Recently, we featured some of the less-than-obvious reasons why a startup might opt to give crowdfunding a whirl. Surprisingly, “free money” wasn’t it.
If you saw that article and said to yourself, “I want in on some of that sweet, sweet brand visibility and market validation,” you’re probably wondering how to do it right. We’re here to help.
First off, let me tell you what this isn’t: this isn’t a list of 7 tricks or 8 tools or even 10 tactics for a successful crowdfunding campaign. If that’s what you’re after, well, here you go. If you need me to tell you need to read Kickstarter’s Handbook, or Indiegogo’s Playbook, then I’m afraid you’re doomed to join the 69 percent of Kickstarter campaigns and 91 percent of Indiegogo campaigns that fail.
Instead, here’s some advice from successful Philadelphia crowdfunders on how to approach a crowdfunding campaign.
1. Why are you doing it?
Before we can get to how to crowdfund, we need to get to why. Unlike most other forms of venture financing, entrepreneurs deploy crowdfunding on a wide range of missions. The first step in crafting a successful crowdfunding strategy — or any strategy, for that matter — is to clearly identify your goal.
Steve Cook and his partners at CookNSolo Restaurants know how to do concept dining — you’ve heard of Federal Donuts and Zahav, right? — but even they had their doubts about opening Rooster Soup Co., a non-profit soup shop. So they turned to Kickstarter with a primary goal in mind: “proof of concept.”
“We wanted some buy-in from the community to know it was a good idea,” said Cook. So they asked for $150,000, which they raised (and then some) from 1,587 backers.
But that $150,000 wasn’t Rooster Soup’s real goal: it was just a metric for market validation.
The real goal was market validation, which is why the decision to crowdfund on Kickstarter made sense — its “all-or-nothing” model offers the best test for market demand. Some other platforms, like Indiegogo and RocketHub, will let a project keep funds even if it falls short of its goal.
That flexible funding model appealed to MilkCrate Philly, which is in the midst of an ongoing crowdfunding campaign. MilkCrate is using crowdfunding to market its mobile app for “sustainable local living” to multiple audiences: potential users, angel investors and business partners.
But Morgan Berman, MilkCrate’s founder, specifically chose Indiegogo over Kickstarter because she and her crew have been bootstrapping since Day 1, and there’s nothing sustainable about working for free. MilkCrate is still short of its $20,000 goal with 24 days to go. But even if they don’t get a single cent more, Berman and Co. will still collect $13,764 — enough to finance the development of a half-dozen improvements to the app.
And while MilkCrate is a Philly exclusive today, Berman says it’s expanding to D.C., San Francisco and other cities soon, so using a larger, national platform makes sense (even if the investment home bias affects crowdfunding, too).
Startups that want to use crowdfunding for pre-sales, or selling products before manufacturing and distribution processes are in place, will want to focus on their target audience. That’s why Cora, which delivers monthly care packages for menstruating women, chose to use Plum Alley, a for women, by women crowdfunding platform. “It was a great way to build our customer base,” said Cora’s founder, Molly Hayward.
2. Crowdfunding is just marketing.
Five minutes after Rooster Soup launched its Kickstarter campaign, Felicia D’Ambrosio, CookNSolo’s communications chief, got a tweet that succinctly let her know that Rooster Soup was doing just about everything wrong.
— Amy Hoy (@amyhoy) June 11, 2014
“I got defensive at first,” said D’Ambrosio, the social media maven largely responsible for @FederalDonuts and its 13,000 followers. She had just spent the last few months plotting and planning Rooster Soup’s Kickstarter campaign. “Who is this woman?” she recalled thinking.
But, “It turns out,” D’Ambrosio said, “that’s what she does for a living.”
Actually, Amy Hoy doesn’t do crowdfunding for a living, but she does do marketing. And Hoy says she didn’t say D’Ambrosio was doing it all wrong. “I just pointed out some things they were missing. I can see why it felt that way, though.”
D’Ambrosio swallowed her pride and asked for help. A few tweets later, and Hoy was over at the CookNSolo offices, giving a crash-course on copywriting.
“Crowdfunding is basically like selling a product,” said Hoy. Only with something like Rooster Soup, she said, “the product is not a thing you get, but a feeling, an experience, a result. But it’s the same type of principal.”
So even though Hoy didn’t have any experience running a crowdfunding campaign, she knew Rooster Soup needed help when the initial campaign page raised more questions than it answered, like why they didn’t just donate soup.
“They weren’t persuading,” Hoy said. “Marketing is a lot more than just communicating, it persuasion.”
Rooster Soup’s problem was that they were just providing information, without any emotional hook — it was a dull documentary when it needed to be more like an infomercial. Hoy spent a few hours explaining the basics of copywriting to D’Ambrosio and the two went through the Kickstarter page line by line. “It was the harshest critique that I’ve ever had,” said D’Ambrosio, “and one of the most productive.”
D’Ambrosio learned on the fly that crowdfunding is nothing more than marketing. Thanks to getting some constructive criticism early on, and to being open to such criticism, Rooster Soup was able to recover and run an extremely successful campaign (being an awesome idea from some of the best restaurateurs in Philadelphia might have also helped).
3. Be ready.
Steve Cook doesn’t like potato salad. Not the actual dish, but the infamous crowdfunding campaign — the facetious quest for $10 for some potatoes and mayo that ended up netting $55,492 — which happened to coincide with Rooster Soup’s own campaign.
“What do you have to do to get more coverage than some guy making potato salad?” asked Cook.
Cook doesn’t actually hate the potato salad guy — who is apparently using the money to throw a charitable fundraiser — but the effortless way he received national press only added jealous frustration to “the most stressful 45 days of my life,” Cook said.
Potato salads aside, most successful crowdfunding campaigns are the product of months and months of planning. Before their campaign launched, the Rooster Soup team spent weeks convincing celebrities to film supportive videos (Ed Rendell’s a celebrity, right?), contacting the press and working their networks as hard as they could.
“I’d say to anyone who wants to do Kickstarter: don’t go into it thinking its really easy,” said D’Ambrosio. “It’s really hard and a lot of work. Hard, hard work.”
After Analog Watch Company’s hugely successful campaign, friends congratulated Buffa on his great luck. “It was not luck,” said Buffa. Rather, Buffa credited his success to “six months of strategy, of identifying similar products in a similar space and market, looking at what their campaigns were like — why they were successful, [and] why they weren’t,” he said.
“And not just anecdotally looking,” Buffa added, saying he mapped data to identify the “ideal price points” for his crowdfunding rewards.
About six months of planning went into Cora’s campaign too. Hayward didn’t just prepare for the crowdfunding, though — she launched ready to discuss the potential for follow-on investment. “Even if you aren’t taking meetings [with investors], start prepping for it, because you will get approached,” advised Hayward.
4. Approach crowdfunding critically and holistically.
Even though it’s is relatively new — founded in 2008, Indiegogo is considered one of the oldest platforms — crowdfunding has already, like moss on a sapling, collected some conventional wisdom:
- offer lots of rewards priced around $25;
- produce a really great video;
- tell a compelling personal story.
While it’s always wise to pay heed to convention, to blindly follow it is truly sophomoric. It doesn’t matter how much work you put into a crowdfunding campaign if that work is thoughtless. Successful crowdfunders approached their campaigns critically, willing to depart from convention when necessary.
Lorenzo Buffa essentially skipped offering smaller rewards for Analog Watch Company’s campaign. Ignoring a $10 “Thanks!” level pledge (picked by just 16 of his 716 backers), all of his pledge levels were set at $75 or more, and all of those were rewarded with a watch. That flies in the face of Kickstarter’s general recommendations, but Buffa plotted out price points for similar products and realized he could — and should — go higher. “The award needs to be in relationship to an accessible amount of money,” Buffa said.
“It’s about identifying the fine line,” he added. “You can’t have a super disconnect from the Kickstarter, discounted price and the regular price.” An overly discounted product, whether offered as a crowdfunding reward or just on sale, can signal low quality to would-be buyers and backers.
Similarly, if your product isn’t particularly visual, spending lots of time on a video is a waste of time. No one would confuse Hoots & Hellmouth’s video for something produced by Spike Jonze, but the Philly roots rockers still raised triple their goal.
Molly Hayward’s personal story — her time in African villages where menstruating girls are forced to skip school because they lack sanitary products — and Cora’s mission are one and the same, so making it the heart of the company’s crowdfunding campaign was necessary.
But not every startup has to be a cult of personality to be successful. There’s nothing inspiring about These French Fries Are Terrible Hot Dogs, but it was a smashing success nonetheless.
5. Should I hire a consultant?
Depends. Do you need one? Some of us are better at sales than others.
By dint of the fact that you’re reading this article, you’re probably not the tri-state area’s top Ford dealer. Designing really wonderful products and selling them are often different things. Tesla was an amazing inventor, but he lost the marketing wars to Edison.
That said, whenever a lot of money changes hands, weaselly middlemen try to get in on the action. Usually we call these rat-bastards “lawyers”(I’d know), but in the relatively regulation-free crowdfunding world, they’re called consultants.
Vitriol aside, whether or not you want to hire a consultant depends entirely on whether or not you want to put the work into crowdfunding or just hire someone else to do it instead. There is an inexhaustible supply of how-to crowdfund articles on the web (including this one!), so anyone with patience and decent WiFi can learn, for free, all there is to know about running a crowdfunding campaign.
69 percent of Kickstarter campaigns fail. 91 percent of Indiegogo campaigns fail.
What a consultant really buys you is peace of mind. But it’s the uneasy kind of peace of mind: if your campaign fails, despite your consultant’s best efforts, you know it’s because your project sucked.
The most popular answer was inadequate marketing, followed by not targeting the audience well and bad videos. For inventors, artists and developers alike, its easier to blame the packaging than the product, which helps explain why a full 60 percent of the failed campaign respondents said they continued to work on their project afterwards.
Consultants, therefore, can provide real value if you’re using crowdfunding for market validation instead of general marketing or actual fundraising. Correspondingly, it makes sense to only use consultants who are willing to work for a percentage of the raise, rather than a flat or hourly fee.