Wondering if crowdfunding is a good fit for your business?
If you’re an entrepreneur, should you use crowdfunding?
What are the actual advantages and benefits of crowdfunding?
With this article, I want to share with you some of the pros to using crowdfunding to get funding for your business.
We’ll examine why this might be a good fit for you, how you’ll benefit, why it should be on your radar.
In addition, I’ll share with you some real-world examples of projects and campaigns that are doing extremely well on Kickstarter, Indiegogo, and other websites.
1. Gauge Real-World Demand
Oddly enough, I don’t think that the actual funding is the most important part of crowdfunding.
It’s actually getting a feel for the real-world demand for your product!
I recently talked with the team behind the Silo Kickstarter campaign that raised $1.4 million in the span of 32 days!
They came up with a revolutionary new way to keep your food fresh longer using
Despite creating the new method, they didn’t know how many people suffered from this problem. Therefore, they took their project to Kickstarter.
In our podcast episode (#241), they detailed the specifics of their successful launch. They revealed how they were able to get so much funding in a short period of time.
As a result of running this crowdfunding campaign, they got the attention of more than 5,000 backers or early-adopter customers. This proves to investors that the product has demand.
It’s a form of early validation.
2. Get Funding For Product Production
Along with getting an indication of demand for your product, crowdfunding also delivers cold hard cash to your door step.
When a backer supports your project, they then get to claim a perk or reward. These are basically pre-orders of the product you’re creating.
By the end of the campaign, you’ll have the funding you need to meet minimum manufacturing order quantities. It’s that simple!
For example, on episode #245 of the Crowdfunding Demystified podcast, I spoke with the team behind the PowerWatch 2.0, which raised $1.8 million on Indiegogo.
This watch is powered by your body heat so that you never have to charge it. The team improved the thermoelectric generators and included all-new solar-cell technology.
When this team cracked their $100k funding goal, they then gained the ability to get this freakin’ awesome gadget out there in the hands of their customers.
It sucks, but you need money to work with manufacturers. The way their business works, they need a big minimum order from you. They can’t do order on demand.
The only way you’ll meet your minimum order quantity is if you come up with a big chunk of cash.
In the past, that might have meant rising private capital or getting a loan, but now you can go direct to your customers with crowdfunding.
3. Credibility and Media Attention
One of the most difficult parts of starting a new business is getting the word out.
What’s cool about a successful crowdfunding campaign is that it tends to spread like wildfire.
You’ll find it remarkably easy to get on media publications with your newfound success. Bloggers will wanna write about you. Influencer will be more open to you.
One of my student’s projects, Poster Keeper, got on a bunch of different publications. You can learn more about their story here.
Not only did they get fully funded, surpass their goal, and gather a base of fans, but they also got into a ton of different publications.
You can see some of their media hits down below.
Rather than trying to get media attention for your product’s launch, you can use your public crowdfunding success to attract the eyes of journalists.
Your crowdfunding campaign will become a full-blown event!
It will enable you to get on publications and in the good graces of social media influencers.
4. Quick and Fast Funding
Other types of funding like angel investing, venture capital, and getting a bank loan take TIME.
You gotta build relationships, court investors, put together a professional presentation, and close the funding round.
Even after a Series A round, you gotta keep hustlin’ and continue to prepare for your next round.
You’re always on the treadmill… wasting time and money.
Rather than putting all that time, effort, and energy into hunting down funding sources, you can get your results in the span of 30 days!
Most crowdfunding campaigns last about 30 – 60 days.
Don’t believe me? Just take a look at Peak Design! These guys raised $5.2 million on Kickstarter in the span of 60 days!
They created a line of versatile backpacks and travel tools. I had them on my show to discover the secret to their success.
In other words, you’ll either have your funding by that period, or you won’t. But, at least you’ll know whether or not your product has merit.
Along with the actual “live duration” there is also the pre-launch that goes into a killer crowdfunding campaign.
I detail the step-by-step process behind the pre-launch extensively in my book, the Kickstarter Launch Formula. You can grab a a copy on Amazon or on Audible.
Actually, you’ll get the book for free if you sign up for a free 30 day trial of Audible (claim the Audible offer).
5. An Established Customer Base
In order to build a strong business, you must first start with a strong foundation.
You need a core base of customers that believe in your brand and wait eagerly for your next product announcement.
No matter what crowdfunding website you choose to go with, there are regular super backers on that site that have supported more than one campaign.
For example, some board game companies have launched more than a dozen projects using crowdfunding. I have a lot of tips as to how to do so.
Steve Jackson games is one such example!
I had them on my show to go through all of there different launches and what they’ve learned about crowdfunding over the years.
You can use a platform to gather a crowd, and then turn that crowd into repeat customers.
The great advantage that crowdfunding gives you is that there is a build-in customer base.
6. Less Risks and Obligations
You have a few different options with crowdfunding that we can get into on a coaching call.
One of them is that if you don’t hit your fundraising goal, then you don’t have to deliver on your rewards because your backers won’t have their credit cards charged.
This is referred to as “all or nothing” crowdfunding. It’s a popular type with Kickstarter and you can also do an Indiegogo all or nothing project.
The only thing bad thing that will happen is that you’ll have a public failure. Oops.
Thankfully, as an entrepreneur, you’re probably already used to failure. You can always launch another project. You can always start a new business.
As long as you don’t get into any serious legal trouble, no one is really keeping score of your failures.
7. Finally Get Serious
Of all of the students that I’ve helped and the members on KickstarterForum, I think that the biggest advantage I see with crowdfunding is that it forces you to get serious.
You finally have to stop putting off this project. You gotta get things together, like the video, campaign page, and launch strategy.
It’s a very motivational process. It creates urgency within you.
Also, being beholden to a bunch of backers lights a figure underneath you to really deliver a great product.
There’s no other way to say it. If you’re gonna put together a crowdfunding campaign, you gotta have a prototype, good marketing, and a compelling pitch.
It forces you to get serious about your startup, business, or creative idea.
