Raising money for a new business venture can be a daunting task, but increasingly, entrepreneurs are turning to alternative sources to fund their ideas and crowdfunding for startup businesses has become a popular choice. Through this, would-be entrepreneurs are able to raise substantial capital from those among the general public who believe in their ideas and are willing to support them in achieving their goals.
But, while crowdfunding can seem straightforward, there are actually many things that may trip you up and cause your campaign to fail. This article will break down some of the most common mistakes startups make when crowdfunding - and tell you how to avoid making them yourself.
The Rise of Crowdfunding
Crowdfunding has become a viable method for startups to fund their business ideas. In fact, a World Bank study has shown that the global crowdfunding market could be worth approximately $96 billion by 2025. It’s no surprise, then, that many startups are turning to this type of fundraising to get the capital they need to kick off their business.
With these fundraising platforms, thousands of entrepreneurs have the potential to see their ideas through with funds generated from the public. Many of these ideas wouldn’t be backed by traditional financial institutions - who would consider the ventures too risky - which is why crowdfunding for a business startup has become a popular choice.
12 Crowdfunding Mistakes - And How to Avoid Them
While it’s true that many startups have been able to raise funds through crowdfunding, it should be noted that not every crowdfunding project turns into a success. That’s why it’s so important that before you launch your campaign, you do your research and have a clear understanding of all the issues that can crop up with a campaign. This will help you avoid common crowdfunding mistakes, which include:
1. Inadequate Research: This is not about how much thought you’ve put into your business idea, but rather, how much you know about how to crowdfund properly. There are certain rules and regulations you need to follow in order to make your campaign a success, so you should make sure you do your research and make sure you're adequately prepared for this.
2. Opting for the Wrong Platform: There are many crowdfunding platforms out there, but some are specialized for certain types of projects and industries. That’s why you should consider the parameters of your project and ensure that you choose the platform that’s best suited to your campaign.
3. Not Having Adequate Proof: The first thing you need to do when thinking about how to crowdfund a startup is to make sure you can prove your idea to potential investors. Of course, if someone’s going to put their money behind your idea, they want to see proof that you’re actively working on it. For example, if you’re creating a physical product, you may want to create a prototype that you can show off to potential backers.
4. Not Knowing Your Target Audience: Not everyone will be interested in every idea, so you need to make sure you define your target audience and work out how to appeal to them. Assumptions are dangerous, so be sure to learn about who your audience is, what they like and need, and how you can capture their interest.
5. Not Having Marketing Materials: Many startups make the mistake of not having high-quality marketing materials available. You should have detailed, catchy collateral available as both print and web content so that you can spread the word about your great idea.
6. Not Setting Goals: Before you begin crowdfunding for your startup campaign, you need to set achievable goals. You should have a total fundraising goal, a timeline, a budget, and a range of other yardsticks for gauging the success of your campaign.
7. Being Too Generic: In order to appeal to your target audience, you need to get specific. You can do this with personalized messages, or detailed information about yourself and your project. This will make potential investors feel like they know you and your brand - and make them more likely to invest.
8. Not Offering Incentives: Although it’s not compulsory to reward backers, offering something tangible in exchange for their support is one surefire way to help your campaign achieve its goals.
9. Lack of Communication: This is another mistake that can hamper the success of a crowdfunding campaign, even those that are carried out on the best crowdfunding sites for startups. You should maintain consistent communication with your backers throughout the process, especially if you know things will go wrong (i.e. production delays). This will boost trust in your product and brand, and ensure that your backers stay patient.
10. Not Using Digital Marketing Channels: Given that hundreds of crowdfunding campaigns are launched every week, it’s essential that yours stand out. The best way to do this is to promote your campaign through all the available digital marketing channels, including websites, blogs, emails, and social media platforms.
11. Not Accepting Feedback: Don’t forget that your backers are as invested in your success as you are. That’s why if they provide any feedback, you should listen to them - not only will this help ensure your campaign’s success, but it could help you build a better product and brand.
12. Lack of Traction: Your campaign isn’t going to go anywhere if it doesn’t see some initial funding. Make sure your campaign gets off on the right foot - once people see that it’s gaining traction, they’re more likely to put their own money behind your project.
5 Successful Crowdfunding for Startup Campaigns - And How They Did It
- Exploding Kittens - This Kickstarter campaign started off with an initial goal of $10,000 but ended up raising nearly $9 million. The project was built around a quirky card game, so they created a cute animated video that appealed to their audience and got them almost 220,000 backers.
- Tropic Feel Shoes - This campaign, which launched in April 2019, is another great example of how to crowdfund a startup successfully. The project focuses on design-forward shoes that appeal to savvy audiences with elements like quick-drying fabrics, a sustainable ethos, and total comfort. It started with a goal of €32,500 but ended up raising €2,063,872 from approximately 25,019 backers.
- The Fidget Cube - Another great example of a successful crowdfunding campaign, this creative project offered backers a reward of a small vinyl desk toy valued at $25. This incentive helped them beat their initial goal of $15,000 to raise nearly $6.5 million.
- Mate Bike - Lauded as the coolest eBike ever, this project involved the creation of a powerful, foldable, high-spec eBike with an affordable price tag. Thanks to its innovative design, this project generated $17.6 million from over 31,000 backers.
- The Everyday Messenger - Another great example of crowdfunding for a startup business, this project created an innovative day bag that’s perfect for cameras and essentials. The campaign’s success was driven by a great video that convinced backers they were investing in a brilliant product and allowed them to raise nearly $5 million.
Ace Your Next Crowdfunding Campaign
Gone are the days when crowdfunding was seen as a risky venture. Many businesses have now taken off by raising capital through this means and crowdfunding for a business startup has become a viable option. However, in order to make your campaign a success, you should learn from others’ mistakes and avoid falling into the traps that failed campaigns have succumbed to.
Easyship has lots of crowdfunding experience and is the exclusive shipping partner for Indiegogo. If you’re looking to create a successful crowdfunding campaign - on any platform - sign up for a free account now to ensure that you can ship your project to success!
