Is crowdfunding right for you? Ask yourself these questions.

August 04, 2015
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Entrepreneurs and early-stage companies looking for financial support to develop a product or service have a viable alternative to traditional methods of funding via crowdfunding. Here’s how to know if it’s right for you.

Are you looking for seed-stage funding?

Crowdfunding works best for “seed-stage” funding (under $250K) and can be more efficient than debt or equity funding. A successful crowdfunding campaign can also validate your idea and lead to a bigger capital raise. It is not uncommon for triumphant crowdfunding campaigns to have angel investors or venture capitalists wanting to participate in subsequent funding rounds, since the early market has been tested and proven. Furthermore, by leveraging backers with a “pre-order” event, a new product can be launched without a capital infused production process. In a traditional go-to-market model, a company would produce a product, market the product and then sell the product. Now, a new startup can market the product, sell the product, and then produce and deliver it.

Are you experienced with social media?

Successful crowdfunding entrepreneurs take the time to develop a comprehensive communications framework and leverage social media for maximum promotional power. They often have strong “social capital,” which consists of demonstrated leadership, an aspirational vision, online reach, high trust, and other related qualities. These entrepreneurs treat their campaign as a “live event” and build the buzz organically through online word of mouth, and by fostering a continuous dialogue with their backers and followers.

Can you tell a compelling story?

The common denominator in nearly all successful crowdfunding campaigns is that beyond having a dynamic product, they tell an authentic story. Unique or quirky products with heartfelt stories help potential backers to cut through the “clutter of online noise” we see on a daily basis. By appealing to the emotional state of a potential backer, these entrepreneurs are able to capture attention quickly and get them to the “funding button.” Since sharing is a big part of the crowdfunding dynamic, emotionally charged campaigns can be particularly powerful. Compelling video, a distinct voice for written copy and quality visuals are key.

Entrepreneurs and early-stage companies looking for financial support to develop a product or service have a viable alternative to traditional methods of funding via crowdfunding.

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