Crowdfunding—is it right for you?
Tammy Y. Allen, Director, Marketing & Programs, The NIIC
Access to capital is a vexing issue for many serious entrepreneurs and business builders. Some see crowdfunding as a free way to raise funds (not true). It is a way to fundraise for a project, non-profit organization or business using an online platform and social media channels.
Various forms of crowdfunding exist. Equity, reward, debt and donation are the most used types. If you are going to use equity crowdfunding, contact your Secretary of State to check the rules and authorized platforms.
My crowdfunding experience includes co-leading one unsuccessful campaign. Before you stop reading, consider how what I have learned may help you to run a more successful campaign.
According to Entrepreneur, a third of crowdfunding campaigns meet their fundraising goals. Which means two-thirds do not. Why pursue it?
- Appeals to multiple individuals for small donations instead of appealing to one source for full funding (to raise $50,000, need 35 donations of $50 a day of a 30-day campaign).
- Like-minded individuals fund a common cause at minimal investment. It helps them to feel like a part of something at the ground level.
- Funders feel good, the company running the campaign receives funding and the crowdfunding platform gets a percentage of funds raised.
Be informed. Identify the best option for what you need. It may be an alternative fundraising option.
- Research crowdfunding and various platforms.
- Be aware of the intricacies involved, including associated costs, how the process works and how payout occurs.
- Learn from individuals who have completed campaigns. What worked? What did not?
Crowdfundbetter.com did a good job of covering the different types of crowdfunding at The Association of Women’s Business Centers 2018 Leadership Conference. These included donation, investment, intrastate and lending crowdfunding platforms. For a rewards campaign, like I co-led, here’s how it was described. “Rewards campaign—used by individuals, pre-startups, startups, existing businesses, nonprofits. Contributions are rewarded with perks, pre-sales/pre-payment for products (pre-manufacturing).”
At The Indiana Conference for Women, I heard firsthand about a successful crowdfunding campaign. The case study featured a company that developed all-natural food for infants/children being fed through a feeding tube due to health issues. The story was compelling. The video emotionally engaged. A groundswell of support formed among parents, caregivers and friends. The campaign far exceeded its goal.
Flash forward to a nonprofit where I worked. We became aware of a park being built where children and adults of ALL abilities could play. This was possible through the equipment being placed onto the playground. The story was compelling. So, we committed to powering a crowdfunding campaign.
We exchanged emails and had a conference call with the company previously mentioned to learn about their crowdfunding experience. We researched other campaigns that used the platform we decided to use.
We partnered with the town to raise funds for this community asset. We had no crowdfunding experience. We worked closely with the platform staff.
Tip: If inexperienced, account for a learning curve and recruit experienced volunteers or subject matter experts.
Identify what needs funding.
We decided to focus our fundraising on purchasing a piece of equipment needed for the playground. The NEOS 360 is interactive, inclusive and combines cognitive and gross motor skills. It was designed to get people off the sidelines and onto the playground.
Set your fundraising goal.
Have funds been raised for what you need? The NEOS 360 price was $29,000 plus installation fees. The town raised some funds to put toward this. So, $20,000 was our campaign goal. We unsuccessfully met the goal.
Missed goals happen. Own it. Our goal was $20,000. We raised $10,000 in funds (including outside of the campaign through the local community). We tracked $14,000 in-kind support from businesses and organizations. The big win for our campaign was the increase in awareness in the community to drive future support.
Tip: For community crowdfunding, donors may prefer their dollars stay local, not go to a national platform you are using for your campaign. Be creative about how to address this to maximize funds raised.
Set campaign duration. We started our campaign in October and ended before Thanksgiving. The plan was to leverage Giving Tuesday and wrap up before the holiday shopping season began.
- Consider the general time of the year (holidays, etc.).
- Assess other fundraising activities that could affect your campaign (e.g., capital campaigns, community or seasonal fundraising, etc.).
Identify perks. For rewards-based campaigns like ours, perks were an important component.
- Establish incentives for each funding level established (e.g., social media shout-outs, bracelets, t-shirts, naming rights, etc.).
- Account for all costs for perks, including shipping to funders.
Tip: Be creative—are there no cost or minimal cost perks can you offer?
Share your story. The more compelling your story, the more likely you’ll have an emotional connection with potential donors.
- Video is a foundational piece of your campaign. You want it to emotionally move and motivate potential donors to action.
- Create micro-messages or video snippets of your main points to extend messaging throughout your campaign.
Promote your campaign. In addition to social media, consider other ways to create awareness about your campaign.
- Consider podcasts, news releases, op-eds, public service announcements.
- Align with bloggers/influencers to share your message.
- Consider live events—both in person and on social media (e.g., kick-off event, silent auctions/mixers, ribbon cuttings, etc.).
Tip: Securing a critical mass of early campaign contributors before publicly launching your campaign creates momentum to encourage others to do so as well.
Be honest. How are you tracking to your campaign goal?
- If you are not tracking to goal, say so.
- Continuously evaluate your promotions and adjust to reach more potential donors.
Communicate with your supporters. They care about your cause.
- Update them along the way to make them feel like they are part of the campaign. Tip: This may also result in them sharing with others about your campaign and drive more support.
- Your social network size is an important indicator of the likely success of your reward crowdfunding campaign. Stay tethered to your online community.
- Say thank you—for each engagement and donation. Keep it genuine.
Keep your promises. When the campaign closes, it doesn’t mean you are finished.
- Fulfill your promises—including distributing all perks.
- Communicate campaign results.
End on a high note. Thank your supporters (again). Also, assess your results. It will help inform future crowdfunding pursuits.
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