Kickstarter and other crowdfunding platforms are becoming increasingly popular as a way for businesses to raise capital. But without proper planning, they can fail and leave you with a lot of wasted hard work. Follow these steps to make sure you reach your Kickstarter goals to start or develop your business!
What is Crowdfunding?
Crowdfunding is when an individual or business asks members of the public to fund their project or finance goal, instead of (or sometimes as well as) getting loans or other finance from banks and private investors. The idea with Kickstarter is that people pay in advance of the development of a product or service, to help with the upfront costs of making it, and they then receive the item or service at a discount compared to the listed retail price as a reward for supporting the business early on.
Another type of funding is like that of GoFundMe or JustGiving, which are platforms designed to raise money for a charity or an individual in need, rather than as a business. This article is going to focus on crowdfunding for your business venture.
The amounts paid for crowdfunding campaigns can be as little as £1 up to thousands. There are lots of crowdfunding websites, but Kickstarter is like using the word ‘hoover’ to mean vacuum cleaner, it is often the word people use to discuss crowdfunding for business. Other platforms like IndieGoGo and Crowdfunder are also popular, but work in a very similar way.
How Does Kickstarter Work?
Setting up a crowdfunder with Kickstarter or similar platform is easy, but takes time.
You need to create a campaign for your product or service. This will tell everyone what you want the money for, why they should give you their hard-earned cash, and what they get out of it in return.
The campaign lasts for a set amount of time. Some campaigns you must reach your minimum goal to get any of the funds raised, while other campaign types you will get the money you raise regardless of whether you hit the goal. Bear in mind that if you do that second option but need to pay for the manufacture or costly research of the product, you could find yourself out of pocket and without a finished product to offer your supporters. So, if you have a bare minimum that you must meet to make your product or service viable, it is best to go with the campaign type that requires you to raise the full goal before you receive funds.
Beware Fees
The crowdfunding platform takes a cut of the funds raised, too. Compare rates between platforms and campaign types to find the one that suits what you need. Some might have a higher commission but charge less per payment, for example.
When your campaign has finished and all funds have been validated, you will be paid the money into the dedicated account you provide. Some platforms require you to withhold a certain portion of funds to allow for refunds on cancelled orders, some pay in full. Make sure you know how much to expect from your final goal when taking into account fees and any withheld funds.
Choose a Niche
The Kickstarters and crowdfunders that do well are those that offer products or services that solve a very specific problem or that appeal to a niche corner of the market.
This is because it is much easier to tailor your Kickstarter campaign to target the people most likely to fund it if you know your audience well, instead of approaching it from a broad angle.
Having a niche is also handy when it comes to platform-highlighted campaigns. This is where the crowdfunding platform decides your project is particularly interesting, good value, and/or exciting in disrupting the current market for your product or service. Your campaign will get more visibility across the site and receive far more views that might convert to funds if this happens. A wishy-washy campaign or a broad product that has a lot of market competition already is far less likely to get the attention required to be highlighted as a platform favourite.
Case Study: Endearment Board Game
A Jane Austen board game, Endearment is the next in the offerings by Dux Sominum Games. Their initial goal was just £3,718. At the time of writing, they had raised a huge £714,578 and was still open for late pledges.
Board games are a popular niche on Kickstarter and crowdfunding platforms. The market for board game players is huge – but this company has clearly found a niche within a niche. Their previous campaigns were for games based around artists, the Victorian era, and extravagant gardens in Rococo France. Their style is clearly that of passionate artists who want to find similar souls. With Jane Austen a constant favourite (you only need to look at yet another Pride and Prejudice series in the works by Netflix as an example), this campaign drilled into the literary side of the board game industry.
Find Your Following First
Having a niche is a great way to know how to tailor your product and campaign to find the right backers for your project. People who will champion what you do, share the message, and support you through the development of the product and beyond are those you want to find.
However, it’s much harder to find success even in a niche if you cold-launch a Kickstarter without a solid base of interest first. Having people champing at the bit to invest in you is a much smoother way to success.
You can do this one of two ways. If you already have a network of followers, such as through your business channels, social media, and a newsletter, then build up the excitement. Engage with them: ask what they would want to see from your product or service, and use that market research to further tailor and tweak your campaign.
If you’re starting from scratch with no followers already, there are two options. You can wait until you build your audience over time, or you can go hard to build that following before you launch. The first option takes a lot longer but builds relationships of trust between you and your audience, making it more likely to convert to sales and support on your crowdfunding campaign.
The second is much harder, more intense, and will require bigger numbers overall on your social media channels etc because your track record won’t be established with them yet – and so fewer people will be likely to invest. This option is going in cold, creating social channels for the project and marketing it HARD, which can be a full-time job for several weeks to build interest.
However, the second option is ideal if your project has low manufacturing or development costs, because you can set a much lower goal and as soon as you surpass it, the viral marketing can snowball to find the right audience.
Case Study: Brandon Sanderson
Brandon Sanderson is an author best known for his fantasy books such as his Mistborn series. He also took over the writing of the Wheel of Time series when the original author, Tom Jordan, died before it was finished.
He already had an absolutely massive fanbase by the time he created an incredible Kickstarter that went down in history for raising the most money ever. But last year, he smashed his own record. With a Kickstarter for four surprise secret novels and a goal of $1m, he raised – wait for it – over $41m. This is all because he has developed a fanbase that is worldwide, passionate, and trusts the quality of what he produces to be within their tastes.
This is, of course, an exceptional example. However, it does show how having a niche AND a following can make a Kickstarter smash through huge financial goals.
Make Sure You Can Deliver Your Promise
There is a downside to Kickstarter and other crowdfunding platforms: you are expected to deliver. OK, that’s not a downside if you’re operating a solid business and have made serious plans with plenty of research. You should expect to be able to deliver your products!
Kickstarter and other crowdfunders do expect you to fulfil your expectations… but there is sometimes not much protection for investors and refunds could be nigh on impossible to get, if the business doesn’t deliver what was promised to them. This can damage the business or individual’s reputation, and mean they will struggle to raise funds in the future with another crowdfunding campaign (or even lose current or potential customers from their business).
Make sure you offer realistic options for your funders.
- Offer a cheap tier which is a token investment for people who want to simply support you with a few quid in exchange for, for example, a digital print or the basic option of your product.
- Make sure you have at least two mid-tier options that give more than the lowest tier, but include options you know you will be able to deliver. This might be a more premium version of your product, extra accessories, or ongoing insights into the development process with emails and video updates or even Zoom calls.
- A premium tier is wonderful for nabbing investors who are already big fans of you and your work. But make the offering very limited. This means you can make it feel really exclusive, go all-out with the rewards those investors will get, and improve your chances of being able to deliver everything you promise.
Building Trust
Delivering on your promise includes proving you can do what you’re setting out to do as part of your marketing campaign for the Kickstarter. For some individuals and startups, this might feel tricky – but you will have a track record or a story behind why you’re raising funds for that particular project. Be authentic and people will flock to you.
If your business has been running a long time, or you have equivalent experience elsewhere, shout about it. Tell people about awards you’ve won, who else is on the team and their experience they bring to the project, and why you feel this product or item solves a problem your audience has because you have suffered the issue yourself.
Case Study: OpenRock Link 20
OpenRock are an established company known for high-quality tech products like headphones. In fact, MoneyMagpie has reviewed and recommended their earphones several times before!
They’ve leaned into their proven track record and history of creating durable, high-quality products with their latest Kickstarter for the OpenRock Link 20. With an initial goal of £7426, they’ve surpassed that by a LOT – at time of writing, they’d raised £36,208, with 29 days still to go.
This is a great case study of all the elements done right.
A clear problem, a clear solution
Our everyday headphones and earphones are fine for a quick phone call now and then, but not for all-day use. Having several sets of headphones can be frustrating, especially if you don’t have the right pair with you for the job.
The OpenRock Link 20 turns earphones into a Bluetooth headset with a detachable, interchangeable magnetic boom mic. This makes it a multifunctional product that’s easy and quick to change across functions.
The track record to back it up
The proven track record of OpenRock is visible in the technical specs offered by the OpenLink 20, building on their experience in designing award-winning headphones and audio equipment. The specificity of the technical listings show they’ve done significant research to develop a product that works. AI noise cancellation, future-proofing Bluetooth with Bluetooth 6.0 connectivity, IPX7 waterproof-rated earbuds and IP55-rated mic, and an ergonomic design honed from previous earbud designs like the OpenRock S2 prove how well thought-out the design is.
The product research is clearly defined on the Kickstarter page, too: credentials such as “rigorously tested over 10,000 attachment cycles” give peace of mind that the product is durable and reliable.
Social proof
Social proof means we trust other people saying something is good compared to a business promising us their product is perfect. OpenRock have a slew of social proof, with so many products behind their name it’s easy to find reviews on sites like Amazon, which are third-party and not something the business just tells us on the Kickstarter page.
And then there’s the page itself: smashing a Kickstarter goal is the best form of social proof, as it shows other people are willing to back them with their cash. That’s why, when campaigns hit their target and go past it, people become more likely to invest. We hate to miss out!
Achievable investment tiers
Finally, the OpenRock Link 20 Kickstarter campaign has realistic tiers to offer investors. Early adopters of the product through the Kickstarter get up to 40% off the retail price, offering great savings which, in turn, gives investors peace of mind. There are also options for multipacks up to four sets in one – targeted at the intended audience of business owners who want to equip their staff with reliable audio equipment on a budget.
The OpenRock campaign is a great example, too, of using Kickstarter to raise funds after a research and development phase of a product. Some businesses choose to use Kickstarter to raise funds for the R&D phase, but that feels riskier to investors if there isn’t already a product made. The early adopters of a Kickstarter product that has already been made can create the social proof to market the product as it launches, but they’re also reassured because the product already exists and can be in their hands soon.
Final Word from Vicky Parry
MoneyMagpie Editor, Vicky Parry, is a fan of Kickstarters for people who have a clear concept for a product or service, but need to build an audience for social proof marketing or to raise funds to manufacture more units.
“Kickstarter comes with some risks for investors, which is why it’s so important for business owners or startups wanting to raise capital using a crowdfunding platform to be sure of what they can deliver. However, it can be a great way to raise money quickly, for a targeted product or service, that bypasses traditional routes of business funding. A successful Kickstarter campaign like the case studies above show how possible it can be to not only reach realistic goals, but smash through them and supercharge your business much faster than through other capital-raising routes.”
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Original source: https://www.moneymagpie.com/make-money/how-to-make-money-with-kickstarter
