Guest author Scott Gerber is the founder of the Young Entrepreneur Council.
Crowdfunding is all the rage these days, and it makes sense. There are many potential benefits, such as the prospect of developing an enthusiastic base of early adopters before there’s even a product for them to hold.
But it’s not as straightforward as it seems, and your success will depend greatly on your execution and your industry. To help improve your chances of a successful campaign, I asked 10 founders from YEC what everyone should know before trying to crowdfund a new technology product.
It’s A Lot Of Work
It’s just as much work to crowdfund a new product as it is to launch a new product. It’s basically the same thing. If you get a huge splash, you’ll have a chance. You’re also pushing people to someone else’s website, so don’t expect them to come back to your personal one. It’s hard to gauge whether it’s better to just do it on your own site!
Your Own Money Is Important
You need your own capital in there so it doesn’t ever say “$0.” If you already have a couple grand in the fund you will look much more like you have support from others, even if it’s the first hour of the account’s existence.
There Will Be Questions
Before people buy into anything, they need full transparency about your product. Make sure that you have all your bases covered by outlining your business plan, explaining the progress of manufacturing and development and showing exactly how the money will be used every step of the way.
Offer A Consumer Product
With very few exceptions, the only really successful crowdfunding campaigns for technology products are for those products a consumer can buy and use. If the people crowdfunding your campaign can’t use your technology, forego crowdfunding in favor of another form of financing.
Make People Care
You need to be able to demonstrate what real problems your new tech product is solving using everyday lingo. Make sure your pitch connects with your audience and illustrates how your technology will improve their lives or the lives of others. You need to convince them to care about the success of your product.
File A Provisional Patent
Things can get hairy really quickly if you don’t put in a provisional patent application to protect your idea. While it’s not a patent, it sets a date for the “creation of the idea” and can protect you later on when you invest the money to buy a real patent.
Early on, people near you may try to say the idea is theirs. If they file a provisional patent without you demonstrating a significant amount of progress with the concept—including a fully working prototype and publicity—you could run into problems.
Crowdfunding Is Marketing
You need to know that your product can get funding through other sources. Crowdfunding is (at least right now) more of a marketing strategy than a fundraising strategy—it’s a way to take pre-orders, provided you can reach a large audience—if you haven’t validated your concept to the point that you know you can get it off the ground without a crowdfunding campaign.
Once you have a good product in hand, you can plan a serious marketing push that leverages your crowdfunding campaign to get your product in front of the widest audience possible.
—Thursday Bram, Hyper Modern Consulting
Build Momentum With Pre-Orders
Momentum is key in crowdfunding! Momentum gets you noticed, gets you featured and ultimately gets you funded.
We launched a new product on Kickstarter with a goal of $75,000. Through family, friends, neighbors and co-workers we had a little over half of that number already spoken for before going live. So when the campaign started, we were out of the gates quickly and that momentum got us featured by Kickstarter and gave us great fodder for social and news channels.
Within a couple days we’d reached our goal and by campaigns end we were over 200 percent of the funding number. We created a shared document with our stakeholders and everyone reached out to people they felt comfortable asking and we collected names, emails and commitments. We then emailed them when it went live to remind them.
Know What Customers Want and Need Right Now
Before launching a new technology product and searching for crowd funding, do extensive research on the product’s target market. What is this market’s current financial situation? How are they feeling about their present situation? What technology are they currently using and what complaints do they have about it? What are their perspectives on existing technology products and brands?
All of these topics must be analyzed before presenting your idea to a large audience that may be funding your product. They will back up your faith in your brand and will make it clear as to why the world needs your new tech product.
Know What It’ll Take To Ship
Before considering setting up a crowdfunding campaign for a product, an ethical company needs to have a very good idea of the resources required and realistic timelines to successfully ship the product.
A brand is based on trust, and you only have one shot at a first impression. Crowdfunded products that ship months or years late erode the trust of their consumer base, and also general trust in crowdfunding platforms.
Crowdfunding shouldn’t be used to judge consumer demand — that’s what market research is for. Be honest; be ethical; be realistic. Do the work up front to understand what it takes to ship, and be very confident that you can ship your product on time and exceed expectations.
Lead photo by Karen Eliot