Crowdfunding: Startup Funding and Inherent Marketing

Coins and plant, isolated on white backgroundCrowdfunding – the act of raising funds from a large pool of individuals who give (normally) small amounts of money in exchange for the eventual delivery of a product or service – is the hot new buzzword flying around the Internet. Successful crowdfunding endeavors range everywhere from the Pebble Smartwatch – which raised more than $10 million – to the Nomiku home sous vide appliance – which raised almost $600k – to photography projects and theater preservations. Those are some staggering numbers for a small business. However, perhaps the greatest value from crowdfunding is the marketing inherent in the system. Because crowdfunding is by nature widely distributed, your brand will reach hundreds of people and nearly every major social media platform before production or distribution even begins.

Scott Steinberg, author of the free e-book “The Crowdfunding Bible”, says that most successfully crowdfunded endeavors start with a strong idea that appears highly marketable, strong “buzz” is what’s going to take your crowdfunded project from dream to reality. Successful projects will also have a well-laid plan for taking the product from “funded” to “financially stable”. Last but not least there must be a solid reward structure in place for the hundreds of investors who will be giving you their hard-earned money. A motivational reward structure will help spread your brand, by word of mouth, to every corner of the web.

If you like the idea of raising funds and building a brand all at the same time, then you’re going to need to find a place to raise the funds. So, let’s take a look at some of the top crowdfunding sites on the Net:

Kickstarter

            Kickstarter has become nearly synonymous with the word crowdfunding. It is the largest of the crowdfunding sites, hosts the largest community of funders, and is responsible for both of the huge success stories mentioned above. Analysts predict that Kickstarter will raise more than $300 million in 2013; that is an awful lot of money floating around. Kickstarter is very open and startup friendly – they are open to any kind of project, from anywhere in the world. However, even though anyone can be a funder, to start your own campaign for funds you must have a presence in the U.S. and probably a U.S. tax ID.

Kickstarter offers a wide variety of services for new campaigns, including analytics, extensive social media integration to expand your marketing, and excellent online support.

Kickstarter charges just 5% if you meet your goal, and nothing if you don’t! So fees are minimal and only applicable above and beyond your goal. However, you must meet your goal or receive none of the money pledged, but at least you won’t be charged a fee.

RocketHub

Like Kickstarter, RocketHub is open to any kind of project. RocketHub has a stronger social element than Kickstarter and includes voting for projects, and the ability to earn badges on the site. This strong social aspect presents another great opportunity to market your brand within the RocketHub community. RocketHub also hosts “LaunchPad Opportunities” which can be won by successful or popular projects on the site. These opportunities are often very valuable and will include perks such as a publicist for your brand, or opportunities to showcase your product in high-profile locations.

RocketHub, miraculously, does not appear to charge any fees and you keep any money raised, even if you don’t meet your goal. The LaunchPad Opportunities are free for anyone who has run a successful project, and only $5 for anyone else wishing to enter.

IndieGogo

             IndieGogo may have a silly name, but it’s a powerful marketplace for crowdfunding startups. Open to any kind of project from anywhere in the world IndieGogo offers a plethora of tools for tracking the progress of your project. IndieGogo also offers the option to keep the funds raised by projects that do not meet their intended goals. Straightforward integration with social media helps you make a strong marketing push during fundraising, and a strong set of analytic tools lets you track incoming funds and other important facets of your campaign.

IndieGogo offers a choice in funding plans:

–       Flexible: 4% fee if you meet your goal, 9% if you don’t, but either way you keep the funds raised.

–       Fixed: 4% if you meet your goal, no fee if you don’t and funds are returned to contributors.

Crowdfunding isn’t for every small business or startup, but for the right product with the right plan it can be an immensely successful way to raise funds while also focusing on marketing, raising awareness and growing the brand.

If you enjoyed this post, make sure you subscribe to my RSS feed!
Posted in Startups.

Leave a Reply

Your email address will not be published. Required fields are marked *