Carol Tice, a contributor at Forbes.com’s Entrepreneurs section, observed crowd funding initiatives in today’s marketplace. In order for crowd funding to properly succeed, a greater understanding of how the process works is needed compared to what most people know. Most startup entrepreneurs fantasize, per se, about raising money on sites such as Kickstarter or Indiegogo. Unfortunately, the majority of these potential businesses are only aiming to get lucky and happen upon a large pool of funds. It is important for people to understand that crowd funding platforms are “simply a more efficient way for you to reach many potential backers.” (Tice) There is more to crowd funding than simply putting an idea onto a website.
Tice continues on to list the ways that facilitate crowd funding success. There are five components that all successful crowd funding startups have in common. First, they have an audience that are already aware of the product being offered — prior to it being posted on the crowd funding site. According to Kickstarter’s FAQs, “In most cases, the majority of funding initially comes from the fans and friends of each project.” (Kickstarter) For this reason, entrepreneurs cannot rely on strangers to fund their project without people already on board. Second, the entrepreneur is offering something revolutionary. For example, the article points out one successful campaign from Kickstarter: the 3Doodler, which allows owners to use a pen to draw in three dimensions. I have personal experience with this exact crowd funding project, where I pledged my money toward the creation of this product and now own a 3Doodler of my own. The reason for my purchase was, quite honestly, the groundbreaking nature of the technology.
A third commonality amongst successful crowd funders is using aggressive marketing tactics in order to capture audience attention. Fourth, the creation and distribution of an engaging video will build excitement and cause viewers to share the content. The spread of the video will help lead to an increasing number of potential consumers. Finally, providing worthwhile rewards for contributors will aid in the success of the campaign. People will not want to invest their money without receiving a benefit that they would enjoy. For example, I pledged 99 USD in order to have the actual 3Doodler as my “reward”, along with a certain number of “ink” refills. I had the option to pledge more or less for different rewards, but the 99 USD level had the reward that piqued my interest the most.
A campaign needs at least four of these elements in order to even attempt to pick up traction on funding. Crowd funding requires careful planning and evaluation in order to be successful.
“Kickstarter FAQ.” Kickstarter Basics » Frequently Asked Questions (FAQ). N.p., n.d. Web. Oct. 2014. <https://www.kickstarter.com/help/faq/kickstarter%2Bbasics?ref=footer>.
Tice, Carol. “The Myth Of Magical Crowdfunding — And What Actually Works.” Forbes. Forbes Magazine, 20 Oct. 2014. Web. 22 Oct. 2014. <http://www.forbes.com/sites/caroltice/2014/10/20/the-myth-of-magical-crowdfunding-and-what-actually-works/>.