4 Pitfalls of Crowdfunding…and How to Avoid Them
The advantages of crowdfunding are numerous: It’s a great way for startups to raise funds fairly quickly; it’s an unparalleled way to engage with and learn from your audience; and the popularity of sites like Kickstarter and Indiegogo means your crowdfunding campaign could be seen by an audience far larger than your existing mailing list.
But of course, there are pitfalls to look out for when crowdfunding and awareness of those dangers can make all the difference.
Pitfall 1: Leaving Your Intellectual Property Unprotected
Solution: This issue should be addressed whether you’re considering crowdfunding or not. Every business has unique intellectual property, and before going public about any aspect of your product — what it’s called, what it looks like, how it works — make sure it’s protected with any appropriate copyrights, patents, and trademarks.
Pitfall 2: Setting an Unrealistic Financial Goal
Solution: Any crowdfunding campaign that meets its financial goal can be seen as a success, so the trick is setting a modest goal that will still enable you to take your product or business to the next level. A failed crowdfunding campaign could result in negative publicity and certainly will affect future attempts to raise funds or attract investors. So while you may secretly be hoping to raise a million dollars, your stated goal should be realistic and even modest. It makes for a great story if you meet your goal quickly and then surpass it, filling your prospective backers with confidence.
Pitfall 3: Rushing the Process
Solution: While it’s true that raising money through crowdfunding can be less burdensome than some other methods, one of the biggest mistakes you can make is to think of this process as quick and easy. Your campaign is basically a product launch, and you’ll need to put in a fair amount of time and effort for it to succeed. This means creating high-quality, professional assets, like videos, images, and copy for your campaign page. It means creating buzz through social media ads, digital marketing, maybe a viral giveaway. It means creating buzz among a strong inner circle of supporters. Offer them early access to your campaign page — they are likely to give you good feedback and needed encouragement, and ideally, they will jump in and back your campaign as soon as it opens to the public. A strong opening to your campaign is critical to building momentum.
Pitfall 4: Making a Mess of the Rewards
Solution: The most important advice in terms of the rewards structure for a crowdfunding campaign can be summed up in three oft-repeated words: Keep it simple. If your rewards are complicated by too many options, too many variables, prospective backers may not be willing to wade through all the detail to figure out what they want. And if they’re willing, they’ll most likely have questions. Is your team prepared to deal with an onslaught of queries about your rewards offerings?
Nearly as important as keeping it simple is creating a sense of urgency. With the most enticing rewards expiring quickly (and applying to just a limited quantity), visitors to your campaign page will feel compelled to grab the limited-time-only deals. It’s human nature — we are all susceptible to the fear of missing the best possible deal.
The simplicity principle also factors into the fulfillment aspect of your rewards. The more complicated the reward offerings, the more painful it will be for your company to fulfill those orders. In addition, be cautious when publishing the delivery date for your products. It’s best to conservatively estimate when they’ll be ready to ship and then hope to pleasantly surprise your customers when their package arrives early.
Many startups and small businesses achieve success in crowdfunding. But the cold, hard truth is that many more fail in the attempt. Going in with your eyes open to the possible pitfalls, and taking the sometimes difficult steps to avoid them, will certainly improve your odds.
If you find this blog useful, don’t forget to check out “What Is Crowdfunding?” and “8 game-changing factors for crowdfunding success”
