The Lean Startup approach prioritizes customer discovery concepts such as rapid prototyping, feedback loops, guerilla marketing, and failing fast. It also acknowledges that most startup companies will struggle to find early-stage funding and utilize bootstrapping techniques (consumer debt, friends and family, home equity or retirement funds, etc.) to generate early momentum for their businesses (Pittz & Liguori, 2020). An additional source of relatively early-stage funding that can propel early growth and accelerate the customer discovery process is building a crowdfunding campaign.
One of the biggest advantages of a crowdfunding campaign is the rapid customer feedback it provides. Crowdfunding produces a more complete picture of your customer profile than interviews and online engagement and a fuller appreciation of the effectiveness of your marketing. It teaches what customers think of your product or service and you will quickly learn who likes your idea, what features are appealing, and, most importantly, who is willing to pay. This type of information regarding product/market fit will go a long way to demonstrating to larger investors down the road that your idea has merit. However, it takes more than a novel product or groundbreaking service idea to generate crowdfunding success (Junge, Laursen, & Nielsen, 2022).
Several similarities have been observed that typify successful crowdfunding campaigns beyond the technical aspects of creating compelling video and related marketing content. Carefully choosing a crowdfunding platform that will best highlight your business is an important first step. There are two basic types of crowdfunding platforms: donation-based and equity-based. In the donation-based models such as Kickstarter and Indiegogo, funders to a collaborative goal in return for products, perks, or rewards. These platforms were the first movers in the crowdfunding space and still represent the lion share of this multi-billion-dollar industry. In the equity-based model, businesses seek capital in return for an ownership stake in the company, often through convertible debt. Investors in this equity-based model have the potential to profit from business growth and returns, unlike in the donation-based model. There are many crowdfunding platforms available that operate both platforms proper due diligence is required to match your business needs to the goal of the crowdfunding site. In many cases, companies that have run successful donation-based crowdfunding campaigns have gone on to additional success through equity-based campaigns later.
Once the crowdfunding platform has been chosen and the content created, the next step is to self-promote like crazy. Expecting the crowdfunding platform to handle all of the marketing and public relations for the campaign is folly and you must make a concerted effort prior to “going live” to build your social media following and create content that can be used for routine posts during the campaign. Once active, the campaign should be aggressively pushed through business connections on LinkedIn, Facebook, and other social media outlets as well as to journalists both locally and with wide readerships and look for opportunities such as guest blog spots, interviews, or other ways to spread the message through their networks.
Professionalizing search engine optimization (SEO) for your business should become a focal point to achieve success with crowdfunding as well. There is a science as well as an art to being recognized on the internet and using a professional SEO writer or firm is a smart investment when crowdfunding. Suffice it to say, SEO optimization is vital since all of the dramatic, creative, and potentially earthshattering content that you have created will be worthless if no one can find it. Employing a professional who can assist with this task will go a long way to determining your crowdfunding success and, if accomplished correctly, your crowdfunding campaign will be one of the top search results for your company in the future.
Finally, it is important to have a plan of action whether you reach your crowdfunding funding goal or not. If you succeed in reaching your target funding amount, how will you deliver on the promises made during the campaign? How will you capture key customer data to drive your company beyond this campaign? What strategy is in place to follow up with the customers acquired and with those who viewed the campaign but did not donate? How do lessons learned from the campaign inform future marketing efforts? Were there any customer insights that were powerful enough and frequently repeated that could generate an important early pivot for the business?
In summary, crowdfunding is a powerful tool for generating capital for your burgeoning business. However, the benefits of initiating a crowdfunding campaign go far beyond simply financing current operations. The time spent on diligently crafting your business’ message, professionalizing marketing efforts, and gathering meaningful customer feedback is critical aspects of continued business growth. When questioning the amount of work versus the potential payoff, do not forget that Oculus Rift – a virtual reality company purchased by Facebook in 2014 for over $2 billion - was originally a Kickstarter campaign!
Junge, L., Laursen, I., & Nielsen, K. (2022). Choosing crowdfunding: Why do entrepreneurs choose to engage in crowdfunding. Technovation, 111
Pittz, T.G., & Liguori, E. (2020). The Entrepreneur’s Guide to Risk and Decisions: Building Successful Early-Stage Ventures. Emerald Publishing, Ltd.