In the past couple of weeks we have talked about the pros and cons of gaining money for your growing business with loans and investors. The final fundraising method we are going to cover is also the newest one.
Crowdfunding has become huge in recent years, helping raise money for films, TVs shows, records, books, games and more. And there are many sites that you can use including IndieGoGo, Patreon and KickStarter.
But what are the advantages of going this route?
- Crowdfunding means that there is no loan to pay back and no investors to answer to. Your profit is yours to keep and your business is still 100% in your control.
- Word of Mouth
- People will know about your upcoming business or products and can spread the word about it to people they know may be interested, well in advance of launch.If you idea is popular enough, you may raise more than you expected. Some have raised millions in hours or were looking for enough to start a side business and raised enough to make it a full time business.
- Gauging Interest
- While you are fundraising, you are also doing market research! You will get feedback from interested parties AND critics that can prove beneficial when building out your project and your overall brand. After your crowdfunding period is over, you'll be in good shape to tweak and retool whether or not you got all the money you need.
But there are potential problems with this option.
- Lack of Support
- If you do not raise enough money in the time frame you set up, then you get nothing. With most of these services there is no partial fundraising, if you are looking to get $50,000 but only get $49,240, you get none of it. So you may want to consider what is the minimum you would need and set the bar at that reasonable height. Or, have funds available to fill a $$ gap so you get the funds you legitimately raised.
- Logistical Challenges
- When you set up a crowdfunding project, you promise to send items to the people who are willing to donate based on how much they gave you. But sometimes things happen. A project I contributed to back in December of 2014 should have been delivered by May but the date has been pushed back to September due to manufacturing issues. Some people have complained, but they got more than 10 times the number of funders then they were looking and that has slowed things down. If this happens to you, first congrats, second, just keep people updated - some will still be angry, but most will understand.
- Marketing to the Masses
- To even get your funding goals met, you will need to be adept at marketing your project. Unlike with investors and loans, you have to present your project and it's significance to the whole world, getting them to buy in and earning their support. That means having branding and communications firmly in place BEFORE you submit your project to any crowdfunding site. This means active social media use and a digital promotion budget. Note: It may be uncomfortable to pester friends and family but that is also part of the game with crowdfunding and leveraging your own personal network is paramount.
Some people dislike Crowdfunding, but I think it is one of the greatest options we have today, like self-publication, which we will get into soon.
Good Luck and Good Sales.