Crowdfunding Overview by Propel Arizona summer 2013
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Widows & Orphans Homeless Financial Armageddon Disruption An Economic Development Phenomenon unding for entrepreneurs! Fraud & Scams? CROWDFUNDING has arrived! revolution! Propel Arizona – CJ Cornell @PropelArizona @cjcornell
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Overview of Crowdfunding, for Entrepreneurs, and some of the practical aspects of fundraising for early stage startups/
Transcript of Crowdfunding Overview by Propel Arizona summer 2013
Widows & Orphans Homeless
Financial
Armageddon
Disruption
An Economic DevelopmentPhenomenon
Funding for entrepreneurs!
Fraud & Scams?
CROWDFUNDING has arrived!
revolution!
Propel Arizona – CJ Cornell @PropelArizona @cjcornell
Crowdfunding
• What is Crowdfunding? Fact vs Fiction.• How does it work? & Why does it work?• How can we use crowdfunding?• Success & benefits: For entrepreneurs &
communities
Beyond the headlines and hype: How can crowdfunding help our economy?
serial / parallel entrepreneur
• 10+ companies
• $250M Funding 4 Exits (great !)
• $3B Revenues 4 Failures (awful !)
• Lots of lessons. Chaos, Pain and Joy.
• EIR, Venture Partner
• Angel Investor
• 5 Companies
• 9 Boards
• 3,000 Tylenol Caplets.
• Ego and Brain Atrophy.
Investor, Venture Capitalist
CJ Cornell is ...
• Professor of Digital Media & Entrepreneurship• Arizona State University, SJSU, Stanford (Lecturer)• New York Institute of Technology • Knight Center for Digital Media Entrepreneurship• Research in digital media, behavior, entrepreneurship
University ProfessorAdvisor, Mentor, Author
• ASU – Skysong, Venture Catalyst, RSS etc
• Arizona Commerce Authority / Venture ready
• Arizona Innovation Challenge
• Book: Age of Metapreneurship. Blog/Articles
First, let’s talk about …
Entrepreneurship &
Arizona
1 #
AZ Entrepreneurship
10top
Places to do business …
46th in the U.S.A.
venture capital, equity investing
We’re Great at Starting up (planting Seeds) **
** and just AWFUL at outcomes – quality, scale, wealth & economic growth
…
WE’RE NOT THE ONLY ONES …
** (fostering entrepreneurial success is hard)
The Funding Gap
concept
IPO (market share, revenues etc )
Product(Risk, growth)
Entrepreneurial Growthconcept->product->market->profit
$$
$
$
Venture Capital
Angels(accelerators/incubators)
Starting a company is easier than ever …
… but growing a company is harder & riskier than ever …
The Series-A Crunch
Crowdfunding
Crowdfunding
concept
IPO (market share, revenues etc )
Product(Risk, growth)
Entrepreneurial Growthconcept->product->market->profit
$$
$
$
Venture Capital
Angels(accelerators/incubators)
Crowdfunding
Crowdfunding
What is Crowdfunding ?
The safety of crowds
The passion of crowdsThe wisdom of the crowds
Crowdfunding
Crowdfunding
Source: http://theyec.org/making-sense-of-the-jobs-act-and-crowdfunding-infographic/
• Source – http;//crowdfunder.com
• Source – http;//crowdfunder.com
5 April, 2012 (and … AugUst 2012, December 2012 …)
0
Equity (investment) crowdfunding in US
cases
2015
Equity crowdfunding practical in US
0
FRAUD
cases
• Equity Crowdfunding - not in the USA (yet)
• JOBS act (April 2012) technically enables CF – but has not yet been approved by SEC.
• No documented fraud in USA or other areas.
• Equity CF is for “high growth companies” seeking significant funding from experienced investors
• Will dramatically change in 3-5 years (CJ prediction)
www.propelarizona.com
WYNTK(what you need to know)
Rewards based,
“contribution” crowdfunding
The Kickstarter model – ‘donations’
“THE KICKSTARTER MODEL”Rewards-based, Donation Crowdfunding:
ALL OR NOTHING
Perks &Rewards
Updates (and Blogging)
Updates (and Blogging)
Comments & Engagement
Kickstarter (2012)
2.2 million people pledged a total of
$319,786,629
(up 221% from 2011)
Backers pledged $606.76 per minute
People in 177 countries backed a project in 2012
(That's 90% of the countries in the world)
Source: http://KickstartersHQ.com
WHY …Do people Crowdfund?
Lessons from Ethan Mollick’s “The Dynamics of Crowdfunding: Determinants of Success and Failure”
3 Why’s: 1. They connect to the greater purpose of the campaign
2. They connect to a physical aspect of the campaign like the rewards
3. They connect to the creative display of the campaign’s presentation
three main reasons why people unconnected to a
project or business would support it:
What Is Crowdfunding And How Does It Benefit The Economy - Forbeshttp://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-crowdfunding-and-how-does-it-benefit-the-economy
The Real(Crowdfunding)
Why’s
• Passion– For the technology– For the industry– For the cause– For the product
• Affinity– For the Entrepreneur– For the region, industry etc
• Connection
• Every reason BUT R.O.I. …
emotional ROI.Not financial ROI
WYNTK(what you need to know)
Crowdfunding is about …
(when crowdfunding …)
“its not what you do, but why you do it,”
WYNTK(what you need to know)
http://www.kickstarter.com/projects/1104350651/tiktok-lunatik-multi-touch-watch-kits
http://trendwatching.com/trends/infographics/presumers/
“Consumers who want products before they are developed”
Pre-ordersEarly adopters
Supporters
UH OH …The Kickstart Model..
1. Crowdfunding = New “1st Money” for ventures($10k - $50k average– but wild exceptions)
2. Equity Crowdfunding is Still Far away3. Rewards based Model IS Crowdfunding today4. All or Nothing Crowdfunding – Standard5. Perks and Rewards: Pre-order Crowdfunding6. Social Media & Content Intensive
www.propelarizona.com
WYNTK(what you need to know)
What does success look like?
• The iPhone-friendly Pebble watch earned $7.6 million more than its $100,000 goal.
• And the Galileo iPhone platform closed its Kickstarter campaign at $702,000, far surpassing its $100,000 goal.
• Ouya raised $2 million in one day for a new Android gaming console (it’s raised more than $5 million to date),
• the Nifty MiniDrive, external memory for Apple MacBooks. The tiny storage company is more than 2,000% above its $11,000 goal with 15 days left in the campaign.
What do successful campaigns have in common?
http://www.kickstarter.com/projects/hop/elevation-dock-the-best-dock-for-iphone
Projectio
http://www.kickstarter.com/projects/1209578799/projecteo-the-tiny-instagram-projector
http://www.kickstarter.com/projects/mikebond/ti2-sentinel-titanium-cache?ref=home_popular
http://www.kickstarter.com/projects/poots/kingdom-death-monster?ref=home_popular
http://www.kickstarter.com/projects/smartthings/smartthings-make-your-world-smarter?ref=category
http://www.kickstarter.com/projects/thejumpshot/jumpshot-a-new-weapon-to-battle-pc-frustration?ref=category
http://trendwatching.com/trends/infographics/presumers/
Successful campaigns took an average 11 days preparing for their launch.
http://blog.indiegogo.com/2013/01/12-insights-for-2012.html
Campaigns ran an average 49 days in 2012, as opposed to 60 in 2011.
Successful campaigns fundraised for 39 days.
http://blog.indiegogo.com/2013/01/12-insights-for-2012.html
Crowdfunding Myths & Mistakes
• Myth #1: If You Build It, They Will Come• Myth #2: Cash is Free• Making it about you• Unrealistic Expectations• Lack of clarity• No call to action• Expecting to be found: (No Marketing)• Ignoring Small Donations/Donors
http://kickstartershq.com/articles/5-project-crushing-kickstarter-mistakes-how-to-avoid-themhttp://www.crowdsourcing.org/document/3-big-crowdfunding-myths-via-funderhut/23804
www.propelarizona.com
WYNTK(what you need to know)
Successful Crowdfunding Campaigns Focus on
The new 4 P’s …
PEOPLEthe
1. PITCH
the
2. PROMOthe
4. PERKSthe
3.
focus on “them” – not your company
WHO are they?What motivates them?Interests, Values … PEOPLE
the
1.The new 4 P’s of Crowdfunding ..
www.propelarizona.com
PITCHthe
2.You are pitching to “them”
TELL A STORY !!
WHY is more important than $$
VIDEO(s) & VISUAL(s)
Tell the story in small ‘chapters’
VIDEO(s) & VISUAL(s)
And even smaller “sound bites”
Give them a Story they can tell to others.
PERKSthe
3.$$ Value is a negative driver !
UNIQUE
It’s about THEM
EXCLUSIVE
And what is important to “Them”
FIRST
Make sure it is …
BUZZWORTHY
PROMOthe
4.It’s a daily/hourly effort …
SOCIAL MEDIA
It’s a conversation …
UPDATES, BLOGS, NEWS
Provide Value, and Talking PointsRE-POST, TWEETable
It’s about … for their network
VALIDATION & EVIDENCE
Crafting a
Successful
Crowdfunding Campaign
2.
Some initial rules ….
1. Crowdfunding takes work, new skills.2. It takes a strategy, and preparation. 3. The rules are different.4. You can’t just post and run …5. It’s a public success or failure – that “stays on
your resume”
www.propelarizona.com
WYNTK(what you need to know)
Components
of a
Crowdfunding Campaign
Title & Short Description • (repeatable & compelling)
Long Description (“The Pitch”)• Make it a story … about “them”
Visuals: Video, Photos, Images Team, Deliverables, Details Perks & rewards Funding Goals: Amount and Timeframe Updates & SOCIAL MEDIA CAMPAIGN
• Repeatable Messages• Daily “routine”• Traditional marketing too
Crafting the “Pitch”
First: Who What Why When …
• The 3 Who’s:– Who are the donors? (affinity & passion)– Who is benefits? (the market)– Who are you?
• The 3 Why’s– Why would your donors care?– Why does the market care?– Why are you the right team to do it?
First: Who What Why When …
• What is your project & goal?– Understandable & Simple– Compelling & Intriguing– Repeatable & Memorable
• How and When– How will you achieve your goal? Realistic?– When, after funding? When will I get my perks?
Other Tips
• Tell a story• Make it about them• The History of the idea is intriguing• What is the Impact? – why is this important?• Try a FAQ• Call to action – get them involved!
Exercise –
Craft the Pitch
Crafting your Pitch Title & Short Description
• (repeatable & compelling) Long Description (“The Pitch”)
• Make it a story … about “them” Visuals: Video, Photos, Images Team, Deliverables, Details Perks & rewards Funding Goals: Amount and Timeframe Updates & SOCIAL MEDIA CAMPAIGN
• Repeatable Messages• Daily “routine”• Traditional marketing too
Tell a storyMake it about themThe History of the idea is intriguingWhat is the Impact? Why is this important?Try a FAQCall to action – get them involved!
The 3 Who’s:Who are the donors? (affinity & passion)Who is benefits? (the market)Who are you?
The 3 Why’sWhy would your donors care?Why does the market care?Why are you the right team to do it?
What is your project & goal?Understandable & SimpleCompelling & IntriguingRepeatable & Memorable
How and WhenHow will you achieve your goal? Realistic?When, after funding? When will I get my perks?
Pitch Notes - 1• Who (donors, market)• “Why” – the story
• Impact (on the market)• Impact (on the donors)
Pitch Notes - 2• Story, and History …• FAQ
• Perk Ideas (what’s important to donors)• Calls to Action
Visuals 3.
The Importance of Visual Media• 64% of successful campaigns in had pitch videos.
• Campaigns with videos under 5 minutes were 25% more likely to reach their goal than those with videos that were longer.
• Average campaign video length for campaigns was 3 min, 27 seconds. Campaigns that reach their goal are 16 seconds shorter.
• On average, successful campaigns uploaded 6 media to their gallery.
• http://blog.indiegogo.com/2013/01/12-insights-for-2012.html
Perks & Rewards 4.
Directed by
Patrick Million
Executive Producer
CJ Cornell
a Patrick Million FILM
American Grandmaster
Rewards Crowdfunding
• Incentives & perks• Pre-Orders• Pre-Sumers
• Market Validation
Rewards don’t have to worth $$
• $25 perk is the single most claimed perk, representing nearly 25% of all perks that are selected.
• While the $25 dollar perk is only responsible for raising 11% of total funds.
• $100 perks raise more money than any other perk price and make up nearly 30% of total funds. A $100 perk combined with the next three perk price points: $50, $500, and $1000 makes up about 70% of total money raised by perks
some
Rules for Rewards
1. Make perks unique & exclusive
Avoid T-shirts, Mugs & Hugs
2. Target them
3. Give them a connection
“The Cocktail Party Effect”
“The Restaurant Effect”
“The Carey School Effect”
The less tangible the perk,
the more public (visible) & EXCLUSIVE it needs to be.
The Campaign 5.
How much $$ ?
How long?
Discussion
• How much should we raise?– Have you raised money before? Return?– Do you/did you work at a highly visible position?– *** Your social network? Large? Followers? – Idea - big market? How unique?– How much (marketing) work will you do?
HOW to Crowdfund?
PUSH - Running the campaign• Social Media• Comments & Updates• Networking• Personal Pitches
Your mission: To get them talking about your project
Now that you’ve launched …
Continue the story
Social Engagement
– Transparency & Trust– Social Proof & Viral FX
– Engagement & “The Fundamentals”– Twitter– Facebook– Blogging
most successful projects receive about 25-40% of their revenue from their first, second and third degree of connections.
This could include friends, family, work acquaintances, or anyone that the owner is connected to.
• http://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-crowdfunding-and-how-does-it-benefit-the-economy/
1. Create: (of course)
- A Facebook Account- A Twitter Account
(for your campaign)
2. Tweet & Post –Frequently–Uniquely–Personally
3. Post Updates & Blog•About your progress•About the subject•About the industry•About the People
4. Go 1-1•Reply to comments•Retweet/Repost
Your fans and donors are your most powerful advocates!
5. Target, Measure & Adjust•Different Messages for different groups
•Google, Hootsuite, others•Learn and Adjust focus
Metrics
http://www.perlsteinlab.com/blog/anatomy-of-a-crowdfund-week-3-slow-and-steady
Metrics
http://www.perlsteinlab.com/blog/anatomy-of-a-crowdfund-week-3-slow-and-steady
the importance of google analytics to track and improve performance
• + perks from fivvr
• http://www.perlsteinlab.com/blog/anatomy-of-a-crowdfund-week-3-slow-and-steady
Campaign ChecklistSocial Media Create a schedule 2-5x / week Use an automated tool Eg HootsuitePost interesting info – Not just pleas for moneyNot just updatesVary your targetsCall to action 1/3-1/2 time
Use analytics and other metrics
Traditional Marketing
Pitch Events Press Releases Demos Testamonials Use an automated tool
What to Communicate:1. Your Progress2. Successes, Evidence of success3. Ammunition for your supporters4. Industry Info, Factoids5. People Info
Plan, Schedule & Update
Your Social Network is a Force Multiplier –
but you have to give them help.
Success Factors 6.
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http://www.indiegogo.com/blog/2012/05/indiegogo-insight-campaigns-that-take-these-six-actions-raise-8-times-more-money-than-campaigns-that-dont.html
http://www.indiegogo.com/blog/2012/05/indiegogo-insight-campaigns-that-take-these-six-actions-raise-8-times-more-money-than-campaigns-that-dont.html
http://www.indiegogo.com/blog/2012/07/indiegogo-insight-winning-the-middle-game.html
successful campaigns raise, on average, 49% percent of their goals during the first and
last 10% of the campaign length.
The most important secret is …
Showing Momentum
(the perception of momentum)
The most obvious secret is …
Credibility
= trust, competence & follow-through
www.propelarizona.com
Crowdfunding
Entrepreneurship & Innovation
Arizona Economic Growth
Practical Crowdfunding
Workshop
www.propelarizona.com
@PropelArizona
Slideshare/PropelArizona
daysCrowdfunding is measured in …
Entrepreneurship
Crowdfunding Arizona
Can it jumpstart entrepreneurship?
1. Kickstarter “Fails”
Arizona does poorly …
2. Members =/ Supporters
% of supporters is the key ….
3. Entrepreneurship is Different
Products, Companies, Entrepreneurs …
4. The role of “Ecosystem”
Incubators, accelerators, mentors etc ..
5. The power of Community
Shared Goals, Passions, Outcomes …
Shared Goals, Passions, Outcomes …
Crowdfunding for Entrepreneurship & Economic Growth
Shared Goals, Passions, Outcomes …
People as Important as Projects …
Organizations & Affiliations …
Entrepreneurs success as much as funding …
$15k - $100k *(Average $50k) ….
Crowdfunding for Entrepreneurship & Economic Growth
