Things to consider when you CrowdFund
CrowdFunding is super cool. Obviously!
I know that now, but did not know it when one of the founders of KickStrtr (which is what Kickstarter (http://www.kickstarter.com/) was called back in the day) was in my office several times over a couple of months pitching me on his in-development website. So I passed. Not once; not twice; but at least three or four times. I couldn’t for the life of me understand why people would give their money away without the opportunity of an ROI. God, I’m brilliant – right? I met that very same gentleman the other night and I had to tell him what a boob I was for not seeing the genius in his concept. His answer – “Don’t worry, nobody got it at the time.” That makes me feel better (not really).
So now that we do all “get it,” there are questions about how to use CrowdFunding most effectively. Well, if you have a one-off project it’s easy. Cutting an album? Opening a bar? Paying for the surgery to reattach a limb for a distant relative? Just throw your campaign up there and see how it goes.
But if you are using it to get the seed funding to start your business, there are a few things you should consider before you kickoff your campaign:
1. Budget. No matter how well you project, you are definitely going to go over budget. Plan for that in your campaign so you don’t hit your goal and then find out that you still don’t have enough money.
2. Other monies. The first money you raise for a business is never the last money you will need so have a plan for what you do when the CrowdFunding runs out.
3. Results may vary. Take the actual results of your campaign, particularly if you are offering a product for sale, with a grain of salt because (apparently) people like helping other people. Your CrowdFunders are not only buying your product or investing in your business, but they are also buying you, your story, etc. As such, your CrowdFunding results may not be indicative of your real market results and you want to approach the open market intelligently.
4. Data collection. Treat your CrowdFunding campaign as a giant focus group test. Compile as much information as possible about your funders from a demographic POV and follow up with them to see why they invested their money in you and/or your product. This will be immensely valuable information down the road when you are trying to convince investors, who are ROI-based, to take a sniff around you and your company.
CrowdFunding can be a very effective way to get some money to prime the pump on a new venture but just like any other funding source, there are pluses and minuses you should consider all the way through. Know what you are getting into, have a plan and a backup plan, learn from your mistakes, and go for it.