Crowdfunding? Is That Still a Thing?
Meet Bryan Azorsky, a maker of physical and digital products. In addition to being co-founder of Bagettes, a website developer for small businesses, an organizer at 1 Million Cups and an author at Nodebud, Bryan co-founded www.TinManPrints.com with Ben Grasser. At TinManPrints, you can make your your photos into metal prints and hang them on the wall using their patent-pending magnetic mount system. Click here to view their current Kickstarter campaign.
Below, he shares his experience as Entrepreneur in Search of Funding, drawing on his own experiences and those from CrowdfundingKC.com, a meetup and website where you can learn more about crowdfunding.
I often find myself in a situation where I am answering “So what exactly is crowdfunding?” The first thing I say is that it is not the same as equity crowdfunding. That is where your backers are actually making an investment in your company (the SEC Title IV rulings are said to become actionable in early June). This, in my opinion is only causing confusion to the original crowdfunding.
The crowdfunding I’m referring to is where you have a project, and you run a funding campaign on a website like Kickstarter or Indiegogo. Both platforms are used for donations from the general public to fund your project. To date, Kickstarter has 8.3 million people donating $1.6 billion to fund over 81,000 creative projects, and Indiegogo has had over 275,000 campaigns.
So yes crowdfunding is definitely “a thing.”
Why should you consider crowdfunding?
You want to raise capital.
This is seen as the main reason people use crowdfunding websites, but I would argue that there are other reasons equally as important.
You want to conduct market research.
Crowdfunding can be a great way to get honest feedback from the general public and see if there is enough interest to move forward on your idea.
You want to create awareness / publicity.
Generating awareness has proven to be effective for the campaigns that have exploded on the scene.
Why—and when—you shouldn’t?
You’re not ready.
I see way too many campaigns that launch and raise zero dollars for the entire length of the project. You have to ask yourself, what was this person thinking? Have they ever shared their idea with anyone else? Have they kept their idea hidden for fear of being ripped off? I do believe that anyone should have the right to share their idea and see if it sticks, but I would encourage you to get plenty of feedback before launching.
You fear public rejection.
When you put your project up on a crowdfunding site, you better be prepared for rejection. Once it’s live, the project will remain there whether it was funded or not, and a failure can be embarrassing.
Why would someone donate money to your project?
Depending on the project, you may want to donate because you like the product or cause. A good example would be supporting a community exhibition like the one Kansas City Urban Potters did recently.
Most people familiar with crowdfunding are expecting something for donating. It could be recognition in some physical or virtual way like a name on a wall at the place of business or on their website. It’s very common to offer your backers rewards for donating at specific levels to encourage higher donations. The perceived value of these rewards is critical to the backer in making the decision. If I donate $50 and you send me a bottle opener with your logo on it, I’m not going to get very excited to contribute. But, if you gave me something with the perceived value of $75+, I’ll feel like it’s a win-win, and will be more likely to become a backer.
What are the risks?
For investors, crowdfunding is a donation, so there's no real return on investment outside of that reward the project promised you for your donation. The sad truth is there is no guarantee that your reward will be delivered. There have been some widely documented scams, so you do need to be aware of the risks.
As the entrepreneur who’s seeking funding, it’s important to create trust with your potential backers. How can you convey that you really will deliver on your promise? There’s no one answer, but being a real person would be the first step. Showing your face in the video would be my first suggestion.
Case in point: I recently saw a project that is a magnetic stand for a smartphone, a hot category, and even though the maker was asking for $300,000, which in itself a crazy high ask, he used a voice modification tool that made his voice sound like a kidnapper. Not the best way to instill trust.
Popular Crowdfunding Websites
Patreon - arts specific
Crowdrise - charitable giving
More Crowdfunding Resources and News
Flickr Photo by TaxCredits.net