Ten years ago, someone with a brilliant (or not so brilliant) business idea had to jump through some major hoops to apply for a business loan or convince an investor to part with their cash.
When the downturn started, those hoops got harder, leaving many wannabe-entrepreneurs with no way to get their projects off the ground.
Enter crowdfunding. Websites like Kickstarter and Crowdfunder allow you to ask members of the public to donate towards the amount you need to get your project off the ground. In return for their donations, they get a product, service, credit or investment or simply the great feeling of helping a new business make a start. You choose the amount to donate and the reward is proportionate.
Investment is not the only thing you need to start a business. As you bring people in to fulfil your promises to investors, management skills for new managers training is vital to make sure your team are happy and productive. Running a business also requires strong leadership skills, which are distinct from management techniques.
Takeaways from Crowdfunding Success Stories
Entrepeneurs/Small Businesses – Clang
Take the example of Clang’s page on Kickstarter – it is fairly self-explanatory of their success. Their pitch is technical and persuasive, yet accessible – the perfect marketing tactic. The ideas-man, Neal Stephenson, establishes himself as an expert in the first sentence, gives his main sales point (“these could be more fun”) and a call to action (“time for a revolution”). I’m convinced.
Rather than having to persuade an individual financer that your idea can make money based on projected sales figures, you have to convince your potential customers that the product is needed. By hitting your targets for funding, you can have unrivalled confidence in the success of your project.
To get this confidence, you need to start marketing. Take time to persuade people of the benefits of your ideas. Having read Clang’s pitch, I now believe that there’s a host of people out there who have been despairing at the low-quality options for swordsmanship in video games, and that putting it right will move the industry forward. Your dream must be expressed as their dream.
Government funding for the Arts is dwindling away – but people still want to be able to enjoy new and creative art every day. Many of the classic success stories from crowdfunding are for arts-based projects. Bands, in particular, are now finding that people regularly visit Crowdfunding sites in the hope of finding and supporting their new favourite band.
Again, it’s about the mass vote. Achieving arts funding a decade ago meant, often, having an entry into the ‘old boy’s club’ or, again, convincing a small board that your arts project was the best. Convincing people to fund the arts in this new way means giving them a reward, i.e. the fruit of your creativity! Your art needs to be good; and your rewards reasonable.
The all-or-nothing nature of Kickstarter means a tendency for other crowd funding websites to be used for charitable fundraising. For example, Indiegogo has various categories of ‘Cause’ initiatives.
Getting the right funding through crowdfunding means choosing the right platform for your purpose. Investigate success stories from each website, and try and work out which reasons for success you can action yourself.
Make sure your project is exactly that, a project with a defined beginning and end; and clear benefits. The money you’re asking for needs to be to reach a stated goal – be wary of an ‘I need money to start my business’ approach.
For more pointers, Mashable has written an actionable list of steps to a killer Kickstarter campaign.
43% of projects on Kickstarter result in successful funding, so think wisely about your intellectual property. Even if you do hit your target and get the funding, you run the risk of someone else picking up your idea and being able to move forward with it more quickly than you.
With more old-fashioned funding methods, before the crowdfunding revolution, the business idea could be kept under wraps until launch.
The Future of Business
Despite the worldwide economic crisis, the emergence of crowdfunding means hope for entrepreneurs and small businesses. If you can’t convince the bank, convince the masses – a vote of confidence from thousands of people should mean a lot for the potential success of your business. You can benefit from the wisdom of the crowd – when the public see the potential in an idea, where banks and traditional investors do not.
The buzz that can be created around crowdfunding success stories can create a self-fulfilling prophecy for ideas that may not have succeeded after gaining their funding through traditional, invisible, efforts.
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