October 22, 2016
If you are an entrepreneur and you have not yet launched a crowdfund project, I want to tell you why this will become a competitive disadvantage for you in 2017. Don’t make the mistake of marginalizing crowdfunding as a creative way to raise capital. Sure, in 2015 alone, over $34 billion dollars were raised via crowdfunding. Kickstarter itself has helped over 113,800 projects get funded, delivering $2.7 billion dollars from more than 12 million backers. But that’s not the real power of crowdfunding. In fact, I’m going to show you why crowdfunding is the ultimate tool for entrepreneurs.
As a 22 year digital marketer, I love that I am a life-long student of business and never stop learning. While there are many books out there, the must read book on crowdfunding for entrepreneurs is Jamey Stegmaier’s A Crowdfunder’s Strategy Guide: Build a Better Business by Building Community. I was so excited by what I learned from his book, that I pulled together this SlideShare (which I presented at my local library) and reached out to Jamey Stegmaier to interview him on the insights he captures in his book:
As an entrepreneur, you need a few key elements in order to be successful in business. You start with an idea, but in order to move that idea to reality, you need: (1) Research to Confirm Demand, (2) Launch Plan, (3) Funding, and (4) Customers. If you don’t have these basic elements, you don’t have a business nor a successful product launch. What’s awesome is that crowdfunding provides incredible support around each of these elements, thereby delivering everything you need to take your idea to reality.
“Crowd Precedes Funding in Crowdfunding”
To be successful in business, you need customers. The more customers you have the better your odds of success. And, to be wildly successful, you don’t just need customers; you need advocates. Raving fan customers are the ones who can’t shut up about your product or service. Advocates make your job 10 times easier because they provide you the word-of-mouth marketing that every brand desires. This was my giant “ah ha” moment. An awesome crowdfunding project isn’t about getting people to financially back your vision, but also to become an advocate of your idea.
When your backers are actively working to ensure your success, you have a giant hit on your hands. The more passionate they are about your idea, the more invested they become – not just in terms of dollars, but in terms of support, feedback and advocacy. As Jamey Stegmaier says, “If your focus is on people, not on money, you will be significantly more successful – crowd proceeds funding in crowdfunding.”
That’s why much of Jamey Stegmaier’s advice is around building community and the importance of this often misunderstood aspect of crowdfunding. Most people mistakenly believe that platforms such as Kickstarter and Indigogo are the turnkey solutions to launching and funding your next big creative project. While these platforms provide much of the technology that you need to launch a crowdfunding project, you first must work to build and attract your own audience.
Research to Gauge Demand
How many businesses fail because they didn’t do their homework? You think your idea is amazing. You ask your family and friends for feedback. Since they all love and support you, they typically agree with you. So you bootstrap or raise enough money to be dangerous. Is that really the best time to find out if there’s demand for your idea?
Crowdfunding is the ultimate in market research. It used to be, as marketers, we’d have to launch surveys and focus groups. Even then, many people would say one thing and act nearly the opposite of what they said they would do. With crowdfunding, there is no mystery. If someone loves your idea, they are literally putting their money where their mouth is. There’s no better way to gauge demand than real life market conditions. And the cool part is that you get all of this up front before you risk the bulk of your money (or that of your investors). If I were launching a company today, this is the only way I would do it – by proving beyond a shadow of a doubt that there’s a market that is indeed interested in what I’m selling. “You might have an idea that you think is really cool, but you don’t know how the general public will receive it,” says Jamey Stegmaier. “There’s no better way to find out than asking people to pay for something that doesn’t exist yet.”
“You Need a Polished, Tested Concept, Not Just An Idea”
Crowdfunding further forces you to build out your complete launch plan – not just an idea on the back of a napkin. “It’s great that you have a cool idea,” says Jamey Stegmaier, “and crowdfunding is the perfect place to gauge demand for a new innovation. But you need to actually design, develop, and prove that you have something worth people’s hard-earned funds before you launch the campaign.”
In his book, Jamey Stegmaier talks about the need for professional creative design to bring your ideas to life. You also need to work through the complete details of your go-to-market strategy so that you can share with your backers exactly how you will use the money raised to deliver the product that you’ve envisioned. This process forces you to articulate your launch plan and share it publically. And that’s when things get interesting because your backers will tell you what they either don’t understand, don’t believe or have a better way of doing what you envisioned.
Crowdfunding: The Ultimate Tool for Entrepreneurs
Do you see now why crowdfunding is the ultimate tool for entrepreneurs? By its very nature, crowdfunding helps you with all four elements of a new product launch:
- Research to Confirm Demand – Before you can even launch a crowdfunding project, you need to build your own audience. The very nature of building your own audience will tell you if your idea has merit. If you strike a cord with others who see the same problem you are working to solve, they will join your mission to ensure that, together, the problem gets solved. Conversely, if you’re having problems attracting an audience, then you’re either not describing the problem correctly or the people you’re talking to don’t agree it’s a problem worth investing in to solve.
- Launch Plan – Can you imagine if you were able to share your entire launch plan with the very customers you’re trying to attract before you invest a ton of resources into building that plan? This is another distinct advantage of crowdsourcing as your audience will provide you with feedback as to what they like and what they are concerned about. That feedback is invaluable.
- Funding – This is ten times better than any research project. If your project funds, then you have a legitimate hit on your hands. If not, then it’s back to the drawing board. Sure, you may have invested time to articulate your vision, but if you didn’t get the financial support, then at least you didn’t lose a ton of money launching an idea that wasn’t resonating with your audience.
- Customers – Perhaps the best part is that when you launch a successful crowdfunding project, you have built in customers. When you over-deliver for these core customers, you are building a loyal group of advocates who will help you continue to grow and be even more successful.
I encourage you to take massive action on crowdfunding. Start with reading Jamey Stegmaier’s A Crowdfunder’s Strategy Guide: Build a Better Business by Building Community. Then follow his advice throughout the book. If you want even more concrete action steps, review my SlideShare as I’ve identified the action steps coming out of each of the core tenants Jamey Stegmaier recommends. Here’s to planning out the rest of your 2017 year and making it even more awesome.