Today we’re going to talk about some of the pros and cons of crowdfunding.
Should you use crowdfunding? Is this something that you should tap into this year? What are some of the costs and drawbacks that come with it?
We’re going to cover all of this so that you can be confident in deciding whether or not to go forward with crowdfunding for your business.
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I have been really inspired by the growth of the crowdfunding industry. I got into it in 2012, and since then, I have seen many great products come to life.
I want to clearly lay out some of the benefits and drawbacks of using crowdfunding to grow your business. With this, I hope that you will keep your own specific business needs in mind.
Pros
Initial Funding: This is a huge benefit for those who need to reach a minimum order quantity for a physical product. With platforms like Kickstarter and Indiegogo, you can get the initial funding you need to pay the manufacturer and eventually ship out your prototypes/products to the backers and supporters of your campaign.
Validation: Crowdfunding can help to validate that the product you have created matters to other people. This is no longer a crazy idea you have in your head; there are tangible individuals out there who are experiencing the problem that your product solves, and they are willing to pay you for a solution. You can take this validation to other investors and prove to yourself that your project is worthwhile.
Media Exposure: A crowdfunding campaign can be a great way to make a splash and get people talking about your product. Not only are you getting more and more support for your product, but the hype can act as a catalyst to get the media writing about your campaign and get people sharing the story on social platforms. While this is all exciting, do note that increased attention can lead to competition.
Access to a Tribe: A tribe of people is a group of individuals that are bought into you and your vision. This will lead to interest in what you have to say and potentially other products that you plan to launch in the future. Every successful business has a rock-solid foundation of people whose needs have been met by the product being offered. Crowdfunding is naturally built to do this, making it a great way to pull off a successful launch.
Repeatable: You can continue to apply the skills that you learn from my videos and launching your own campaign for future projects. This is not a one-and-done scenario; you can continue to come back to the marketplace and continue to grow your brand.
Cons
Obligations: Money isn’t free. When people give you money on Kickstarter or Indiegogo, they are expecting that you will ship out those products or rewards. They are expecting a delivery of the promise you are making in your pitch video, so that they can open the package and experience the benefits of your product. If you haven’t totally thought through manufacturing and other complications, be aware that there are expectations from those who have donated.
Investment: In order to launch a successful campaign, you have to invest significant amounts of time and money. To receive the validation talked about in the pros list, you have to make your product stand out. Investment can pay off tremendously in the long run, but you have to make the leap. Check out some tips from successful campaign creators to see how your investment can go as far as possible.
Copycats/ Publicity: Crowdfunding campaigns are public by nature; they can be shared, get people talking on social platforms, and create buzz that entices other entrepreneurs to do the same thing. This is one of the realities of doing online business: you are going to invite copycats and imitators who want to get a slice of the pie.
Overwhelming: By launching a crowdfunding campaign, you can be called upon to wear a lot of different hats. Keep in mind that you are only as good as the people you surround yourself with, so make sure to build a team that can help you with things like marketing, video editing, and manufacturing the product.
How Long Will It Last?: With the industry becoming a lot more sophisticated, it’s hard to promise how long this industry will last. If you are on the fence, have some urgency behind this goal or this vision so that you can make sure to reap the benefits mentioned previously in this article. We just don’t know how much longer it will be this easy to launch a campaign.
If you haven’t already done so, check out my other Youtube Videos or my book, The Kickstarter Launch Formula, for more information on how to make your vision a reality!
