Are you considering launching a Kickstarter or Indiegogo campaign for a product idea?
If so, you’re not alone.
Crowdfunding allows entrepreneurs and creators to raise funds from the public online through backers who are passionate about start-up ventures.
The most successful campaigns raise millions of dollars, with thousands of others reaching smaller funding goals every year.
In 2019, the market size of crowdfunding was a whopping $13.93 billion in the U.S alone.
And believe it or not, it’s still growing exponentially. By 2026, the market size is expected to reach $39.79 billion.
Pretty incredible, right?
And you can get in on the action. In this article, we’re taking you through all the reasons why so many entrepreneurs are turning to rewards-based crowdfunding as a means of getting their project off the ground.
Let’s dive right in!
Lower Risk
Once upon a time, starting a business was a make-or-break venture. You had to go all-in financially, even in knowing that most start-ups are prone to fail.
Crowdfunding changes all that.
On platforms like Kickstarter, it’s basically structured so that your manufacturing and distribution costs are covered by the end consumer.
You’ll still have to put money up front for things such as:
- Marketing
- Prototypes and patents
- Hiring a crowdfunding agency
Still, it’s going to save you a lot of money and risk.
And if you play your cards right and smash your funding goal, you could repay yourself for all those costs once you’ve pulled off a successful launch.
Keep Your Equity
Unlike many traditional methods of obtaining capital, rewards-based crowdfunding allows you to complete ownership of your company.
Gone are the days where sharks take a huge chunk of your forthcoming profits in exchange for seed money.
Of course, equity crowdfunding is growing like a rapid-fire as well.
That’s where you get to raise funds from the crowd in exchange for equity, which can also be a great option for certain projects.
If you’re interested in learning more about the risks and benefits of rewards-based versus equity crowdfunding, make sure to check out this helpful video.
Gauge Market Demand
Another great perk of rewards-based crowdfunding is that you can test out market demand before you launch on an e-commerce platform.
Don’t get us wrong — e-commerce is an awesome way to grow and scale your business — but what if your minimum order quantity is 1,000 units, and nobody wants to buy?
Launching a crowdfunding campaign before ecommerce has several key benefits:
- Gauge interest / demand for your product
- Build a crowd of dedicated customers; great social proof
- Test out which ad strategies work best for selling your product
Obviously, everyone’s situation is different.
If you’re interesting in learning more about whether or not the crowdfunding route is right for you before transitioning over to ecommerce, check out this insightful article:
Kickstarter First, Shopify Later? The Benefits of Crowdfunding Before eCommerce
As your business scales, you’ll probably be looking to bigger investors to bring your project to a global scale.
Appeal to Future Investors
First off — crowdfunding in itself can do just that. The most successful campaign of all time — The Pebble Time Smartwatch — pulled in more than $20 million dollars from 78,471 backers.
Talk about making it big-time.
But even if your campaign has 1 / 100th of that success, it puts you in the conversation.
Big-time investors are interested in ideas, but they’re more interested in products that actually sell. A rewards-based crowdfunding campaign could be that proof.
Imagine coming to an investor and being able to say:
X amount of people believed in this project so much that not only were they willing to buy it, they were willing to pay a higher price to bring it to life. I raised X amount of money, and there is already great awareness around the product.
For most investors, this is going to pique their interest.
So if you’re playing for long-term success, crowdfunding is a great short-term strategy to get the ball rolling.
How to Run a Successful Crowdfunding Campaign
Think rewards-based crowdfunding could be a great strategy to get your product idea off the ground?
All that’s left to do is take the leap of faith.
Keep in mind — it’s not going to be easy. Only 38% of Kickstarter campaigns are successfully funded, and there is always the risk of failure.
Luckily for you, applying tried and true methods can significantly increase your chances of success. It’s time to start your research process.
Here at Crowd Crux, we’re all about providing you the resources you need to be successful as an entrepreneur using crowdfunding.
Some ways that we help you out:
- The Crowd Crux blog, podcast, and Youtube channel where we’re always working to deliver the best insider tips, tricks, and secrets from experts who have a wide range of experience in the industry.
- The Crowd Crux weekly newsletter delivers awesome, valuable insights to your inbox every Thursday.
- Books and courses designed by our founder Salvador Briggman, such as The Kickstarter Launch Formula and its sister UDEMY course
- Coaching that ranges from advice all the way to A to Z crowdfunding services. Book a coaching call with Sal today!
We hope that this article has been helpful for you as you consider turning to rewards-based crowdfunding for your start-up venture.
We’re pumped to have you as part of our thriving community. And remember, Crowd Crux is your resource for all the best insights!
