What Actually Works in Crowdfunding

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Crowdfunding has helped many organizations find the funding they need for success and sometimes in big ways. Many people and agencies, however, have also found that there is no market need for their ideas right now and failed to achieve their funding goals. A myth has developed around the industry that it can become a magic source of money so that all capital needs can met, but that just isn’t true. If you can avoid these mistakes, then crowdfunding can be a useful tool to use.

1. There’s Always Someone With a Fantasy

Everyone has a dream that they wish to pursue and there is nothing wrong with that. It’s the expectation of raising money just because a dream is “awesome” or viewed as something that can “add to the common good of society” that is a fantasy. Crowdfunding comes down to real dollars and cents. If you don’t have a portfolio of work, an ability to prove you’re worth an investment, and no subscribers to an email marketing list, then you’re expecting lightning to strike. That’s an unrealistic expectation.

2. It’s Not a Big Money Machine

One of the most touted statistics on Kickstarter right now is that 41% of the campaigns which go live wind up receiving the funding that they need. On the surface, that looks pretty awesome. Here’s a more sobering fact: there have only been 1,600 campaigns that have successfully raised over $100,000 in order to meet a goal. Crowdfunding is not designed to be an easy way to get mega amounts of cash. It’s about getting what you need and nothing more.

3. 1 Out of 5 Campaigns Doesn’t Even Get Started

Another aspect of crowdfunding that is often overlooked is the initial application process. There are a lot of people who want to run a crowdfunding campaign, but they get rejected during the application process. Kickstarter says that they reject 20% of the campaign applications that come their way for one reason or another. In practical terms, that means about 1 in 3 campaigns that are attempted will actually succeed.

4. People Don’t Just Decide to Contribute

Crowdfunding always boils down to value. If you can provide someone with a lot of value in a reward or through equity, then you’ll be more likely to get random investors who stumbled across your campaign. If you’re a rap artist from the US Midwest who comes from a family that earns six figures every year and you’ve had a privileged life, a hard core rap album about the struggles of life just isn’t going to relate. Value to the consumer always comes first.

5. You Need to Have an Attractive Project That Creates Local Opportunities

You could throw up a crowdfunding campaign that gets approved. There might even be family and friends who help to support the campaign. The local media, however, isn’t going to support the campaign with free press unless you have a means of being able to create local opportunities that are interesting, profitable, or both. Just because you send a press release to a newspaper doesn’t mean people are going to publish it… or even bother to read it.

By avoiding these fantasies, you’ll be in a better position to create an interesting, valuable, and profitable crowdfunding campaign.