We in the media tend to project a skewed version of what crowdfunding is all about. By reading headlines alone one might come to expect crowdfunding campaigns to be universally successful, capable of raising outrageous amounts of capital for any idea ranging from brilliant to potato salad. In reality, crowdfunding is an art; it requires finesse, skill, preparation, strategy and time.
At a panel discussion during the 2015 Canadian Crowdfunding Summit at the MaRS discovery district titled Money Doesn’t Grow on Trees, a number of experts in the crowdfunding space sought to dispel some of the myths and help provide advice to those interest in launching their own campaign. Here are some of the key takeaways.
Crowdfunding is Community Building
More than a source of capital, crowdfunding serves as a test market and an opportunity to build a community around a product or service. This sense of community building is a vital element of any successful campaign, beginning long before its launch and continuing long after its close. Bret Conkin, the founder of CrowdfundSuite, explained that entrepreneurs “need to bring their own crowd,” which can be accomplished by reaching out to friends, family and social networks to get them interested in the idea long before launch date. “Starting a campaign isn’t the first step, you need to build an audience prior to the campaign,” he added.
That Community Needs to Be Excited for Launch
The most critical point of a crowdfunding campaign is the first 48 hours. In that time backers are open to new ideas, but stumbling on a campaign that’s been active for more than 48 hours with minimal support can raise a red flag. That is why this sense of community building is so vital. That community should be ready to donate to the campaign within hours of its launch, giving it that vital first push it needs to attract more donors moving forward. “People love to back a winner, and if they see you’re on track than the excitement grows, and the campaign will get backed,” said Conkin.
Campaigns Need to be Transparent
According to panelist Apostolos Sigalas, the founder of GreedyGiver, crowdfunding campaigns need to be very transparent in order to attract backers. Providing a clear outline of how the funds will be used is an important step towards transparency, as is an explanation of why the entrepreneur is excited about the idea they’re putting forward. “You’re asking people for money, so they need to be comfortable with the fact that you know what you’re doing, that the money will be used properly, and there’s some validity to the plan,” he said.
A Compelling Video Is Key
According to panelist Diana Yazidjian, the president of DFY Consulting, crowdfunding campaigns that include a video explanation are twice as likely to get funded. She adds that the video should be between a minute and a half and three minutes long, and should feature the entrepreneur or team behind the campaign passionately explaining the problem their idea is addressing, the solution they are proposing, and what the end result of a successful campaign would look like. “It has to be emotionally strong for them to memorize it. You need to trigger emotions as well as rational elements,” she said.
My two cents: crowdfunding has undoubtedly changed the game for entrepreneurs looking to build startup capital, but the impression left by wildly successful campaigns, which tend to dominate the headlines, paints a skewed picture of the realities. Crowdfunding isn’t easy money, and even the most worthy product will fail to reach its funding goal without a meticulously thought out marketing and social media effort.