WHAT IS CROWDFUNDING?

“THE PRACTICE OF SOLICITING FINANCIAL CONTRIBUTIONS FROM A LARGE NUMBER OF PEOPLE ESPECIALLY FROM THE ONLINE COMMUNITY”

- MERRIAM-WEBSTER DICTIONARY

BASIC OVERVIEW OF THE INDUSTRY

2012: - 2.7 Billion $ raised

- 1,000,000 campaigns

2013: - 5.1 Billion $ raised

~ 2025: World Bank estimates crowdfunding market could reach 96 billion $.

*1.8x size of global venture capital industry today.

PROS AND CONS OF CROWDFUNDING

For Whom Pros Cons

Creators -Better Project/Supporter match-Provide info about projects-Increase supply of early capital-Early market research-Engage users in creation of product-Easier to create group-culture early

-Disclosure Risk (patent, customers, costs, key employees, strategy)-Difficult to raise follow-up capital-Difficult to deal with large number of investors-Must deal with differing visions

Funders -Access to investment opportunities-Early access to new products-Community participation-Support for product/service/idea-Formalisation of contracts

-Creator incompetence-Fraud: lack of repeated financial interaction increases chances of fraud-Project risk: Creator controls information release

Platforms -Revenue model: 4-6% of funded projects-Simple mission: Maximize number and size of funded projects

-Reputation Risk

TYPES OF CROWDFUNDING

Donation

• Backers donate money to ideas they want to see turned into reality.

Reward

• Backers get a product/service or personal thank-you for backing a project or business

Equity

• Backers get shares in company in exchange for finance

Credit/Debt

• Backers loan money and in return get back capital (most cases with interest)

THE BIG GUYS

Kickstarter VS Indiegogo

KICKSTARTER- “all-or-nothing” funding. If your campaign does not reach

its full goal by the set date, the pledged donations cannot be collected and must be returned to the donors

- campaign harder and promote their passion to make sure they receive the funding necessary

- selective of projects that are allowed to be funded

- all projects have a clear goal and can be completed

- 5% fee for successfully funded projects, while failed projects incur no fees

- Average crowdfunding campaign: $5,000

INDIEGOGO

- Open to all

- Success is driven by perks, rewards

- flexible funding (can either keep or not keep funding if goals are not reached)

- site applies a 4% fee to the funds raised for successful projects, making it a slightly cheaper

- Flexible Funding allows creators to keep the funds they have raised, for a 9% fee, even if the project is ultimately unsuccessful. However, creators are held accountable for delivering all promised donation perks.

- Unsuccessful Fixed Funding campaigns are not charged any fees, creators are not required to fulfill any donation perks, and all contributions are returned.

THE COMPARISON

THE PITCH

The video pitch is the best way to sell your idea online. Having a good video pitch can make or break your campaign.

EXAMPLE 1 EXAMPLE 2

THE LIST

10) Vision that inspires

- The key is inspiring people to take action

- Karen Klein, the bullied bus lady

9) Publish the facts

- Entrepreneurs backed by third-party vetting actually have a better success rate

8) Urgency

- crowd-funding platforms require time limits on our funding goals, but also because studies show that campaigns that reach 30% of their funding goals within the first seven days are the ones most likely to get to 100%

- As soon as a project is posted, the clock starts ticking.

THE LIST (CONTINUED)

7) Social proof (ALS Ice bucket challenge)

- Humans want immediate social proof before they join new things

- Using our own personal networks is critical

- Getting well known industry experts to back to you is always a plus

6) Creativity

- much competition for attention that people have learned to tune out the noise

- crowd-funding platforms report that the more creatively presented projects have higher success rates—beyond 55%.

5) Making it easy to say “Yes” (Veronica Mars)

- People don’t like to pony up money for things that they question

- prefer to make those buying decisions in small quantities

- setting lower requirements for entry, while clearly demonstrating high value

4) Exclusivity

- People pay big money for exclusivity, not common promotion.

THE LIST (CONTINUED)

3) A Solid plan (shredz)

- marketing and promotion are critical for a successful crowd-funding campaign

- social media is key to the viralability of your campaign

- Timing is everything

2) Share the details

- Goals and goal-setting are important characteristics of any campaign

- objectives, and challenges

- By addressing the challenges upfront, it helps investors connect with the project and see that failure has been considered, details have been shared, and a plan has been put in place.

1) Authenticity

- We want to see the person behind the mask

- Studies show that the most successful campaigns connect to a person or story.

TACTICS AND METHODS

Partner with other brands

- Access new markets

- Inherit brand image

ex: Uniqlo sponsoring free admission to the museum of modern art.

Referrals

- Allows for rapid growth of customer-base

- Cost-effective

ex: Dropbox offering more inbox space for every refferal.

Freebies to connected “influencers”

- Endorsements by influencers help generate buzz, which can translate into sales

ex: Uber offered free rides to VIPs at local tech and venture capital events.

TACTICS AND METHODS (CONTINUED)

Pre-launch exclusivity (beta products)

- Generates buzz

- Keeps large donors happy

Provide valuable content

- Allows you to build an engaged audience

- Helps you establish a reputation as an expert in your industry

- Helps customers feel more connected and generates brand ambassadors

QUESTIONS?

* Don’t forget to pickup a checklist!