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Why do some startups smash their crowdfunding targets with apparent ease while others fail to get off the starting blocks?
Pebble famously nailed its $100,000 target on day one, and went on to raise over $10 million on Kickstarter, while lost item finder Tile raised $2.6 million, way more than the $20,000 it had been hoping for. These were exceptional outcomes, and average campaigns deliver more modest results. But others just fail to get off the ground.
As Liam Fay-Fright, founder of communications firm Common Industry explains, this is often because the people behind the campaigns are blinded by optimism bias and set unrealistic targets, not just for the raise but also for delivery of the product or service.
He says: “You believe in your product but you have to be honest about the potential size of your audience and the likelihood of that it will buy or invest in your thing and set your expectations accordingly.”
Funding targets need to be achievable within the first week or so, but many campaigns fail because they set targets they can never achieve. “Success begets success and people are more likely to back a campaign for products or businesses that have a chance of becoming a reality,” says Fay-Fright.
Success also depends on the quality of the campaign’s content, and ultimately in the size of marketing budget, which will need to be adjusted according to what you are raising money for.
A tech startup is more likely going to have an audience on Kickstarter, but looking for investment for a new fertilizer concept, for example, will require more effort and greater spend on marketing and promotion as that potential audience won’t necessarily already be on a platform.
Content quality has to be high, and it is worth investing in professional design support, as Arnold Du Toit, investor in residence at startup accelerator and coworking space Central Research Laboratory, discovered whilst running his own Kickstarter campaign.
“Your content is a window and insight into your innovation and idea so having professional content is key,” he says. “I chose the wrong agencies three times in a row and didn’t manage them properly, which caused a lot of issues and delays.”
Getting professional help with designing a campaign will pay off, but keep in mind that you’ll still be involved in a lot of prep work on your copy and direction and on hand for the video shoot.
If marketing budgets are really tight you could try applying your entrepreneurial skills to figure out a risk reward agreement that delivers the best results. “I’ve seen great ideas which didn’t capture the first seconds of their audience due to the wrong intro music and color tone, so you can’t afford to skimp on good content,” adds Du Toit.
Graduate careers platform JobLab is currently overfunding on Crowdcube, having hit its £200,000 ($262,000) target in just two days, and has three weeks left to run. For entrepreneurs looking to replicate this success cofounder Aidan Cramer’s advice is to take advantage of the many useful tools that can help target the investors who are likely to be interested in your business.
For example they used LinkedIn Helper to create a list of people with ‘angel investor’ in their profile, automatically sent them a connection request and asked whether they would be interested in viewing their pitch deck. They used DocSend to share the deck itself, which enabled them to collate contacts and email addresses.
“In general, we treated the campaign as a marketing activity, just as we would around the launch of a product,” says Cramer. “Getting the word out far and wide but in a targeted way is integral to hitting your target, and quickly.”
For ZoomDoc, an on-demand GP service, its success in closing a crowdfunding raise of £500,000 in January, was helped by having a celebrity investor in the shape of tennis star Andy Murray on board.
“Having Andy Murray as an influential investor helped validate our exciting proposition to a large number of investors,” says CEO Dr Kenny Livingstone.
Other key factors in their crowdfunding success included having a service that investors and people at large can relate to and could see clearly how the solution would actually help them themselves. “The success of that campaign set us up for our £2 million EIS (Enterprise Investment Scheme) raise which is currently ongoing,” says Livingstone.
The golden rule to avoiding a crowdfunding catastrophe is to invest the time in getting it right. A good campaign can take at least three months to put together.
“Get your ducks in a row, invest in quality and above all be honest,” says Liam Fay-Fright. “Kickstarter no longer accepts early stage concepts because so many projects failed in the early days of the platform. If it’s going to take deliver, then say so.”
April 5, 2019 at 05:24AM
Forbes – Entrepreneurs