SA Crowdfunding Blog

Monday, 12 November 2012 13:49

Crowdfunding Mistakes - What can we learn?

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Over the first five months of operating we have seen very healthy number of entrepreneurs adding their projects here on StartMe. Showing the real power of crowdfunding we have also seen three entrepreneurs receiving full funding to get their business ideas of the ground. These are businesses that may have otherwise not been able to get started and for many of you this holds exiting prospects going forward.

We have also however seen a large number of projects not funded by the crowd. Somehow many project creators seems to expect that simply by posting a few paragraphs and picture on the website it will result in money flowing in. If this is your approach to starting a business and you feel that minimum effort equals large rewards then it not surprising that those who invest on crowdfunding websites such as this was not at all convinced by either you or your idea.

So I want to highlight some of the biggest mistakes project creators make here to make sure you don’t make the same mistakes.

Some of the biggest errors include:

1. No Project images or Video
The internet is a visual medium. Finding a website with no images will quickly result in your navigating away. Posting your project here with no descriptive images and video will almost automatically ensure that your project is dead on arrival. Add images of your products or ideally a video of you and your idea. The more excitement you create the more investment you will attract. Showing the crowd what your product looks like and how it works helps them to see your idea as being real.

2. No Entrepreneur Profile People buy from people and in the same vain, people invest in you as the entrepreneur Transparency is the name of the game. The crowd must believe you are both credible, skilled and have what it takes to see your start up succeed. Provide clear details on who you are. The more the better, Provide images of you and your team and tell the audience what you bring to the project. Imagine applying for a job without giving any details on yourself. This is the same and people’s money is t stake.

3. Being inactive
Most entrepreneurs feel they can just post a project on a crowdfunding portal and watch the floodgates open and cash pour in from the crowd. This couldn’t be further from the truth and the traffic from a portal alone is not adequate enough to get funded.

Entrepreneurs should not expect to gain more than 5 – 10% of overall funding from the portal traffic itself. Heavy traffic portals like Kickstater may have a higher percentage but the truth is most crowdfunding portals act as a facilitator and conduit between Backers and Startups. The burden of getting funded is almost entirely on the shoulders of the entrepreneur.

Between 60 – 70% of you will not get funded which is just the reality of the crowdfunding space, but the buzz you generate for your startup is a marketing tool in itself. We have see many startups get funded “offline” as a result of trying to get money from an “online” crowdfunding campaign.

4. Funding Levels unrealistic
The idea behind crowdfunding is to bring the power of the crowd to your startup via micro-finance. Many entrepreneurs submit crowdfunding rewards priced at R500 and R1000 thinking this will achieve success faster. The reality is most Backers invest / pledge in the lower accessible tiers like R100 and R200Rrands. You are more likely to get 10 people at R100 than 1 person at R1000. This is not to say someone will not fund at a R1000 price point but the reward should be equal to the funded amount.

5. Uninspiring rewards
So imagine for a moment that you are someone who finds this crowdfunding site. There quite a few projects that you see as quite interesting. But you only have around R300 or so that you can spare this month. Which one do you contribute to? Clearly the rewards play a very important role here. You look at the rewards and based on that you make your choice.

Make sure your rewards are inspiring. If the contribution is important to you then offer a suitably important reward.
Read 3580 times Last modified on Monday, 12 November 2012 13:57
Ben

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