A decade ago, independent-minded entrepreneurs might have scoffed at the idea of asking the public to fund their latest project. Today, more than ever companies are turning to crowdfunding sites like Kickstarter, Indiegogo and Fundable to help turn their start-up dreams into reality. These sites allow companies to connect with potential investors by making them part of the development process, whether they’re a tech start-up building a new product or a chef opening a restaurant.
There are plenty of benefits to crowdfunding, but it’s not necessarily the right choice for every company. Here are four questions you should ask yourself before embarking on a crowdfunding campaign.
1) Are you in it for the right reasons?
While the main goal of crowdfunding is to raise money for your project, don’t make it all about the money – it’s about more than just getting something for free. Benefits of a campaign include promoting your company and product, connecting with new customers and learning about their needs and wants. Savvy customers will sense whether you’re truly invested or just out to make a quick buck.
2) Is your project ready for the spotlight?
Don’t just come to your potential investors with some half-baked idea. Show them you’ve put serious thought and effort into it before turning to them for that final push. The most successful crowdfunding projects were in development long before the campaign went live. For example, Kittyo, a recent Kickstarter success, had already developed a functioning prototype that allowed cat owners to interact with their pets remotely. All they needed was $30,000 to help pay for custom tooling so their factory could manufacture the first batch of products; they ended up raising nearly $300,000.
3) Is it a good fit for your customer base?
Crowdsourcing is just as much about reaching new customers as it is connecting with your old ones. Nonetheless, it’s rare for a campaign to get off the ground without at least a little push from the existing client base. You’ll be counting on your followers to believe in your project and to help promote it throughout their own networks both online and off. Ask yourself if your connections will support your project or if you’ll be stuck promoting it all by your lonesome.
4) Are you prepared for the outcome?
Whether your crowdfunding campaign succeeds or fails miserably, you’ve got to be prepared for the outcome. If it fails, be ready to move on and take what you can from the experience, including valuable feedback and suggestions. And if the campaign is a hit, be ready to deliver on your promises as quickly as possible-even if, like Kittyo, you have a couple thousand more orders to fill than you had expected.
Considering crowdsourcing? What are some questions you’ve asked yourself before taking the plunge?
Diana Gomez is the Marketing Coordinator at Lyoness America, where she is instrumental in the implementation of marketing and social media strategies for USA and Canada. Lyoness is an international shopping community and loyalty rewards program, where businesses and consumers benefit with free membership and money back with every purchase. Check out Lyoness on Twitter @Lyoness_EU.