Many of you have likely thought about launching a crowdfunding campaign. While the media tends to write about success stories, the majority of crowdfunding efforts fail. Less than one in five technology projects on Kickstarter reach their funding goal. While there’s no reliable data about Indiegogo, it’s commonly believed it has an even lower success rate.
The main reason crowdfunding campaigns fail is the lack of preparation. So before you get too excited and jump on a crowdfunding bandwagon, think about the answers to these questions that can make or break your campaign:
1. Is your product a good match for Kickstarter/Indiegogo?
To answer this question, identify your specific target audience. For example:
- Sex: Male
- Age: 25-35 years old
- Location: living in an apartment in a megalopolis
- Education: has a college degree
- Marital Status: single
- Social Life, Interests, Etc.
If you aren’t sure about the specific target audience, we suggest running a short Facebook ads campaign targeted to each of these different segments to find out which groups have the highest conversion rates. Then, compare your potential customer base with the community of crowdfunding websites.
2. Are there successful crowdfunding campaigns for similar products?
Use search functions available on both platforms to find out the following information:
- Number of campaigns run with similar products
- The success rate of these campaigns
- How much was raised?
- What were the most popular rewards?
- What media outlets covered them?
You’d be surprised how much you can learn from other campaigns by reading their descriptions, backer comments, and updates. You’ll have a significantly higher probability of reaching your goals if there’s an existing community of backers for your type of product.
3. Are you targeting a local, national or international market?
Traditionally, the products with a wider potential customer base have had a higher success rate. This will also affect your marketing strategy. Compare your target geography with the crowdfunding website’s community using SimilarWeb.com or Quantcast.com. To see the geography of supporters for specific products, use the “Community” tab on Kickstarter when researching similar projects.
4. How much does it cost to make your product and to ship it to your customers? What discount are you ready to offer to your campaign backers to make it more lucrative for them to support your project?
The vast majority of successful crowdfunding campaigns has between 100 to 300 backers. Conduct precise research about your production and fulfillment costs. Interview potential manufacturing and distribution partners; ask for referrals, think about different scenarios (compare the costs based on different numbers of backers). Make sure to have as accurate information as possible about the shipping costs to different countries. Experiment with packaging options and set money aside for damaged products and returns due to incorrect addresses.
5. What will it cost to complete the project?
Besides the production and fulfillment costs discussed above, you’ll have a number of other expenses:
- The crowdfunding platform & payment processor fees
- Video production & marketing
It takes much more time and effort to run a successful campaign than you might imagine. Make sure you have a realistic budget and be diligent about sticking to it.
6. What will be your funding goal?
This is arguably one of the most complicated questions to answer. After you come up with specific numbers to the two questions above, you should decide how much you can realistically raise. Only 11% of Kickstarter projects raise over $10,000. You should research the amount of money raised by similar projects, evaluate your marketing budget and pre-existing community of supporters. Indiegogo experts suggest that you secure 30% of your funding PRIOR to launching your campaign. So, make sure to balance the project’s financial needs with your capabilities.
7. How long will it take to deliver the product after the campaign ends?
Multiple studies have proven that the delivery time has a significant impact on the funds raised. In most cases, your campaign has a low chance of success, if you need more than 6 months to ship the product to your backers. It is especially critical for technology products (because they become outdated very fast) and kids/baby campaigns.
8. What is your team’s expertise?
Campaigns run by teams almost always raise more funds than those created by individuals. Build a team of supporters who are not only excited about your product, but also, can add value to your campaign. The most critical skills include product design, project management, campaign marketing and creative expertise.
9. What is your marketing strategy?
The worst mistake you can make is to post your campaign on a crowdfunding website and expect backers to find it. Kickstarter hosts 4,000-8,000 new campaigns every day, so it’s up to you how you are going to stand out from the crowd. Make sure to have all your ducks in a row before you push the launch button.
The main sources of crowdfunding traffic are:
- Your own personal connections
- Social networks
- The media
- The crowdfunding platform itself
Don’t launch your campaign until you have a clear vision of what you are going to do to convince your own friends/family/business partners to support you, to mobilize the power of social networks and to attract the attention of journalists. Crowdfunding backers support those who look like a winner. It’s your job to present your project this way.
10. What is your action plan?
After you come up with a strategy, you need to create a timeline with specific milestones. Decide on the critical goals which you need to reach in order to have the campaign ready. Make a weekly schedule. Decide on the best time of the year for your campaign, the launch day and the duration of the live campaign. The first few days of a live campaign are the most critical. Make sure to mobilize all your resources. Discuss with your team how you are going to monitor the effectiveness of your actions, personal responsibilities, and who will have the decision making power. If you want your campaign to become a big success story, treat it accordingly.
We wish you succeed in this exciting and challenging journey. This series will help to make it more manageable. Our future posts will be useful for answering some of the questions above. Keep reading, and you will be better prepared and increase your chances to make your crowdfunding dream a reality.