Founders often talk about the benefits of crowdfunding a brand-new project: it's a unique opportunity to engage your community, build grassroots exposure and test an idea's longevity early. But what you don't hear as much about are the challenges -- and there are many.
To learn more, I asked 8 entrepreneurs from the Young Entrepreneur Council about the less-glamorous side of crowdfunding, and what advice they have for others considering it:
1. Missing the Expertise of Startup Investors
Not all investor money is equal. Raising money from people with little experience in investing in startups and whose sole exposure to investment is public markets is fraught with risk.
Early investors play a critical role in a startup’s success prospects. Their mentorship, networks and experience can prove invaluable—you won’t get that from the “crowd.” Crowdsourcing can be a great tool, but it should be used selectively and carefully.
2. Executing the Project
We funded a $35,000 comic book project and discovered that some of our funding community wanted to be more involved in the creative process after funding than we were aware of. We had to rethink our entire strategy to involve them, and then we had to get our team members in the right seats to execute the project brilliantly.
We actually took several steps down the wrong path before catching ourselves and changing direction. As the company founder, my zone of genius is screenwriting, and yet we were using fiction writers for the project. We had to work as a team to restructure my time, so I could lead this project and ensure its quality. It has turned out to be one of the most challenging, but inspiring shifts we've forced ourselves to make.
3. Providing Customer Service
One of the more difficult things with crowdfunding campaigns is realizing that your new customers have varied expectations. Some folks want the product you've offered within one month, while others assume there's a good possibility the product will never be made.
Avoid stress by over-communicating timelines throughout your program. Guess what types of questions fans will have, and have draft answers ready for your team to utilize. Also, make sure to send updates weekly.
4. Planning for Life After Crowdfunding
Crowdfunding can be a promising way to raise money to finance projects and businesses, but the success of crowdfunding goes hand in hand with careful consideration. One common challenge is that when the campaign ends, companies seem to stop their growth.
My advice to these companies is to plan for life after crowdfunding, even before the crowdfunding process begins. This means they need to have an effective business plan, hire employees with a great deal of experience in the related field and develop a solid marketing strategy for all stages of performance.
5. Keeping Up Momentum
One of the biggest benefits of running a crowdfunding campaign (besides the funds) is the exposure and community involvement that come along with it. We funded our latest game through Kickstarter and enjoyed a huge boost in momentum throughout the campaign.
However, the enthusiasm of the crowd quickly wanes as they shift their focus toward the latest exciting endeavor, and your startup's job then becomes to keep that attention squarely focused on your post-campaign activities. Simply posting updates is not enough—you must keep everyone engaged from all angles, and this will obviously vary from product to product.
The important takeaway is to never let the momentum slow, because it's much harder to get the ball rolling after it has stopped.
6. Understanding the Audience
We've worked with our clients on several crowdfunding campaigns, and without fail, people always underestimates the outreach they need to do. It's crucial to identify audiences who can be reached both before and during campaigns.
7. Fulfilling Rewards
Most companies plan for how much it will cost to make, ship and manage perks and rewards, and don't take into account what happens if you suddenly have to ship out thousands of units of a product that hasn't been made yet. That's why we started ensuring all fulfillment is done by our company, so crowdfunding companies don't have to worry about it.
8. Getting Additional Exposure
When we used Fundable for crowdfunding, the process came with a PR division that allowed BottleKeeper to gain a pretty incredible amount of exposure. When combined with a solid marketing and launch plan, it's really the exposure that gets you out of the "family fund" that many crowdfunders struggle with.
But when the successful campaign ends, and you're knee deep in the logistical aspects of running a functional business, it becomes really difficult to keep up with additional exposure. One of the most important things to do is create direct relationships with the media contacts that originally provided the exposure. Try offering them the chance to review your product once it's complete. This will help continue both your momentum and exposure needs.