How many times have you come up with a great idea for a product that would help you or others in their daily life and thought “if only I could find a way to make this a reality?” Well, with a lot of time and effort there is now a realistic way to overcome what almost always seems to be the biggest hurdle–the resources.
Crowdfunding is quickly becoming the method of choice for raising money towards a specific project by getting relatively small amounts from a large number of people through Crowdfunding websites. Two of the biggest Crowdfunding platforms, Kickstarter and IndieGoGo, have brought together hundreds of thousands of willing investors with people who have decided to bring their dream product to market.
Have you heard of the Pebble smartwatch? Believe it or not, they got their start through Crowdfunding. The Pebble watch gives you instant alerts of missed phone calls or emails through working with your smartphone. During its first 48 hours on Kickstarter, it earned $1 million. That led to an overall accumulation of $10 million!
Another Crowdfunding superstar is the Veronica Mars movie. Although it was a highly successful TV show, with a cult following, it still needed investors to get the movie made. As a result, it became one of the highest-grossing Crowdfunding projects to date. Their goal was to raise $2 million in funding. However, they raised closer to $5.7 million.
Last, but not least, is a company that made recent headline, Oculus Rift. Facebook just purchased the company for a whopping $2 billion. This virtual reality headset company raised $2.4 million. This was far above its goal of $250,000.
There is a lot of work involved prior to being able to successfully launch your idea on one of these sites. The first and most important step is to find an idea that is practical and will interest people. The simplest way to do this is developing an idea that will solve another person’s problem, be it their copper piping getting stolen or improving their work/life balance, both examples of products successfully launched largely through Crowdfunding.
There will be potentially significant startup costs before you can tap into Crowndfunding financing so you need to assess your sources of funds such as credit cards, loans, savings or someone you know to invest.
Prepare and Plan
To be lucrative, you need to have spent the time to properly develop your idea as far as you can with the resources you have available. This means developing some kind of prototype or representation of how the final product will work. Another key element is doing market research amongst family, friends and as many other people you can find to get opinions on the viability, practicality and desirability of your product. The internet can be a valuable tool with many sites available where you can show your design and get feedback.
The ideal scenario is for you to generate interest through some initial marketing, and be prepared to start production just prior to launching your Crowdfunding campaign. This way, once you have raised the funds, you are able to produce and ship the product to your investors without delay.
This includes things like already having a website, a way to store and distribute your product and a customer database for managing and fulfilling orders. Once the campaign begins, you won’t have time to do anything else as you will be constantly responding to rapid fire questions from all types of potential investors.
Achieve Campaign Success
Crowdfunding platforms require you to set a funding target, and this can be critical to your success or failure. You need a figure that is sufficient for you to achieve your minimum goal of delivering the product and the lower the target is, the greater chance you have of achieving and exceeding it. Noteworthy campaigns can achieve multiple times their target as people love to invest in projects that exceed expectations.
You’ll need a good and focused presentation to go along with your campaign as there are thousands of campaigns going on at any one time, and you need to stand out from the crowd. Designing an eye-catching pitch does not need to be expensive, a video prepared using your phone can suffice, but it does need to get the point quickly and accurately in addition to why a potential investor needs it in a short time. Most people won’t spend longer than thirty seconds looking at a project before moving on if it doesn’t interest them.
Additional Benefits of Crowdfunding
Using Crowdfunding opens your product up to a huge pool of not only potential investors but future customers. What you will find is a savvy and interested group of people who, even if not initially investing in your product, are more than happy to share their opinions on your idea and what they would like to see in order for them to invest in or purchase it. This gives you a great opportunity to gain valuable information that can be used both now and in the future as your company develops.
The newest twist in the Crowdfunding wave is the emergence of Equity Crowdfunding which allows people to invest in return for a set amount of shares rather than donating money. Although in its infant stage there have been some changes to the existing laws to allow this to move forward, slowly.
The SEC has also put in place some due diligence and compliance requirements that still need more clarification. Nonetheless, the signs are there that Crowdfunding is not only here to stay but will continue to grow and provide a greater range of investment options as the necessary frameworks are put into place.
The benefits are obvious. As long as you have a usable product, have completed your research and are ready to take orders, nothing should get in your way. Do you plan to use Crowdfunding this year? Let us know in the comments section below!