When Regan Wann of Shelbyville, KY, decided that she wanted to expand her business Through the Looking Glass Tea Shop by moving to a larger location, she didn’t apply to a bank for a loan, or max out her credit cards. Instead she decided to raise the money by asking her crowd.
What Is Crowdfunding?
Instead of asking for a loan, donation or investment from one entity, with crowdfunding you ask your friends, family, fans and network to contribute money towards a project through a crowdfunding website. Contributors feel more like partners because they are rewarded with various prizes and credits depending on how much money they give. It’s better known among creative types, who often use crowdfunding as a means to record an album, make a film or write a book, but more and more entrepreneurs are looking to crowdfunding as a legitimate way to find the resources to start up a business.
Crowdfunding sites have been popping up all over the web, the most popular being RocketHub, Kickstarter and IndieGoGo. Regan contacted RocketHub after hearing about it from a cyber-friend who had worked with the site to crowdfund art projects. After talking with Brian Meece and Vladimir Vukicevic, two of RocketHub’s co-founders, she set herself a goal of 44 days to raise $3,275. The challenge of crowdfunding sites are all or nothing: you either have to meet your goal within the allotted time, or you don’t receive any funds at all.
Your donors reap your rewards
Regan offered a variety of rewards for different contributions starting from $5 and going up to $1,000. For $5, your name was added to the “Wall of Thanks” at the shop, and for $250, not only was your name on the “Wall,” but you also received a hand-written thank you note and a tea sampler basket with 5 teas, an infuser, a teapot and a $25 gift certificate. Thanks to not only a network of supportive family, friends and fans of the shop, but also random people who came across the project on the website, Regan ended up more than meeting her goal ($4,050).
Is Crowdfunding the future for entrepreneurs?
Entrepreneurial products, including mobile apps, smart phone cases, video games and flexible lights, to name just a few, as well as brick-and-mortar stores like Regan’s, can be seen on various crowdfunding sites, with fundraising goals ranging from $3,000 to $50,000. Contribution processing fees vary from site to site, so you might want to draw up a comparison list of fees, pros and cons, etc., before deciding which site to use.
The three pillars of crowdfunding a successful campaign
According to Brian and Vlad at RocketHub, there are three keys that are necessary in order to run a successful crowdfunding campaign.
- A cool project. Brian and Vlad encourage folks to make their project really cool, which can be done with even just a family project. Make something that’s special that matters emotionally to people. It also helps if the project is spearheaded by an interesting creative person. For example, a compelling video to get funding for a documentary.
- The audience. Everyone wants a runaway viral hit, but it won’t happen without priming the pump of your own audience. Your friends, family, colleagues, your religious or ethnic community, your Facebook or Twitter network, whatever your community is – you need to engage them. The bigger the network is, the more energized it is, the more excited they are by your project and the more likely they are to spread it to their own networks and communities and make it go viral.
- The rewards. The rewards need to be good and they need to be fair, with a high perceived value, so no $100 pins or $50 bumper stickers. The rewards should also engender a feeling of intimacy – people want that authentic, intimate feel that’s very different from getting something shrink-wrapped from Amazon.
Rewards need to be varied in price ranges — small, medium and large. The more interesting and appealing the rewards, the more they can really monetize your network. And the rewards build a brand – the community can learn about what the creative is like by seeing what they’re offering as rewards.
So before you give up your dream project because don’t have the funding, think about asking your crowd.
- Take five minutes to check out a crowdfunding website so you can see what all the buzz is about
- Contribute to a project you believe in (you can give as little as $1)
- Consider posting your own project. It’s a great way to tell if it really has potential.
Photo courtesy of Dutiee.com
Got ideas for crowdfunding rewards? Have a project? Dish here.
Mrinalini Kamath is a freelance copywriter and marketing strategist who focuses on small businesses and entrepreneurs. For more information, or to sign up for her monthly e-newsletter, visit http://www.mkwriter.com.
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