4 Simple Steps to the Not-So-Simple Task of Launching Your Crowdfunding Campaign

Image: Woman's Face with Fan on Money Covering Half of Her Fact

Pitching “the crowd” can be tough But if done right, a successful crowdfunding campaign can be a game changer for your startup.

By Joanna L. Krotz (Host, The Woman’s Playbook)

Whether donated contributions or equity investments, crowdfunding is fast becoming the game changer for startups and next-stage growth.

The first mistake you can make is to think this’ll be easy money. Think again. You have to create a campaign, and any form of raising money is hard.

Crowdfunding is real work and requires engaging the customer community. Here’s what it takes to create a persuasive pitch.

Step 1: Do Your Research

First, identify the funding communities sympatico with your idea.There are now dozens of crowdfunding platforms and many specialize, whether in industries, silos, services, for-profit, nonprofit, social entrepreneurship, the arts or even women-only ones. Research online to find one for your enterprise.

And before you get started on your pitch, look at what other companies are doing. To experience the process and fully appreciate what you’re asking of contributors, fund a project yourself with a small amount of money. See if you think it’s well executed and a good fit. Put yourself in the customers’ shoes.

Step 2: Select the Right Type of Crowdfunding

Next, choose which kind of crowdfunding you want. There are two distinct forms:

  1. Donation-based or product presell crowdfunding. If successful, rewards contributors with an incentive, product or service.
  2. Crowdfunding investing or securities-based crowdfunding, mandated by the Jumpstart Our Business Startups or JOBS Act passed in 2012. If successful, lets small investors purchase actual equity in growing enterprises.

Some advisors have defined crowdfunding as an intuitive supply chain that can move from donation to reward to equity — and that creates an IPO on ramp to take the company public.

So think of crowdfunding as a roadmap, not an end unto itself.

Step 3: Shape Your Pitch

Crowdfunding reverses the usual entrepreneurial process by typically designing and building a product or project before you seek financing. So as one advisor puts it, the crowd provides “market validation and identifies people who actually want to buy your product.”

You still need a convincing business plan. But with a funding pitch, you’re not so much impressing spreadsheet types as engaging customers.

Step 4: Formulate Your Plan

Now that you’re ready to dive into crowdfunding, make sure you follow these tried-and-true tips to be successful.

  • Set a goal. Figure out how much funding you need to raise.
  • Build a social presence. Build your social networking platform alongside your business plan, well before you launch your campaign. Most crowdfunding will come from fans and followers on social media as well as friends and family.
  • Develop an engaging story. Personality, voice and storyline count; humor is optional, but it better be good. Tell your story simply and share your passion for the social or business value.
  • Understand the funding platform rules. Read all the fine print. Is it an all-or-nothing model? What’s your timeframe? What are the penalties for missing your goal and what percentage of the funds does the platform keep?
  • Choose your rewards if your campaign is donation-based. Be specific about timing as well as shipping options and delivery. Or, if your campaign is investment-based, remember you’re creating shareholders — and you’ll have to answer to them.
  • Keep your pitch concise. Make your video short, clear and authentic, with a call to action. Typically, pitch videos run no more than three minutes. If anyone watching can’t figure out what the project is about or what you’re asking for after the first 60 seconds, go back to editing.
  • Communicate, communicate, communicate. Keep in touch with backers and keep expanding your social network. Answer every question. It’s hard but critical work.
  • Stay tuned to evolving developments. Crowdfunding rules are in flux. For instance, many crowdfunding accounting issues are still undefined, such as how sales taxes will be collected.

Was your product or service crowdfunded? How did you do it?

Joanna L. Krotz

About the guest blogger: Joanna L. Krotz hosts THE WOMAN’S PLAYBOOK, the Internet radio show that connects and informs women entrepreneurs. Each show features real-life challenges of women owners and practical advice from smart experts. Live on Talking Alternative Broadcasting, Thurs., 12 – 1 pm, Eastern, or via iTunes podcast. Because being equal doesn’t mean being the same.