Crowd-Funding Campaign Lessons Learned: What You Need to Know

14 January 2013

When you’re starting a new company, coming up with an innovative, profitable business idea is more than half the battle. But acquiring funding to get it off the ground is also key to winning in the early stages of the entrepreneurial game.

A common strategy for new start-ups is to turn to crowd-funding websites like KickStarter and IndieGoGo, which have harnessed the power of the internet’s mass audience to give web-savvy entrepreneurs a chance to take advantage of it, if they’re willing to put in a little legwork.

But even with a platform to back you up, raising funds isn’t easy. I learned first-hand that a successful crowd-funding campaign requires the utmost research, planning, and care. As a Marketing Associate for a brand-new start-up, I recently launched a crowd-sourced funding campaign to bring in contributions from interested funders and get the word out about our website and mission.

And along the way, I gained some useful insights for intrepid crowd-funding neophytes. Experience is the best teacher, right? Unless you can find (and pay) a professional crowd-funding manager, odds are good you’ll find yourself in the same boat I was in. So before you get started, let me share what I learned:

 

Consider Your Options

Kickstarter and IndieGoGo are the primary crowd-funding services out there, but the two sites differ considerably. Kickstarter emphasizes project-based funding campaigns, and the projects they accept generally need to have a definite end-date and clear metrics for completion and success. For businesses just starting out (like ours), the lack of an “end” to your vision may preclude you from qualifying. But where Kickstarter focuses on funding projects to completion, IndieGoGo promotes the broad funding of ideas, from for-profit businesses to not-for-profit causes to creative endeavors.

Kickstarter also has and all-or-nothing funding policy: You get to set your financial goal, but you only get the funds if you reach it. While this may seem a daunting way to set your project up, it often results in more contributions from the unknown crowd. Wary-but-interested would-be funders are often more likely to contribute knowing that their investment only counts if the campaign is a success. IndieGoGo, on the other hand, has a different financial structure: Projects are able to keep the money they raise regardless of whether or not they hit their target (albeit for a higher cut of the proceeds).

We went with IndieGoGo—we didn’t meet Kickstarter’s project-oriented criteria—and we were charged 9% on the contributions we received (a fee that gets kicked down to 4% if the campaign reaches its funding goal). But even with this higher fee, it was a smart choice for us: We set an ambitious goal—and would have gotten $0 if we’d gone with Kickstarter. So weigh your options closely—crowd-funding sites are not created equal.

 

 

 

Set Your Goal

Don’t force your wallet to be bigger than your needs. When it comes to setting a funding goal, think about and calculate out exactly how much money you require for your stated campaign. Raising money just to raise money (or setting your goal much beyond the expenses you’ve calculated) will not help your campaign be successful.

Your funding goal should also be a number you that know to be obtainable, beyond a shadow of a doubt. After all, you can always exceed it when the campaign makes it big! But if you don’t make it, you’ll face a financial penalty (or receive no money at all).

 

 

Stay Focused

We launched our campaign simultaneously with our site’s launch, with the idea that we wanted to get it mentioned in our initial press coverage. But with all the business of the launch, it was a week or so before we had placed the donation widget on our site. Plus, the IndieGoGo project was only one iron in our fireplace during the campaign’s short run, and the multitude of other projects and newsworthy events that overlapped with it meant that the campaign was constantly competing for attention—both ours and our audience’s—throughout its duration.

Of course, multitasking and juggling multiple priorities is inevitable for a start-up, but the money you raise will be directly related to the amount of effort and energy you put in. So make sure someone on your team can have a strong, dedicated focus on the campaign—it won’t take off without it.