Crowdfunding promises a straightforward way to gain exposure, consumer insight and of course, monetary backing, and for good reason – it raises over 5 billion dollars per year. While crowdfunding may be an excellent route to take in your efforts to bring an idea to life, unfortunately it is not the answer for every project looking to raise money.
Many projects are wildly successful in large part due to the power crowdfunding has, but there are a few project characteristics that are warning signs that your project may not be best suited for crowdfunding. To ensure success for your crowdfunding idea run it through this warning sign checklist and see if it can pass the crowdfunding test.
Warning Signs That Your Project Is Not Meant To Be Crowdfunded
- Do you have a working prototype? It is much harder to sell an idea than a proven product. A working prototype proves to backers the idea will become a reality. If you are unable to provide a working prototype, potential backers may have a hard time convincing themselves to back an idea instead of a tested and true product. Also, note that some platforms, including Kickstarter, require all projects to show a working prototype.
- Do you have a unique, tangible reward to offer? “What do I get out of it?” – The question many potential backers ask themselves prior to backing a campaign. Many backers are interested in the idea of becoming one of the first to support a project or idea, the problem is there are many deserving crowdfunding projects. One way to set yourself apart is to provide a unique reward that will differentiate you from other great campaigns. No or poor rewards immediately eliminates reward-driven backers as potential supporters.
- Do you have support lined up for day 1? Projects rarely meet their funding goal on day 1. In order for your product to be seen, you must have people willing to share it; this begins with a large group of friends and family that are there to share and support your product with their personal networks from the first day of launch. Friends and family are often responsible for funding the first 30% of financial backing. No day 1 support means no free and immediate publicity.
- Do you have a free product to give away? To ensure success you’ll need a group of leads ready to go on launch day, usually in the form of email addresses for potential backers. To gather these emails, you’ll need to provide an intriguing offer. In most cases the best pre-campaign offer is one of your products for free. If you are unable to give away one product for free it will be difficult to persuade potential backers to sign up for campaign updates knowing there may be no reward for them doing so.
- Is your product too similar to the competition? This warning sign speaks for itself. When a crowdfunding project is too similar to the competition, it is difficult for potential backers to buy into the idea that they are becoming part of a one-of-a-kind product experience. What’s the point in being the “first” to support a project if others are becoming the “first” to support a similar campaign? When there are similar project campaigns on crowdfunding sites there is good chance you will be splitting your pledges and backer support with the competition from the get-go.
- Do you have to meet a high funding goal in order to fulfill rewards? : People are motivated by reward. If you set a high funding goal and offer low monetary perks/rewards, potential backers may become wary of supporting your project. For example: If a crowdfunding campaign had a $20 standard reward and a funding goal of 8 million dollars (like Exploding Kittens) the campaign would need 400,000 backers to reach its goal. This high-funding, low monetary reward combination means a large number of backers are necessary in order to fully fund the campaign, and turn the project and perks from ideas, into reality.
- Do you need to launch in a hurry? Often times companies create strict timelines for projects that don’t include enough pre-launch preparation time. Preparation time is crucial to crowdfunding success. Preparation should include: creating a project following, fleshing out ideas and creating a distinct sense of your product and brand. By giving your project a short or non-existent pre-launch period you are setting your campaign up for a difficult launch due to little product awareness.
- Do you offer a prohibited perk/reward? Crowdfunding sites have very specific rules you must adhere to. In some cases, offering a specific perk or reward may be prohibited, but you can still run a campaign related to it. For example; you can run a crowdfunding campaign for a brewery, but offering beer as a perk or reward is prohibited. Make sure you verify the legality of your perks/rewards regardless of if it is your product, before launching your crowdfunding campaign. To make sure you’re following the rules, check out Kickstarter and Indiegogo’s prohibited item lists!
- Are you already selling your product elsewhere? Often times potential backers are more likely to back a project that is close to, or looks like it will reach its funding goal. By selling your product on a separate page you are discouraging backer support, which will lessen your crowdfunding pledge total, and in turn lessen potential backers’ likelihood to support the project, not to mention most platforms don’t allow it. Many backers enjoy crowdfunding because they are helping to bring a project to life, and if it already exists, what is the point of getting involved?