Do's and Don'ts of Crowd-Funding Your Startup

Startup CrowdFunding

For Eric Migicovsky, founder of Pebble, raising money was becoming much harder than expected. Though he had received a funding of USD 375,000 from some angel investors, this money was not enough to embark on a significant production run for Pebble. That’s when Eric decided to put Pebble on Kickstarter, the world’s largest crowd-funding platform for creative projects. Eric decided that he would ask for USD 100,000 from the Kickstarter community – enough to cover Pebble’s first production run and get a cover article on the popular gadget blog, Engadget. The project met the goal of USD 100,000 within a few hours of going live. First day ended with USD 600,000 and Pebble raised USD 10.3 million during the 25 day period.

Eric’s decision to approach Kickstarter for raising funds turned out to be a good move for Pebble. Every day, hundreds of individuals and companies approach these crowdfunding platforms to raise funds for their requirements, ranging from personal needs to product research and development.

There are certain things that you need to keep in mind while you launch your project on one of these sites to raise funds. We bring out the top 10 things to keep in mind while approaching such a website.

  1. The Purpose

    The purpose for raising the funds should be clear to you. Knowing the purpose also gives you a clear sense of direction. In the above example, Eric had a clear understanding of how and where he would be using the money raised for Pebble. The purpose should be clearly stated in your campaign for it to attract backers.

  2. The Platform

    Check out various crowdfunding platforms to get an idea of the type of projects that are getting funded and those that aren’t. Every crowdfunding platform has a different model and focus and thus cater to certain specific type of funding requirements. It is very important that you approach the platform that fulfills your need. Besides Kickstarter, other global major crowdfunding sites are Indiegogo, Crowdfunder, RocketHub, Crowdrise and many more. India, too, is home of many crowdfunding platforms such as Catapooolt, Start51 and BitGiving, to name a few.

  3. The Amount

    Ask for minimum amount that you need to get started. Do not ask for maximum amount. Setting expectations too high can be a dampner if the targeted amount is not reached. Further, some platforms such as Kickstarter refund the money back to the funders if the target is not achieved. Others such as Indiegogo let you claim your funds even if the target for the campaign is not reached. Whatever you receive over and above your target is an added bonus.

  4. The Launch

    Most of the websites will not prohibit you from running campaigns on multiple websites. But such an approach could leave your backers confused. They would not know which website they should visit to learn more and support your project. Further, it can split the contribution received on multiple platforms and stop you from reaching your goal on any of them. Sally Outlaw, founder and CEO of crowdfunding website PeerBackers, advises against this, as it’s too much work and you may lose focus and momentum.

  5. The Backers

    Tanya Prive, in her Forbes’ article, points out three main reasons why people back unknown projects on crowdsourcing websites. Firstly, they connect with the purpose of the campaign. Secondly, they back it for the reward associated with the project. And thirdly, they get drawn to the creative manner in which the campaign is presented. Make sure you fascinate your backers on all these counts.

  6. The Idea

    When Canonical listed Ubuntu Edge Phone on Indiegogo to raise USD 32 million, little did it know that even after raising a record breaking USD 3.4 million in first 24 hours of the launch of campaign, it would have to eventually refund the entire contribution from over 27,000 funders. Many attributed the failure to the idea being ahead of its time.

  7. The Campaign Time

    Run your campaign for adequate time. Experts believe that a typical campaign should run between 30-45 days. This gives you enough room to share updates of the project with the backers without annoying them. An email updating them of the progress of the project every 10 days, is the norm. Campaigns longer than 45 days tend to be less effective as it takes out the “urgency” factor.

  8. The Right Expectations

    Though it may sound counterintuitive, your backers are looking for rewards from your project, whether tangible or intangible. Let your backers know, right from the start, what you are offering in return. And then stick to it.

  9. The Plan and Execution

    Crowdfunding campaigns are a not “Launch-it-and-collect-your-booty”. They are full-scale events and have to be treated the same way. It involves planning, marketing and executing the campaigns just like an event. Plan ahead of time, market it on the right platforms (online and if required, offline as well). Set strict schedules for sending out press releases, running email campaigns and posting updates.

  10. The Communication

    Keep your investors and potential investors updated on every single development related to the project, whether it’s positive or negative, even after the campaign. This acts as a confidence building measure. Piwik’s founder Matthieu Aubry says that it’s important to ensure everyone gets what they had pledged after the campaign has ended.

While crowd-sourcing is a great way to raise funds for your project, do not leave your ideas unprotected. If you only have an idea and no way to protect it from infringement, do not reveal it on these platforms. Hit these platforms for funding only when you are sure you can copyright the product/idea.

What points do you feel should be kept in mind while approaching crowdfunding platforms. Let us know in the comments below.

 

Arunima Shekhar has 9+ years experience developing, designing and marketing technology. She is Co-Founder at Scrambled Works, a creativity lab & Founder of Tell-A-Tale, an alternate education initiative.

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