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Bank loans and venture capital continue to be popular funding sources, but they do not work for every entrepreneur. Some startups are turning to crowdfunding as an alternative to traditional loans and a means to get their businesses off the ground.
But simply creating a cool new product or service is not enough to attract contributors through online crowdfunding platforms like Indiegogo and Kickstarter. A successful crowdfunding campaign requires extensive, thoughtful planning and focused marketing to attract and engage supporters, combined with hours of intense, hands-on work.
Just ask Helmut Wyzisk III and Jeff Becker, co-founders of Earhoox, which sells soft, silicone attachments that hold earbuds firmly in place. The company started in 2012 and raised almost $10,000 in a month-long Indiegogo campaign.
“Looking at the landscape of crowdfunding now, and knowing what we now know, I think we could do 10 or 20 or 30 times what we did in that crowdfunding campaign,” Wyzisk said.
Becker explained that the partners selected the Indiegogo platform because it offers flex funding — the ability to keep the funds raised even if goals are not met — and because of Indiegogo’s international presence.
“Various [crowdfunding] sites have different audiences, and various products, services, films, causes, etc., will all resonate differently with each,” he said.
Here, Wyzisk and Becker share crowdfunding lessons learned from their experience.
Tip #1: Get an early start on marketing
Crowdfunding is all about momentum. A campaign that attracts early supporters is more likely to meet — and surpass — its goals than one that stumbles out of the starting gate.
Promoting your campaign by reaching out to your personal network of friends and contacts early in the process can help you raise more money, the founders of Earhoox say.
“It’s not something you can put together the weekend before, or even a month before,” says Wyzisk. “You need to have relationships in place, and plans in place, and marketing strategies, so you can get that initial 10% [of the fundraising goal] right when it launches.”
Becker agrees.
“We should have spent more time up front planning the launch and amplification of our campaign,” he said.
The takeaway: Get your supporters on board well before your campaign begins.
Tip #2: Offer incentives to make it go viral
As Wyzisk says, it is important to leverage not only the relationships you have with your supporters, but also the relationships they might have with other potential supporters. Providing the right incentives can encourage fans of your products to recruit their friends.
One tactic for doing so is to create “stretch” goals, says Wyzisk. These goals reward supporters with bonuses whenever certain targets are reached.
“You have to continue to throw fuel on the fire,” he says.
The takeaway: Find ways to reward your supporters for spreading the word about your campaign so you can expand your network and more quickly reach your goal.
Tip #3: Streamline your operations
Entrepreneurs need to invest a lot of time and effort into preparing for the campaign, but at the same time, they cannot afford to neglect their business operations. Wyzisk and Becker said that despite getting an early start on planning their campaign, they were still “overwhelmed” when the floodgates opened.
They saw the success of their Indiegogo campaign as a validation of their concept, but they still needed to attend to a lot of the details of running a business for the first time in their lives.
“Most of the work came after the campaign ended, working to fulfill and meet deadlines,” says Becker.
Wyzisk suggests that startups might want to keep their operations simple at first to make sure they can manage them effectively. Getting to market fast and efficiently is important.
“You can always go back and do something better the second time, which we did,” he says. “We went back and rebuilt our website, and made it better.”
The takeaway: Simplify your business operations so you can focus on the crowdfunding campaign and a successful launch. You can refine your strategy as you go.