Do you remember the days when products boasted the “As seen on TV” stickers to help them stand out from everything else? Crowdfunding is the modern equivalent of that.
Crowdfunding sites such as Kickstarter and Indiegogo originally gained notoriety by providing an alternative to the closed world of venture capital. Large corporations and startups alike have embraced crowdfunding platforms as a way to ensure there’s a demand for their products.
While there’s plenty of theory you can use to improve your chances of crowdfunding success, below are a few practical tips to help you to successfully raise money.
Let your community define the product
As Steve Jobs famously said, “Customers don’t know what they want.” Forbes discusses how built the Mac for his needs rather than others. While arrogance made the Mac a success, it doesn’t work as well when working with proven idea.
Video games are a perfect example of why listening to your customers is essential if you want to succeed.
Star Citizen became one of the highest funded Kickstarter campaigns in history (raising $2,134,374 by 34,397 backers) because it was built around community feedback. As mentioned in Ars Technica, founder Chris Roberts said that he chose to crowdfund fund Star Citizen’s development because it provided more flexibility than traditional studios
Although you can’t satisfy everyone, you need to be open to feedback if you want customers to buy your video game.
Don’t betray your backers
One of the most controversial crowdfunding campaigns in history is the Oculus. As one of the most successful campaigns in crowdfunding history, Oculus went from offering their product to having a $2 billion buyout by Facebook in only 601 days. As discussed in a piece from TechCrunch, Oculus has an interesting history but their acquisition sparked major debates beyond the technology sector.
As mentioned earlier, one of the reasons crowdfunding has taken off is because it democratizes funding. Proponents of the crowdfunding platforms boast that it allows products to be developed organically without the influence of large companies.
When Facebook bought out the Oculus, backers were furious that the developers sold out to a large corporation and that they didn’t receive a cut of the revenue despite making the the virtual reality headset possible, which leads into the next topic…
Crowdfunding is not venture capital
Most consumers aren’t familiar with the differences between rewards crowdfunding and equity crowdfunding. The former is what you see on sites like Indiegogo and Kickstarter. Similar to product pre-orders, users are able to purchase something early in exchange for added incentives. Equity crowdfunding is similar to venture capital where investors get a percentage of the company.
Rewards crowdfunding vs. equity crowdfunding is a complex topic beyond the scope of this article. You can learn more about the topic in Forbes. As it relates to your projects, remember that when raising money, transparency is key.
A form of affordable publicity
Even if you aren’t trying to raise money, crowdfunding can be used to reach new audiences. By launching a fundraising campaign you can leverage sites such as Kickstarter and Indiegogo for additional exposure in the media.
The Pono created by Neil Young is a perfect example of Kickstarter being used just for publicity. When Young wanted to create a music player engineered for high-quality audio, he needed to make sure he wasn’t filling a void which didn’t exist.
Up until the Pono was created, only audiophiles cared about high quality audio. MP3’s have been the de-facto audio standard for years due to the low file size. Young’s invention brought HD-audio to the masses by showing you don’t need to sacrifice audio quality for portability.
Harder than it looks
Before launching a crowdfunding campaign, you need a clearly defined set of objectives to be successful. The previously mentioned crowdfunding campaigns succeeded because they had realistic goals with solid execution.
Even if you don’t hit your goal the first time, you can always redo your campaign. Just make sure to step back and examine the strengths and weaknesses of your campaign. From there you should be able to improve your chances of success.