The Real Talk About Crowdfunding
By Michael S. Melfi JD, MBA
As many readers know, I have significant experience in the Crowdfunding industry, from authoring a book, to assisting portals with their launch, consulting emerging brands and even speaking to the Chinese Delegates on a recent visit to America. With all this experience, I wish there was a magic pill to a successful fundraise and despite the secrets my recent book alludes to, there definitely needs to be all the right pieces and players in place to run a well orchestrated campaign.
First piece is finding the right team - this may be your current team and you can also pull some assistance from family and friends. It may even require hiring a professional like Jeff Aronoff from Sidewalk Ventures or Christopher M. Olenik and the team at Agency 2.0 to assist on the project.
Once a team is in place, it is really important to understand which type of crowdfunding project you will be doing - donation, reward or equity. It is also important to ensure that you are building a strategy and plan based on this decision. During the process of creating a strategy, different tactics will apply to different projects. For instance, a start up would not do well with a community-based equity investment offering, as most investors will be relying almost exclusively on past financials and for a start up there is very little past performance to measure the quality of the investment.
Regardless of the project type, there needs to be value created for the funders, whether literal or figurative. In most equity crowdfunding cases, putting the right financials together is very important as Investors want to know that they are investing in some kind of asset or strategy that will lead to growth of the company and return for them. Understanding what the funding sources will be looking for in your project description, video, rewards and ROI are all aspects that are critical to the success of the project.
With every campaign it is in the best interest of the campaign owner to establish at least a 40% base of funders in the early stages of the campaign. The ability to demonstrate the acceptance of others will work as a catalyst for other funders, which creates a snowball effect.
One other piece is the ability to focus your time and energy on the campaign, understanding you will run into challenges and knowing you can, and will, overcome them. You may get distracted, but securing funding can be another full time job, but one that is very important for growth.
The critical pieces you need for a successful crowdfunding campaign are the team, understanding the best type of campaign for your business or product, honing your message to fit the campaign and funder targets, showing value, getting 40% of your funding with early funders, and your focus throughout the campaign and after it is closed.
So, while crowdfunding is a great option for raising funds, as with anything in an entrepreneurial journey, it is important to have the right pieces in place so as you hit obstacles and challenges, you have the ability to overcome these situations and continue to grow and create success.
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