Creating a successful crowdfunding campaign depends on your ability to explain what funders are going to receive in return for their money. If you look at the most successful crowdfunding campaigns, the creators have something very specific to offer. The first level or two may amount to little more than a thank you, but whether we’re talking about a very cool watch or fifteen percent equity in a new company, you’ve got offer something that backers are willing to pay money to get.
Building a Budget
You can’t raise any money until you have an idea of how much you need to do your work. You have to start by calculating a budget that will get you to a certain point. That budget needs to include everything, from hiring any necessary help to making sure that you’re fed during the time you’re working on your project. You can’t expect to make any sort of profit out of a crowdfunding campaign — most companies use even campaigns on sites like IndieGoGo (where you’re essentially preselling your product in order to bring in money) to put to cover infrastructure and startup costs. You should also expect to pay taxes on the money you raise and take that into account, along with any fees that any crowdfunding tools will take.
Once you’ve got those costs outlined, you know how much you need to raise. You’ll also have an idea of where the funds you’ll raise will put you, in terms of advancing your project. You’ll know what you’ll be able to offer. You’ll be able to outline incentives from there.
But make sure you’re adding the costs of making those incentives available to your budget and increasing what you’re asking for along the way. If you want to offer t-shirts, for instance, make sure that you’ll have enough money to print your t-shirts and send them out.
Choosing Your Incentives
The incentives that you offer for funders will make or break your campaign. You’ve got to offer something people are interested in. If you’re offering a straight percentage of equity in a startup, that means that you have to offer enough equity and show enough potential for return to make any investor’s risk of losing everything worth it. Exactly how the rules will play out on how equity and shares will be handled under the JOBS Act isn’t clear yet; because there’s still time before you’ll actually be able to offer shares in your company as an incentive, you’ll have an opportunity to figure out what to do. Of course, if you aren’t based in the U.S, there are several options already available to you in terms of crowdfunding — but getting some financial advice will still help you make sure you’re handling everything correctly.
If you’re looking at offering specific products or services that you can deliver once you get up and running, you need to focus on what will get people excited. You’re going to be asking any backers to give you money upfront and then wait a while — perhaps months — to get their goodies. You’ve got to offer something good, something they can’t just go out and buy in the meanwhile. Access to whatever you’re building is the obvious answer, but make sure you’re packaging it effectively. Go out and do some market research to make sure that you’re offering something people want.
Check out part 1. Part 3 will be available tomorrow.