Crowdfunding has gained huge popularity as an alternative funding tool, having grown more than triple its size in the past three years alone.
But it’s quickly becoming its own crowded space. With thousands of live projects simultaneously pleading for pledges, portal sites make it increasingly difficult to connect with backers.
Crowdfunding helps validate an idea or a product, but your campaign must be solid and fully fleshed before it launches. Here are the most common problems entrepreneurs run into when setting up their crowdfunding campaigns, as well as corresponding ways to avoid them:
Problem No. 1: Choosing The Wrong Platform
You’d be surprised how many choices crowdfunders have these days. It’s important not to count out any platform that can give you your needed start. Some say it’s better to avoid big players like Indiegogo and Kickstarter, yet Kickstarter just gave Blackbird Label a great leg-up on their campaign. Never discount keeping watch in favor of more niche options either. There are company platforms that are specific to your target audience — think EquityEats, Plum Alley, or Fundable.
There are specialty platforms for music, fashion, healthcare, nonprofits, and more. These niche options offer the additional benefits of existing vested member communities and specific campaign structures for fundraising.
Problem No. 2: Setting Far Too Aggressive Fundraising Goals
People often set a huge goal, which can easily result in a “failed” campaign. Your goal shouldn’t be to become 100 percent funded — it should be to become 5,000 percent funded! Figure out the absolute minimum you need to get your venture off the ground. This will not only let you reach “funded” status more quickly, but it also gives potential backers more confidence in contributing to your campaign as you start soaring toward — and past — your fundraising goal.
Another option is to break down your funding into phases, establishing a goal for each phase. Showing your research and establishing correct estimates for launch shows your audience that you have done your due diligence and are more trustworthy than other campaigns.
Problem No. 3: Offering A Poor Reward Structure Design
Giving potential backers too many options isn’t always a good thing. Yes, some projects warrant a large variety of rewards, but more often than not, that represents a barrier to conversion. Give backers clean and simple options. Starting with between five and seven reward options is usually the best. Keeping the list of rewards short will also make the fulfillment process much easier, saving you time and money.
Studies show that the $25 perk is most often chosen, however, the $100 perk earns the most, accounting for nearly 30 percent of the total funds. You can use these price points to determine the most valuable rewards, making sure you tie them into your campaign. Ask yourself whether you would contribute to your own campaign — what makes the rewards unique?
Problem No. 4: Overlooking Marketing
Some people wrongly assume that the platform itself will do the marketing for them. That’s not the case. You need to hit the ground running in every possible way when your campaign launches.
You’ll want to choose the right types of marketing and stay lean. Leverage any free marketing resources you have — for instance, social media and personal networks. Focusing on getting featured in larger publications could be a waste of time and resources.
Usually, those publications will approach you if you have enough traction to meet their standards. Also, smaller niche publications can provide a stronger return on investment; you’ll be positioned in front of a concentrated segment of your target demographic.
Problem No. 5: Starting Your Campaign Cold
It’s rare for someone to want to be the first pledge in a campaign. Increase your chances of success by assembling a starter crowd. Gather friends, family, colleagues, and anyone else to contribute as soon as the campaign launches.
Line up bloggers and small publications to view details ahead of time. Create a landing page, and start marketing the campaign before its launch. Add an email sign-up so you can follow up with potential backers once your campaign starts.
Doing this beforehand will increase your chances of meeting your goal; future investors will become interested after seeing others have already contributed. A campaign that gains 30 percent of its goal within the first week is more likely to succeed than a campaign that doesn’t.
Problem No. 6: Being Too Aggressive On Your Published Timelines
You need to stick to the timelines you publish for your product. It will likely kill your relationship with your backers if you start missing your own deadlines. You might feel you need to get to market as quickly as possible because of threats from the competition, but your timelines are public.
Allow for months — not just weeks — of buffer time on the production supply chain projections. If you are wrong and wind up delivering more quickly than promised, you’ll be a hero.
Crowdfunding is a powerful and engaging tool for entrepreneurs, but like all tools out there, you need to really study, practice and plan before you can master it. Avoid the common pitfalls of choosing the wrong platform, starting too slowly, setting unrealistic goals or a confusing reward structure, or creating unrealistic timelines.
Instead, know that strategic planning leads to an effective and successful campaign that can launch your product even further than you’d imagined.