Campaign Development
How to Develop a Compelling Crowdfunding Campaign
Crowdfunding can be an incredible way to raise awareness of your brand and the money you need to expand your business. Since 2009, Kickstarter has raised more than $3.6 billion for users. Indiegogo has raised almost $1.5 billion for users since 2008, and in 2017 their profits rose 50%.
Many entrepreneurs are encouraged by the amazing success stories of projects like Oculus Rift, a company that designs VR headsets. They raised over $2.4 million on Kickstarter and were subsequently bought by Facebook for a massive $2 billion. A father and son team created Flow Hive 2 – an innovative solution for beekeepers that allows honey to be harvested more simply and gently. They raised $13,254,473 on Indiegogo, 18935% of their initial $70,000 goal.
Crowdfunding has transformed business for a huge range of entrepreneurs and has really come of age in the last decade. But for every Oculus Rift and Flow Hive 2, there are thousands of campaigns that either fail to reach their initial target or never get off the ground. The average amount most Crowdfunding campaigns raise is $9000, and 70% of campaigns fail to achieve their goals.
Planning Is Everything in Crowdfunding
One of the main reasons campaigns fail is down to a lack of planning and campaign development. This means that the campaign gets no chance to stand out in an increasingly cluttered and competitive sphere.
It’s important to understand going in that there are significant challenges. But, with careful planning and execution of your campaign, you can get a wealth of benefits from using crowdfunding, including:
An opportunity to concisely define your business goals and product/service
Discovering more about your ideal customers, what they want and how your business can better serve them
The chance to build better relationships with customers or potential investors
An increase in brand awareness and PR
And, of course, achieving the financial goals you set!
At Mount Bonnell Media, we help European entrepreneurs to develop killer crowdfunding campaigns that give you these benefits- even if you don’t achieve 100% of your financial goal first time.
In this guide, we’ll walk you through what you need to consider as you develop your campaign.
Researching and Clarifying Your Crowdfunding Concept
The preparation for your crowdfunding campaign should start way before you begin choosing a platform and creating a campaign page.
You might already have an incredible business plan, idea or product, and know who you want to market it to. But, chances are, you haven’t researched to see if what you have to offer fits a crowdfunding campaign.
Before you start looking at platforms and what kind of campaign you’d like to run, you need explicit knowledge both of what you’re offering and if there is a market out there for it.
If you have already run successful businesses in Europe, you need to know if your service or product will translate to an American audience. Is your campaign going to be geared towards backers in the US? If so, how will you present it differently to the way you market yourself in Europe?
You also need to consider how much money you are trying to raise and if you have an achievable plan in place to fulfill your obligations if your crowdfunder is successful. Do you have the right processing and fulfillment/logistics in place? Can you get your message out to the right people before your campaign starts?
Choosing Your Campaign Type
Once you’ve researched your target market and come up with a clear concept and goal, you need to decide which platforms and campaign types will work best for you.
There are four main types of crowdfunding campaign:
Reward-Based. Backers put money towards your campaign and get a reward in exchange, based on the amount they put up. Usually, the reward is a physical item, but it could be a service in some instances. Often individual backing amounts are smaller (between $1-1000).
Equity-Crowdfunding. Investors tend to put up a more substantial amount (often $1000 and up), and in exchange, they get a small piece of equity in your company. These types of campaigns are geared toward attracting Angel Investors and Venture Capitalists.
Donation-based These campaigns are usually run by non-profits or those who are hoping to raise money for a good cause. This can range from large charitable actions to asking for money to help with individual medical expenses.
Debt crowdfunding. You ask to be lent money and receive a series of small loans that you must pay back with interest. Debt crowdfunding can be used to consolidate loans, refinancing or a range of other reasons.
In our experience, entrepreneurs tend to choose either a reward based crowdfunder or an equity crowdfunder, so we’ll focus on these for this guide. If you have any questions about other types of crowdfunder, please get in touch, and our advisors will be happy to discuss them with you.
Equity or Reward-Based Crowdfunding – Which Is for You?
There are pros and cons to both equity and reward-based crowdfunding:
Rewards-based crowdfunding tends to work best for campaigns that have a specific product or innovative solution to market.
The pros of a reward campaign are that you are only obliged to your backers to the tune of the reward you have offered for their contribution. Once you have fulfilled all the rewards, that ends your commitment. Rewards crowdfunders tend to suit consumer-focused businesses with a tangible product in development.
If this applies to your business, rewards crowdfunders can be a brilliant opportunity to test your target market. You can use the campaign to interact with your customers and discover more about how they use your product.
Equity-based crowdfunding can work for you if you want to raise more money from individual investors and you already have an established business and service you want to expand. Equity allows your investors to take part in your company journey longer-term and also benefit financially when your company succeeds. On the negative side of the coin, investors stand to lose part of all of their money if your business fails – so is more of a risk for them.
Equity-based campaigns tend to have fewer investors who put up more money. This can lead to more manageable relationships and a real build on your network and contacts. These types of campaigns do well with clearly defined business niches and objectives rather than an immediate physical product.
Choosing Your Platform
Once you’ve understood your crowdfunding concept and researched your market, and determined the basic type of crowdfunder you want to start – it’s time to research platforms and choose one.
There are plenty of platforms out there, and each one offers different benefits and types of campaign. If you’re looking to do rewards-based crowdfunding you might try out Kickstarter and Indiegogo (Indiegogo also offers equity crowdfunding in collaboration with MicroVentures) If you veer towards equity crowdfunding Angel List and Fundable are good places to begin your research.
Each platform has its own rules, culture, and types of projects it accepts. So, it’s important that you explore several to see which will be the best fit for you. Mount Bonnell Media can help you with platform research and advice on which one to choose.
Platform Considerations – Fees and Fundraisers
One important area to consider is the fees each platform chargers and how this might affect your outcome. On some platforms, the amount of money you raise in the first day or two of your campaign can significantly impact whether your campaign “trends” and therefore gets out to a wider audience.
Crowdfunding sites like Kickstarter promote campaigns that raise a lot in a short space of time because these campaigns have more chance of reaching their goal and therefore they get their cut.
Fees can range, but you generally get charged 5% of total funds raised AND an around a 3% credit card processing fee per transaction. Fees might also vary depending on whether you take an “all or nothing” approach or a “flexible goal” approach to your campaign.
All-or-Nothing or Flexible Goal?
Depending on the platform you choose, you can decide whether to set a flexible goal for your crowdfunder or to choose to go all-or-nothing. Flexible goals mean that once your campaign ends, you can keep all of the money you have raised. All-or-nothing means if your campaign does not meet your initial funding goal you have to refund all of the backers.
You might think that flexible funding is, therefore, the way forward, but there’s some evidence to suggest that all-or-nothing campaigns tend to be more successful.
Researchers looking at 22,875 campaigns hoping to raise between $5000 and $200,000 on Indiegogo (who allow both methods) found that those who used a flexible (or KIA – keep-it-all) approach played much smaller with their fundraising. They tried to raise on average $19,677 compared to the $31,355 average goal of the all-or-nothing campaigns. Interestingly even though the keep-it-all goals were smaller, more of the all-or-nothing fundraisers hit their target.
One of the reasons for this could be that backers prefer to see a campaign through to completion, rather than something only partially finished.
Working With a Team or Going It Alone?
So, you have a business idea, and you think crowdfunding is for you. You’ve done some research and chosen a platform, and campaign type. You upload your page and send an email out to invite people to contribute. Easy, right? Well, unfortunately, these days, not so much.
The sheer volume of people creating crowdfunding campaigns means that you need to put a lot of energy into yours. This means not only building up a buzz beforehand but responding to queries, making sure you update your page regularly, creating excellent marketing materials and promoting your message across social media channels.
A lead-in time to the start of your campaign should be at least 30 days, but often ideally more than that. This is not a “quick” social media blitz a few days before your campaign begins. If you have that sort of time to dedicate to your campaign and are happy to wear the many different “hats” that is needed to create a comprehensive campaign then going it alone could work for you.
However, most successful campaigns are successful because they use the power of many people to create a buzz. This makes sense – after all, crowdfunding is about connection and community. That’s why to truly succeed; it’s a good idea to build a core team around you as the campaign is developed.
Developing Your Campaign Message
Now you have all the basics in place. You’ve defined your product/service and clarified exactly what you are offering. You’ve chosen the right platform and campaign type and have gathered a team (or cleared your schedule if going it alone) around you.
This is the crucial time where you take all that research and raw material and develop your exact campaign message and how you want to deliver it.
Creating your page will be important, including adding an effective video to it. But you also need to know how you’re going to communicate via other channels. How will you start getting the buzz building amongst your potential backers? What sort of messages will you convey and how are you planning to explain to your backers exactly why they should back you?
You need to make sure you can start conversations – make it personal, and reduce the amount of information you give to people in one go.
Things for European Entrepreneurs to Consider
If you already have a European customer base, you might want to consider whether you can leverage this base. Will you reach out to your European contacts? If so, how will you bring them on board with your new American venture?
Will you consider finding new backers in the US, and how will you tailor your messages for this new base? Can you tailor your campaign to appeal to multiple types of customers both in Europe and the US? When it comes to investment if you have decided on equity crowdfunding will you reach out to US-based investors, or further afield?
It’s important to recognize the importance of the uniqueness of the US market and the backers you hope to reach. The way you market your campaign for an American audience will be different to how you connect with a European audience.
How Mount Bonnell Media Can Help
At Mount Bonnell Media we have a team of professionals who can help you develop your crowdfunding campaign. We’ve lived and worked in the US for over a decade and have extensive contacts in local markets Stateside.
We’ll help you to develop the right messages for your campaign, and how to present them in a way that has the best chance of resonating with your chosen audience. When you work with MBM on your crowdfunding development you will get:
Advice and support to research your product and service and how it will fit with a crowdfunding campaign.
A comprehensive platform/campaign review to help you pick the right type of campaign for your concept, and the right platform to launch it on.
Development of your campaign page and marketing materials – including high-quality, professionally produced video.
Comprehensive support to build a team of skilled professionals around you to develop a winning campaign.
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