It represents just one of the alternate funding options for entrepreneurs and business, and is increasingly viable as interest takes off. Does your business have an idea that could benefit from crowdfunding, and where will the scene take us in 2014?
The Crowdfunded Meet their Crowds
Backers across the range of crowdfunding services including Kickstarter, Indiegogo, WeFund and others are racing into 2014 on the back of their biggest year. From collectively raising $1.5 billion total back in 2011, individual projects can now raise millions on their own and the number of small projects (needing perhaps a few thousand dollars) are rocketing. See some of them on Kickstarter's lookback clip to see what's possible.
Some successful crowdfunded campaigns are showing off their gadget and Internet of Things focused wares at the 2014 International CES, like Indiegogo's biggest success, the Canary security system. But you don't need a high tech toy to succeed, just a solution to a problem that enough people or businesses have, or something that will improve their lot.
As national (the JOBS Act) and State laws are catching up with these services, they are maturing fast. This creates a world of opportunity for investors, small businesses and even established companies or business figures trying new things. Startups in particular can take advantage of the funding opportunities to avoid the savage angel and venture capital markets by appealing directly to their potential market.
Tips for Successful Crowdfunding
Kickstarter and Indiegogo are the go-to markets for projects, but check for others that may favor your region or specialization. Still, if they can manage to support an idea for a crowdfunded trip to Mars and a Minority Report-style display for current TVs, we're sure your idea will fit somewhere.
If you need funding to develop an app or gadget, either will do. But other services offer equity stakes or loans for the money. If you don't have a product that will tempt many casual investors, say a very niche or complex service, they may be more suitable.
- Before starting any campaign, ensure you've budgeted correctly for all costs, including the cut from the crowdfunding service, import and parts costs, or any taxes you might have to pay.
- Once you've figured out how much you need, prepare your campaign as you would a business plan, honestly highlighting strengths, ambitions and key assets, as well as risks and challenges (Kickstarter has a section just for those). Offer decent incentives for participants, tee-shirts just won't cut it.
- Prepare to publicize your campaign the minute it goes live and keep pushing across social media, press, and through influencers, friends and business associations. Engage with backers and those interested as early as possible -- campaigns have time limits, make use of every hour of it.
- Focus your campaign on social media platforms where your audience is, but don't repetitively spam them, offer news and updates, with progress reports
- Once the campaign is over, win or lose, keep investors up to date and be honest about delays or issues.
Avoiding the Crowd?
Questions over crowdfunding will remain, however. Will the bubble burst at some point? There have been a few minor scandals, and product failures to launch, but if one massive project goes down, will that affect the scene?
Legislation or taxation may eventually make it seem less attractive, there's even the small possibility that banks will sense a threat to their business and respond through political pressure, or by creating their own versions of project funding.
With the tech scene such a key part of crowdfunding initiatives, does it tempt you to test your latest idea or product in the market, or is your business rooted in traditional funding methods? It will be interesting to see what 2014 brings in the form of innovation and bright ideas.