CROWDFUNDING has become an increasingly popular means for entrepreneurs to get their ideas out to market faster than bootstrapping and without the complications associated with receiving venture funding. It’s a good choice for entrepreneurs, startups and even established businesses that are having difficulty finding investors or who have products that are not mainstream enough.
According to Massolution’s 2015 Crowdfunding Industry Report, Asia is the fastest-growing market for crowd-funded projects, especially as backers and funders see growth fatigue in more established North American markets.
Since crowdfunding is essentially a social platform, however, success might be hit-or-miss for entrepreneurs that don’t exactly have a good grasp of social platforms and regional contexts. The key here is arriving at a combination of entrepreneurial and inter-personal skills and finding a product that will strike a chord in the audience’s hearts.
Address problems with innovative solutions
This addresses the fundamental need of an entrepreneur: to scratch an itch or to alleviate a pain point. This could address a minor annoyance, or set the course for truly game-changing technology. However, with crowdfunding, you need to make sure that the target audience will identify with the pain point enough to be interested with the solution.
Kickstarter is breaking down assumptions about where innovation can occur https://t.co/yO2QUBJ3OE
— CrowdFund Buzz (@icrowdfundbuzz) September 24, 2016
You need to convince your target audience of the product’s value if you want them to support your project. People will not back something they don’t need and don’t believe in. Creating something innovative that does not address any practical need is not likely to get the funding to make it happen.
Design the perfect pitch
When backing a crowdfunding project, remember that people tend to make decisions based on feelings – so invest emotionally in your product and your pitch. This applies not only to technology-oriented products, but also – or especially – in artistic pitches, services, and cause-based fundraising.
There may be dozens or more projects out there competing for a similar product or cause. You can make a big difference by appealing to your target audience’s emotions. Once empathy has been achieved by establishing a shared pain point, for instance, or by getting them excited about your product, then you will be more likely to get funding.
A good way to establish a connection with the audience is through a video pitch. Take the time to design a clear, focused and compelling pitch in which your product can shine. Showcase your credibility as an entrepreneur and as a person. Outline the benefits of the product and, if possible, demonstrate how it exactly works.
Talk about what makes the product unique, and how it solves the problem in a way that potential users will like.
Find a capable and flexible manufacturer
Hardware-based crowdfunding projects are common, although even the best of them can hit a brick wall during production. Thus, simply getting funded will not give you the assurance of market success. You need to actually be able to build and deliver a product. When it comes to physical products, this means finding a manufacturing outfit that can meet your needs.
You will need to decide whether to build your product locally or overseas as well as find a company that matches your own business goals, and can be fast and flexible enough to make adjustments. Communication is key to ensuring the production meets all your requirements and that of your customers, so having a firm grasp of the entire manufacturing process is essential.
And then there’s shipping and fulfillment – you need to find a fast and efficient means of shipping to each backer. Otherwise, you might end up messing up with delayed deliveries or damaged goods, thus receive bad reviews in the process.
Plan ahead, but be flexible
Crowdfunding campaigns can be a good gauge of consumer interest. Some entrepreneurs market their solutions through Kickstarter, Indiegogo or some other platform before mass production, to at least make sure people are interested. Before even launching your campaign, take the time to test your product or prototype with a limited audience.
Bad Results? Try optimizing your campaign….adjust the headline, change/add rewards, change the goal date… #LearningIsEarning
— The Crowdfund Guy (@Crowdfund_RT) April 21, 2016
And once the pitch is out of the bag, make adjustments based on feedback. Crowdfunding successes don’t have to be a fixed affair from start to finish. You can make changes to your product along the way, as long as it’s for the benefit of your customers.
Some (legal) challenges ahead
While crowdfunding is an attractive and viable means of funding, it may not always the the best option – depending on where you live. Malaysia recently passed laws that support and regulate crowdfunding, and so has Thailand. But in the Philippines, crowdfunding is still a grey area legally, although lawmakers and regulators are open to supporting this mode of funding projects and businesses. On the other hand, startups and entrepreneurs in India might face trouble with the law, as regulators are wary of the risks.
Just like with any entrepreneurial endeavor, raising funds through crowdfunding platforms requires hard work, focus and dedication to be successful. According to Kickstarter, only 36 percent of campaigns eventually get funded. Even among the successful ones, 9 percent are likely going to fail in delivery. This means prioritizing research, planning from the start and being dedicated to making it work.