A Guest Post from Midwest Investment NetWork.
Entrepreneurial finance has seen rapid changes in the past few years. The future is very bright indeed for crowdfunding or rather reward-based crowd funding. In reward-based crowdfunding, you cannot offer someone a share of your company’s future profits. In return for contributions, you can either offer your supporters an intangible benefit (such as a thank you, a mention of the contributor’s name in credits, inclusion of name in online supporter list, etc.) or a tangible benefit such as T shirts, an autographed book copy, a download of your movie or music as a reward for contributing to your project.
While crowdfunding is a great way to raise capital, a lot of preparation and thought must go into creating a crowdfunding campaign that will actually bring in the money.
Speak to people who have crowdfunded
If you know someone who has succeeded in raising money through crowdfunding, you can speak to that person and get some advice. The most important ingredient that most people who were successful at crowdfunding will attest to is hard work. Before your campaign goes underway, try to get a team together and share responsibilities. Someone should always be available to speak to people and answer questions that your supporters may raise online.
All contributions should be public
Let’s consider that you want to make a short film and you need money to produce it. Normally, you would approach your family and some friends to back your project financially. You can approach your family and friends but wait for until the project is launched and then ask to contribute to your project through your online page.
Unlike traditional businesses, with crowd funding, people often contribute to your project publicly. Note that more raised inside of your campaign, more traction the project achieves and more support you get from people who are yet undecided whether they should support your project or not.
Don’t Be Anonymous
Note that your supporters are not only interested in your project; they also want to know about you. Crowdfunding campaigns should never be run anonymously. Upload pictures. Better still connect through Facebook. Update your profile. If it is appropriate, you can also reach out to groups who might take a special interest in your project, not only for financial support but also to promote your project in their areas of influence.
Prepare a Break-Even Analysis
If you are crowdfunding through a popular portal, and you have decided that you want a certain amount of money, note that you may have to pay transaction costs and commissions to the site, after the campaign gets funded successfully. You may also have to produce the rewards (especially tangible ones) and deliver them.
A break-even analysis can help you understand if your target is too low. Keep your rewards unique. As the funding is underway, post updates regularly, and keep your supporters involved throughout. Address their concerns and answer questions promptly. Note that if you plan another campaign sometime later, you might need their help again.
- License: Creative Commons image source
The guest post was written by Mike from midwestinvestmentnetwork.com. Mike is an expert in raising start up capital for companies online and offline as an entrepreneur himself.