30% of your goal in the initial week, to ensure you’re maintaining adequate momentum.
For more on how Cornell students are using the power of crowdfunding campaigns, visit crowdfunding.cornell.edu.