Since starting CrowdCrux, I’ve been bringing up crowdfunding to a lot of different students and young entrepreneurs with which I come in contact. Surprisingly, an overwhelming majority don’t know what equity crowdfunding is and only have a vague notion of what Kickstarter, Indiegogo, and Rockethub are all about.
When I ask them whether or not they’ve considered using Kickstarter to campaign for a product idea or if they plan to take advantage of the Jobs Act once the SEC has finished crafting regulations, most either say no or that they haven’t given it much thought. I couldn’t help feeling confused and a little frustrated. I began to explore the reasons WHY crowdfunding isn’t on the radar of many student entrepreneurs. Below is what I discovered.
Lack of Knowledge
So many students simply didn’t know about the benefits and drawbacks of using crowdfunding and whether or not it was a viable way to fund and market-test a product. In addition, since equity crowdfunding hasn’t yet been implemented in the US, many students haven’t heard of it or identified it as a game-changer.
Confusion Over Best Sites
The larger sites have done a great job creating education campaigns and getting the word out, but there is still a lot more that needs to be done. With this recent swell of niche crowdfunding sites, it can be difficult to identify which sites are the best for your particular needs and which community will help most in your month-long campaign effort.
Not Enough Community Success Stories
It seemed like some individuals had an abstract idea of what crowdfunding was and how to use it, but they hadn’t known any friends, acquaintances, or role models who had created a campaign and saw success.
No Big News Stories
Lastly, there haven’t been that many viral news stories where student entrepreneurs have used crowdfunding to achieve their entrepreneurial dreams. Students, like everyone else identify worthwhile pursuits from the news and the success that others have experienced.
Why Should Students Use Crowdfunding?
Campus Network
As we have seen from Facebook, campus networks can have a huge viral marketing effect. College campuses are composed of 2,000-20,000 students who are constantly sharing content and visiting community sites like Facebook, Twitter, LinkedIn, Reddit, etc. If a student entrepreneur identifies a common problem shared by college students, then a great way to test their solution would be to conduct a fundraising campaign that would assess market demand and result in seed capital. Even if their proposed market solution is not intended for a problem that students share, they can certainly benefit from the network effects especially if they utilize influential individuals on campus and the administration.
Alumni Network
A quick search on my mid-sized college’s Alumni LinkedIn group yields 22,925 members. Of course, the actual number of Alumni is much larger. Many of these individuals are influential and keep in touch with the university whether it be attending career events or mentoring undergraduates. One of the major indicators of fundraising success is the ability to tap into multiple networks and facilitate social sharing. Already, students have an advantage over others with this expansive network of alumni that are willing and able to help.
Limited Success with Alternative Financing Routes
Students entrepreneurs are disadvantaged in that they rarely have a credit rating, have little collateral for a loan, have almost no professional experience, few references, and lastly many have not started a successful company before. At the same time, they are hungry, have high stamina, often times greater tech skills, and can tap into networks where other professionals or entrepreneurs would like to serve as advisors and mentors. Young entrepreneurs should consider using mentors to raise the credibility of their crowdfunding campaign and seek introductions that could lead to media attention or the endorsement of community leaders.
Develop Sales and Marketing Skills
Conducting an internet fundraising campaign for a product idea or service is a great way to get experience with internet marketing, sales, forming partnerships, and social media marketing. In addition, it forces you to write a compelling pitch and offer creative and valued rewards. These are skills that don’t just help when raising money, but are a great foundation for business success in the long run.
Industry Specific Audience
As a student, when you think of a solution to a market problem, it can sometimes be difficult to reach your target market if your ability to acquire introductions are limited due to the size of your professional network. Putting a project on a specific Indiegogo or Kickstarter category will allow you to get the feedback of individuals looking to fund projects in that industry. In addition, going further by focusing on a niche crowdfunding site community can have a similar effect.
To get started, check out UpStart, which recently updated its site to allow alumni and students of five Boston area universities to fundraise for startups in exchange for a share of their income for 10 years.
