Crowdfunding for business in Australia is starting to gain momentum and being added into the mix of options available for founders as a source of funding.
In January 2018, crowd-sourced equity funding became available for public unlisted companies and it is expected that it will be opened up to proprietary companies later in the year.
Reward-based crowdfunding has been used for a while to help to all types of projects in music and the arts but it now starting to be used to help start-ups get their operations up and running and to help existing businesses expand a product or service line.
It is recognised that reward based crowdfunding is about more than raising funds. It can be helpful to generate your first customers and brand advocates, to generate feedback for your new offering, to test your minimum viable project and establish minimum orders for production.
Indeed, for crowdfunding campaign creators can expect with no exception that by the end of their campaign they will have had a great learning experience, uncovering real market needs and moving forward with the funds raised, or getting back to the drawing board and trying again with a different approach if they find there is not the level of interest they expected in their new product.
Frankly, there is no magic formula to make crowdfunding campaigns successful every time. Projects, ideas, and target audiences are so unique that there is always something to be unexpected and to be a success at most things in life it takes hard work.
Having said that, after working with many Australian start-ups and entrepreneurs preparing reward-based crowdfunding campaigns, we have singled out five ingredients which contribute significantly to crowdfunding success. These ingredients should also be highly applicable to equity crowdfunding campaigns too.
Plan your campaign for success
Since the early days of crowdfunding, there is this unfounded hope that awesome ideas or prototypes are enough to raise funds. It’s time to dispel the myth once for all. There’s a lot of work involved in creating and running a successful crowdfunding campaign. It starts with good preparation and planning – reaching out to the media and influencers, generating signups on a landing page, through to building a tribe of followers and raving fans. Bottom line: funds do not arrive by magic.
Fine-tune a compelling message in your video
Did you know that people and goldfishes now have a similar attention span? You don’t have much time to convince potential backers to support your project. Because of that, videos are an ideal channel to communicate a lot of information quickly — with 55% of consumers paying close attention to them.
Whilst videos are not essential, crowdfunding campaigns with videos are significantly more successful. You do not need a Hollywood blockbuster, so start planning what will go into your project’s video as soon as possible. Try keeping it short – 60 seconds should be enough – and tell your main message within the first 15 seconds.
Get backers to pledge from day one
Some crowdfunding campaign creators do not always distinguish between Facebook “likes” and people who actually want to back your project. It is important to recognise that social media engagements and followers do not automatically convert into pledges and backers.
I am often told by campaign creators eager to launch:
“Oh it will not be a problem for us to hit our campaign target, we have 4,000 Facebook likes” or “no worries, I have sent a message to my contacts, so they know that we will be live soon.”
It is essential that you get your campaign off to a good start by proactively encouraging a crowd of serious backers to pledge from day one otherwise it is likely to be very tough to get steam up to hit your goal.
Seeing initial commitment is a critical decision-making factor for potential crowd members to fund a project, and you have got only one chance to make a first good impression.
Think carefully about your funding goal
You might be tempted to raise as much money as possible, and set an ambitious target but this is often counter-productive. It is often best to seek less and exceed expectations to generate more buzz and make things more manageable.
There is nothing to stop you exceeding your target. A target that looks possible is likely to encourage backers whereas one that looks impossible is likely to be off putting.
Have the right team members in place
Planning for crowdfunding success takes time and effort, and it might just be too much to do it on your own. If it makes sense for your project, try assembling a team with a mix of skills so you can develop a better product or service as well as manage your campaign more effectively.
To create a crowdfunding campaign several skills are required and it is unusual for all those skills to rest in one person. By creating a team not only will you be able to better cover off the skills required but everyone will come to the party with different contacts leading to an immediate expansion of your network.
We hope that these 5 tips will get you thinking about whether a crowdfunding campaign is right for your business.
At ReadyFundGo, Australia’s crowdfunding platform for business, we think it is a privilege to hear about so many amazing ideas. We truly enjoy supporting innovators to launch their campaign and raise the funds to get their idea off the ground or expand their existing business.
Jill Storey is the CEO of ReadyFundGo, Australia’s crowdfunding platform for businesses and a board member of the Crowd Funding Institute of Australia (CFIA). She has extensive experience in helping campaigners achieve their crowdfunding goals. Visit www.readyfundgo.com today to get your campaign started or get in touch at firstname.lastname@example.org if you have a question about starting a crowdfunding campaign for your business.