I get asked all sorts of things about crowdfunding, but there are 10 questions I get asked most commonly. Today, I’m going to answer them all.
There is plenty of more detailed content on this website, so I’ve linked out to relevant posts with more detail where it applies. This post should answer the questions a person has when starting out with their crowdfunding adventure.
What is crowdfunding?
Basically it is when you ask a crowd of people to contribute many small amounts of money to make a large amount of money.
You can use crowdfunding to raise money for practically anything, however the money doesn’t come out of nowhere. To crowdfund successfully, you need to get your head around two things:
- Clear communications and sales
- Promotion and marketing.
What types of crowdfunding are there?
There are four main types of crowdfunding.
Donation: you have a cause, people give to it. There is no expectation from the donor to receive anything in return.
Reward: you have a project, product, or idea. You pitch that project, product or idea to an audience, who may choose to purchase a reward, or simply donate. Rewards are often related to the initial project, product, or idea, and are ‘tiered’ to a minimum donation amount.
Equity: You pitch your business via a licenced platform to a crowd. The crowd can choose to invest in your company via your pitch and business plan. The number of shares an investor receives in your company is directly related to the investment made.
Debt: You ask for a loan from the crowd via a licenced platform. You pay it back, with interest.
Is crowdfunding right for me?
Well that depends. How comfortable are you with telling people your story? How happy are you to ask for money?
There’s a misconception that crowdfunding is easy money. If that’s all you’re after then there are easier routes. You really need to value your crowd ahead of anything else.
You cannot simply set up a page and expect to come back in a month to a large sum of money. You need to commit to promotion. You also need to prepare yourself for a bit of an emotional rollercoaster.
Trust me, there are easier ways to get money if that’s what you want. This is not a magic bullet, but it is an option if you’re prepared to put in the effort.
What crowdfunding platform should I use?
That depends on a few factors. I honestly recommend you ask me.
I’ve written a blog about this in the past, but sometimes when people make this decision they shut the doors to some bigger opportunities.
It’s a very hard one to answer in a blog as the landscape is so varied and each project is so individual. I recommend CrowdsUnite as a great place to start with your platform research.
The one thing you’ll need to know is what type of crowdfunding you’re planning to do, as this will most-impact the platform you use.
Donations: GiveALittle (NZ-based, zero-fees), FirstGiving, GoFundMe
Rewards: Kickstarter, Indiegogo, PledgeMe, Pozible
Equity: Snowball Effect, PledgeMe (both only open to NZ-based companies), CrowdCube, Equitise… this is a fast-growing field. If you’re seriously interested in Equity Crowdfunding I recommend chatting to Nathan from Value My Venture.
Debt: Harmoney, PledgeMe (NZ-only)
Where do you find a crowd?
Look around you. Your family, your friends, your flatmates, your colleagues. Members of groups you’re involved in – church groups, knitting groups, sports teams.
Members of forums or Facebook groups you contribute to, your Twitter followers, your G+ circles. LinkedIn groups and YouTube subscribers.
There are LOTS of people in your social sphere. You are more connected than anyone has ever been in any point of history before.
What you are probably actually struggling with is the next question.
How do I ask someone for money?
No matter what your project is for, there is always going to be an element of storytelling and sales in every crowdfunding project.
You have to sell both the end result, and yourself. You have to build trust, and convince people this is something they should want to help with. Half of the hard work will be done by your campaign page.
Make sure your crowdfunding video includes an “ask” – a call to action where you actually ask people to pledge. Ensure that your description hits the main questions and objections.
Then all you actually need to do is ask people to check out your page. To do that, you need to tell them about what you’re doing, and why they should help. They won’t click if you’re asking them for money up front.
I’ve put the link on Facebook, now what?
Around 15% of your Facebook friends or fans will actually see it when you post your link.
Part of it is timing, part of it is the fact Facebook likes to charge money to get messages in front of people’s faces. Either way, Facebook is not the most effective way to talk to your friends.
First, walk out your door and talk to people. When someone asks you “how are you?” say “I’m great, I’m working on this awesome project!” Tell everyone you meet or talk to. Let your passion shine through. If they’re interested, they’ll let you know and you can point them to the page.
Secondly, dust off that old Gmail or Hotmail account. And start sending out some emails. But do it smart.
It’s so effective that I’ve written a dedicated blog on how to do this properly, and it includes template to get you started. I know it sounds old-fashioned, but trust me: email gets results.
How do I get into the newspaper or on TV?
Start by working out what your angle is. This should be your story, or the result you hope to achieve: not the fact you are looking for money to do it.
Crowdfunding is not a story. Ideally you’ll be able to pitch different angles to different journalists. You should try to be familiar with the kind of stories that they do. For example, you don’t want to pitch your new album to a business journalist.
Next, give the journalist a call, or send them a personal email. Explain your story briefly and cross your fingers.
If they choose to run your story, request that they include a link to your crowdfunding project.
For more tips on sending out press releases, check out this post.
How do I thank my backers?
One mistake a lot of crowdfunders make is forgetting to thank your backers. Even in a ‘reciprocal’ arrangement like rewards crowdfunding (where a backer gets a reward in return for their pledge), saying thank you goes a long way.
It’s not all about being polite. It’s also about considering the long game. If you’ve funded, you know how hard it was to get there. If you need to fund something in the future, then keeping the crowd up to date and involved now can simplify that for you next time.
I call it making Forever Fans.
Why should I use updates?
It’s about gratitude, respect, and just being polite.
It doesn’t matter if someone has given you $5, $50, or $500. If they have invested money in you, then they have also invested their emotions in you. Crowdfunding always goes bad when the communication goes south.
Keep your supporters up to date, let them know what’s going on. Show them how their contribution has been used. Build a team of Forever Fans who will support your ideas again, and again, and again.
I’ve written more on how to write an update over here. The post includes some templates to help get you started.
