Is Crowdfunding Right For You? Check out Crowdfunding Planning

posted Jun 3, 2013, 11:15 AM by   [ updated Jun 5, 2013, 11:14 AM ]

The ultimate crowdfunding questionHere at CrowdFunding LIVE, we get inquiries about projects all the time. We try to spend as much time as we can communicating with the potential project posters to help them get ready to launch. We have a series of basic questions we ask each of these people. They’re the same ones we include in the project submission form on the site, but we get much more specific in our second communication for some very good reasons.

The first question has to do with whether you are a legal business, do you have a business plan and how long have you been in business. Really, all of those things are connected.

Next, we try to find out if the person has any marketing ability. Specifically, we ask how big their database is and does that include Facebook, LinkedIn and Twitter (or other web-based sites).

This is when we bring in a math exercise to help these people see the correlation between the amount of money they want to raise and the number of people they have the ability to market to. Example: if you want to raise $5000 and you have 100  people in your database that you can send an email to, then each of those people have to send you $50 to reach your goal. Now, if the statistics of response to email is anywhere close to being accurate for crowdfunding, then you can expect about 10-20 people to open your email. Of those people about 1-5% will click on the link you provide in the email and they’ll go to your project site. Of those people you hope at least 5 of them will give you a pledge. So, of your original 100 people, maybe 5 will give you money. Not great, huh? And, of those 5 backers, only one will help you spread the word.

Of course, some people will have better open rates, but they usually have been communicating with their datebase on a regular basis, providing well written emails, good information or good offers.

So, our next conversation with these people interested in crowdfunding is about, realistically, how they need to think about their “crowd” or their database.  On their lists there are people who will also have lists. There will be people you can call to ask if they will pass your email on to their friends and colleagues or post in Facebook, Twitter, etc. There may be colleagues whose business clients or vendors could benefit from the success of your product or service, so they might be more inclined to want to help you find success.

The whole point of crowdfunding it to spread the word about your project, what you’re trying to do, and get others talking about it, sharing it and widening your sphere of influence to a larger and larger group of people. Those people become your “crowd” and they’ll give you money and continue to be part of your database. You can continue to communicate with those people throughout your business launch and beyond. It’s up to you to create a community with the people who’ve shown an interest in what you’re doing.

Too many people think that if you simply put up a crowdfunding project, people will just show up and give money. It just doesn’t happen that way. People have to be told about the project, the great reward they’ll get for donating to the cause and they have to be given the link to the project’s website.

Think about it this way. If I built a cute little shop with wonderful gifts and goodies, but it was off the main streets and away from traffic flow and I didn’t tell anyone about it, how long do you think I’d stay in business?

But if I built this adorable boutique filled to the roof with affordable, creative, hand-made, one-of-a-kind gifts and offered free hot chocolate and cider for the holidays…and I posted on my Facebook page, my LinkedIn page, Twitter, blogged on my website, handed out flyers and emailed everyone I’ve ever known in my entire life…what do you think would happen?

Well, in the first scenario, I’d probably take a lot of naps with all my free time. Now, in the second scenario, I’d probably be busy handling new customers who heard about it from me, a friend, saw my flyer, and got a Tweet about it, and so on. If I was really resourceful, I’d call the people who do local radio, TV, magazines, newspapers, and Internet blogs and ASK for them to do an article, a show, an interview or blog about my project.

We know this works, because we’ve done it to promote and countless other promotions, events and launches. We know it works because that’s what the really successful crowdfunding projects have done. And they don’t just use one medium, they use all of them. They blog, they Tweet, post on Facebook, they do interviews and write articles. They attend networking events and mixers. They ask their relatives, friends and business associates to help them. They talk about it to everyone and anyone who will listen. They ask their friends for help with their video or hire someone to do a great video for them. They get the help of college students to tell their friends through social media. Whatever it at their disposal to promote their project, that’s what they do. They don’t sigh and say, “I don’t know how to do social marketing”, they figure out how and get it done.

Crowdfunding isn’t for everyone, but…

It can be one of the tools you use to raise funds for your business. It can be a rung on the ladder to get started, to get to the next level for greater funding or peer to peer venture capital, to get pre-sales for their product and move along the road to success. It takes work, but the rewards can be great. You can sure that if you don’t do the work, (marketing), no one will come.