Top ten crowdfunding mistakes and how to run a successful campaign
Crowdfunding is great way to raise funds when you need to get a proof of concept or new product launched. It’s better than getting investment, because you don’t have to let go of equity and can still maintain ownership. And, it’s better than getting a loan from the bank and going into debt – especially if it’s for a product or project that you’re not sure is going to work.
As the Marketing and Data Wizard at crowdfunding platform Pozible, Elliot Chapple has seen a fair share of hugely successful and disastrous crowdfunding campaigns.
Elliot shares the ten biggest crowd funding mistakes and what you can do to avoid them.
Mistake 1: Post and wait
Solution: Develop a marketing plan
One of the biggest mistakes I see is businesses putting up their idea and just expecting pledges to come in. It doesn’t work like that.
Do not underestimate the importance of a marketing strategy and the effort required to make a campaign successful. We recently ran a survey amongst people whose campaigns had failed and 58% of them said it was because they didn’t have a promotional strategy in place.
Everyone thinks their idea is genius and all they have to do is put it up on a crowdfunding platform and people will find it. Every major success story on Pozible is from a group who’ve had an existing following and email database, and have put in a huge amount of preparation to get it to take off.
Mistake 2: Expect people to magically find your campaign
Solution: Start with an audience
Crowdfunding works best when you already have an audience. That’s why creatives usually do well with crowd funding, because building an following comes naturally for musicians, bands and artists - it’s usually what they need to do to make a living.
Months before you start your campaign, build your audience and network. This way, when you do launch, you already have lots of people and organisations helping to get the word out.
There are no golden rules for building an audience, but think about who would be interested in buying or using your product and what social media channels they use.
Set up pages on 2-3 relevant social media platforms, such as YouTube, Snapchat, Instagram, Facebook, or LinkedIn, and experiment with different pieces of content to see what works - Generally speaking, people engage with content that is either useful or entertaining.
It's important to also create a landing page in order to collect email addresses. It’s easy to set up a Mail Chimp account to capture email addresses, and there are lots of providers to choose a landing page from including Squarespace and Wix.
Mistake 3: Only target customers
Solution: Build a wide-network of relationships
Think about other people and organisations that might be interested in supporting you and sharing your story:
Start talking to journalists and build a relationship with them, so when you launch your campaign they might give you some media coverage.
Try and find partners with a similar purpose or mission as you, as they may share your campaign on their social media channels.
Find relevant influencers that have a following with similar interests that you are trying to target. Send them a free product and if they like it, ask them to share it on their social media channels.
Mistake 4: Let the campaign grow organically
Solution: Go hard at the beginning
The general public requires proof of traction before they pledge. They aren’t going to pledge to a campaign that has only raised $50 - they don’t like to be the first to jump in. They’ll only pledge to a campaign that has raised a few thousand dollars or at least 30% of the total campaign amount.
This is why it’s important to have an audience before starting. You’ll need to rely on followers to kickstart the pledges and get it to the 30% mark and then hope your promotional plan drives the rest.
Mistake 5: Expect the pledges will continuously grow
Solution: Be prepared for the slow middle
Every campaign, whether successful or not, is slow in the middle. The good ones go well at the beginning and then well at the end, when the deadline comes closer. This is something that happens with every campaign, so it is important to be ready for the lag in the middle and have activities prepared to maintain momentum.
Mistake 6: Offering $1 rewards
Solution: Rewards starting at $10
A $1 reward in a campaign is a waste of time. People rarely pledge less than $10 because it isn’t worth the time and effort to type in your credit card details for less than that amount.
Make sure the real estate on your campaign page is well thought out and lists your rewards in a prominent position, starting with rewards for $15.
The most frequently pledged amount is $50. So, have rewards for about $50, that appeal to a wide demographic and that you have an unlimited amount to give away.
Mistake 7: Discounted product rewards
Solution: Priceless experience rewards
It’s important to give people something that makes them feel a little bit special. Rather than just sending them a product, try to invite them to participate or be involved somehow in the project.
Give them something money can’t buy.
There are the obvious rewards, like giving people your product at a discount, but sometimes it is the more left of center ideas that can be really successful and help to create buzz around your campaign.
For example, one of the rewards that we saw recently was for an ice-cream company and they wanted to raise funds to buy an ice-cream truck for their business. They created a reward for $100 to drive you around in their ice-cream truck and you could play whatever music you wanted out of the speakers on the roof. They would drive you to a location of your choice and give out 20 free ice-creams to your friends and strangers.
It was an awesome reward because it was something that their friends could share on social media, it was an unforgettable experience, something to talk about and plus it didn’t cost the ice-cream company any money to accommodate.
Mistake 8: Assume people will fall in love with the idea alone
Solution: Put a face to your campaign and tell your story
Who you are and your story is very important. You need to tell people about who you are in a way that is interesting and that people can relate to. People are more likely to give you money if they believe in you and your motivations.
Pitch videos are a great way of telling people who you are and what your campaign is about. It doesn’t need to have high production values, but it’s important that you connect with people’s emotions. Just use the video camera on your smart phone, as the quality is great; however, audio is something that can let the video down. Spend $30 on a proper microphone from JB-HiFi, a rove mic or a lapel mic will make your video sound so much better.
Mistake 9: Setting an unrealistic campaign target
Solution: Strategise the minimum amount you need to raise
The average amount of the campaigns on Pozible is $7,000, but we also have lots of campaigns for smaller amounts and campaigns over $100,000. A recent campaign we ran was the Melbourne Map project. It had a target of $20,000 and ended up raising $120,000. It’s important when setting your campaign target that it seems realistic you will reach it – otherwise people won’t both pledging.
Mistake 10: Assume everyone will love your idea as much as you
Solution: Take the time to consider whether you have the right project or product for crowdfunding
Not every idea is a great idea for crowdfunding. There are some projects that just won’t succeed, no matter how much work you put into the campaign. Crowdfunding is great for projects that are at an early stage, and for projects that are new and exciting. More established businesses don’t do well at crowdfunding unless they can find a new and exciting spin on the concept.
Crowd funding is also great for projects that have a positive social or environmental outcome, as it connects with people’s heart more.
There is no easy way to raise funding for a new idea, and unfortunately crowdfunding isn’t the silver bullet. It takes a lot of work to convince people to hand over their hard earned mula, but with some planning and prep-work it could all be worth it.