What should I consider before crowdfunding?
Crowdfunding is an obvious choice for some and a confusing one for others.
Especially for start-ups, the link between having a fantastic idea and actualising it is often the financials.
The BrandRefinery team are well-versed in all things crowdfunding consultancy.
If you’re in the process of getting your product on the market and are deciding on whether crowdfunding is the best route – read on.
What is Crowdfunding?
For those that are unfamiliar with crowdfunding, crowdfunding is the process of funding a project by creating a campaign which members of the public can back with their own money.
We wanted to share 5 questions to ask yourself before you decide to crowdfund your project.
These questions are designed to gauge whether your goals are realistic for crowdfunding or if another route to market would be better.
1. Are you looking at equity or reward-based crowdfunding?
There are a few types of crowdfunding, the most common being
a) Reward-based crowdfunding
Reward-based crowdfunding refers to campaigns that offer tiered perks in exchange for funds.
Backers pledge for a specific amount and receive the product back after the campaign completes.
b) Equity crowdfunding
Equity crowdfunding refers to campaigns that request funds in exchange for shares in the company, allowing investors to partake in the brand’s growth.
2. What are your internal and external targets?
Your internal target is how much you would like to raise overall, perhaps how much you need to raise to fulfil manufacturing. This is likely going to be higher than your page’s funding target.
Your external target is your public funding goal, which can be exceeded if you get more backing. This should be lower than your internal funding goal.
The quicker you raise your external funding target, the more attention you will get from within your chosen crowdfunding platform.
3. Do you have an existing budget for the project prior to funding?
Crowdfunding has many different aspects to consider, such as a campaign video, product photography, graphics, influencer outreach and more.
This could also potentially call for an existing prototype ahead of the campaign launch for imagery and samples. These things all add further cost.
It is worth identifying how much existing budget you have to get the campaign live.
On top of this, you will need to fund campaign advertising and create regular social media content and a landing page for the campaign.
These are all important costs before the campaign closes and you receive your funding.
Realism is key to ensuring success.
4. What are your desired timelines?
The above assets such as the video production and campaign advertising will take time, so it is important to create a realistic timeframe for your campaign.
Most crowdfunding campaigns last 30 days, with Indiegogo offering InDemand afterwards if the campaign exceeds its goal.
We recommend that you will need at least a third of your crowd ready to back before the campaign launches, which will require database building through advertising and email marketing.
Read our blog on sourcing your database here.
5. Which assets are you going to need to create in order to build your campaign?
It is worth assessing your existing stock of brand assets and clarifying what you will need.
Some campaigns are launched by existing companies that have a wealth of good quality content to share. Others need to completely formulate the brand from the ground up.
Coincidentally, preparing a list of asset production is great to ensure you’re on track at each step.
Here at BrandRefinery, we specialise in product launches and crowdfunding, offering support at every stage of the process.
Our speciality is product validation – testing the market, identifying audiences and creating a bespoke strategy plan in response to our data.
If you are interested in validating your project and building your initial database with us, please get in touch.
We are more than happy to aid in any aspect of your product launch.
Here are the questions we just raised, for easy copy and pasting for your strategy planning!
- Are you looking at equity or reward-based crowdfunding?
- What are your internal and external targets?
- Do you have an existing budget for the project prior to funding?
- What are your desired timelines?
- Which assets are you going to need to create in order to build your campaign?
Thanks for reading!