Collaboration on the web is an area of exponential growth. Crowdfunding, which is a way of raising finance by asking individuals to commit whatever amount of money they wish to invest in a new product or start-up company via the web, is one of the standouts for growth in this evolving economy. Bringing together people who want to support the product or company, crowdfunding is becoming ever more popular and, as a result, is a rapidly growing market that is effectively transforming how individuals invest and spend their money, and the ways in which businesses can raise capital.
Technavio’s report on the global crowdfunding market forecast that it would grow at a CAGR of around 17 per cent between 2017 and 2021. In fact, the lead analyst, Brijesh Ujjwal Doshi, said that “North America is one of the most developed markets for crowdfunding. Equity crowdfunding is gaining prominence and is seen as an investment opportunity by many investors. The crowdfunding market in this region overtook the venture capital model, indicating that crowdfunding is the preferred source of revenue for startup enterprises, entrepreneurs, and established companies to generate funds.”
Just like there are many different types of capital rounds for businesses to raise money in all stages of their growth, there are a variety of different crowdfunding sites to choose from, such as Crowdcube, Crowdfunder, Kickstarter and Indiegogo, which was the platform Chasing Innovation selected for our own crowdfunding campaign.
As in most business cases, timing is key as you’re far more likely to be successful crowdfunding for something new, creative, unique and innovative than for a product or service that has been around forever and which everyone already has. In 2017, the drone craze had not yet taken hold so we were ahead of the game in setting up our crowdfunding campaign then for Chasing Innovation’s GLADIUS Advanced Pro underwater drone. Since the company’s setup in 2016, we had spent the first year prior to the launch of our GLADIUS Advanced Pro raising awareness of it and building the momentum. This meant our crowdfunding campaign was more of a success – so much so that it achieved around $500,000 in two months on Indiegogo. This was also due to underwater drones being a rarity at that time and our rapid success showcased this.
Selecting the right crowdfunding platform for your brand
Our chosen platform was Indiegogo as it is best suited to innovations in tech and design, before they go mainstream. Kickstarter is good for creative projects, like music, arts and films, RocketHub is for projects and endeavors, while Crowdcube is useful for those seeking business equity funding and Angel List for VC and investor-backing. However there are many, many more platforms to choose from so do your homework and check them all out before deciding which one is the right one for your product or business.
Whichever platform you do choose, there are lots of crowdfunding methods to decide on too. The crowdfunding type you select for your business should take into consideration the product or service you plan to offer. There are three different kinds of crowdfunding for businesses:
- Rewards-Based Crowdfunding, where you offer those people who choose to contribute a reward in the form of the product or service you are crowdfunding for. This is one of the most common forms of crowdfunding as it allows businesses to incentivize contributions without incurring much extra expense or selling ownership stakes.
- Equity-Based Crowdfunding, where contributors become part-owners of the business by trading capital for equity shares. This means contributors receive a financial return on their investment and ultimately a share of the profits.
- Peer-to-Peer Lending, which is like loaning money to a friend, as businesses looking to borrow funds outside the more traditional methods, like through a bank, can borrow instead from individuals willing to lend them money.
How to generate interest during the pre-launch phase
Although the media will most likely not write about your crowdfunding campaign during the pre-launch phase, as there is nothing noteworthy to say about it at this point, it is never too early to create a media kit, detailing your company and product, to send to them for their own information.
Aligning your crowdfunding campaign launches with PR activity is a key tip for success as your PR team can secure interest in trial product/service units with relevant media so they can review them and let their readers know about it after the launch. PR could also include pitching interviews around what you want to raise funds for, if review units are not yet available.
Making your crowdfunding campaign a success
Make sure you are socially active as companies with Facebook, Twitter, LinkedIn and Instagram accounts, for example, can promote the new product or service using these to reach target audiences. After all, how will people know they can invest if you’re not letting them know? Ensure that you give your investors regular updates on your campaign’s progress and always share news and milestones reached. If they are as interested as you are in these updates, they are likely to share the news and help market your new product or service on your behalf.
Make your product or service as enticing as possible. To capture the attention of potential investors, the campaign should have a short and snappy sales pitch and some standout images or great video content related to your idea, which will help it stand out from any potential competitors.
Offer good rewards for investment as the amount people choose to invest will be higher if you are giving them more for their money. Good options for reward are to give investors early access to the product or service, discounts and extra goodies that will encourage them as they’re getting something real and worthwhile in exchange for their money.
Some people will only want to invest a small amount though, so be sure to offer a range of investment levels to choose from and not just one amount. The more options you have, the bigger the range of people you can interest in investing as crowdfunding campaigns with levels all the way from $5 to $1,000 are accessible to all financial levels.
Just like with the regular updates that you want investors to share, make your crowdfunding campaign easily to share via social media. Think of your investors or interested parties as influencers. If they like your idea, they are more likely to share it with their friends, family and followers, who in turn may do so too.
As a new way of doing business and financing products and services, crowdfunding can have its risks. One of the biggest risks involved with crowdfunding is failure. This is perhaps the scariest part of a crowdfunding campaign as most businesses that seek financing through crowdfunding are start-ups or early-stage businesses, and those are more likely to fail than established businesses.
Another risk is that your new product or business idea is out in the open for anyone to copy or steal when you launch a crowdfunding campaign. Protecting your intellectual property is a must. Crowdfunding involves a lot of people knowing a lot about your business and idea, so gives other businesses the chance to copy ideas before you have seen them through to fruition. Look into trademarks and patents before going live to avoid anyone stealing what is rightfully yours.
Be confident that the amount you are asking for is enough for you to grow the business and deliver the promised return to investors. No-one will be happy if you go broke after investment before being able to provide them with what they have invested their money in.
Through Equity-Based Crowdfunding, where you are selling a share of your business to investors, make it crystal clear that you control and run the business even after you’ve reached your target. Investors who own shares may expect to have a say in how the business is run or in the development of the new product or service, which can hold up delivery.
The benefits of crowdfunding
Despite these risks, crowdfunding is growing in popularity and some of the reasons as to why it is worth the risk are that you are able to tap into a wider investor pool and enjoy more flexible fundraising options. Crowdfunding campaigns also require you to review your business, idea and new product or service before setting up the campaign, which is invaluable in getting it right from the start.
From launch to the end of your campaign, you need to share and promote it in a variety of ways, from social media updates and email newsletters to other online marketing tactics tied to PR and reviews. If you have a website and official landing page set up for the new product or service, be sure to always include a link to that as well as your crowdfunding campaign page so that, after your project has closed, anyone reading those older marketing calls to action can still find you via your website link. Having the website link included also gives would-be investors the chance to go to your business’ location online to learn more about your company, product, service and team.
Another after-crowdfunding success hint is to utilize any feedback and interest to develop the product or service further, to meet demands and expectations, rather than sticking like glue to the original idea. Evolving your product or service will help make it the biggest success it can be.
Because our founding team were all professional and experienced managers from established innovative technology companies like Huawei, LG and CSIC (China Shipbuilding Industry Corporation), and we had spent over a year perfecting the GLADIUS Advanced Pro design before launching it on crowdfunding, we did not need to make any amends to its quality or design after closing. Instead, we stuck to our original product design and quality to produce a LED-equipped smart submersible all-types of water, from sea to freshwater, drone with omni-directional capabilities that was an instant hit with underwater photographers and adventure-seekers. The camera can dive up to 328 feet to capture 4K images and video, and live stream with incredible clarity, while the game-like controller makes it easy to use and the polymer lithium-ion batteries supports up to three hours of continuous shooting and only require an hour and a half of recharge time. It is equipped with low battery protection, which notifies users when the battery power drops below 10%, and when the power is below 5%, the system will enter lock mode in order to avoid permanent damage to the battery.
In addition to being a fast way to raise finance with less upfront outlay than traditional business models, crowdfunding is also a great place to build traction for, and validation of, your new product or service. You can to test the public’s reaction to your product/service as, if they are quick and keen to invest, the investment rate is a good way to determine if your product/service will work well in the marketplace after release.
Crowdfunding acts as an invaluable form of marketing to promote your product or service ahead of official launch and gains you early adopters and loyal advocates ahead of release, so we’d recommend giving it a go if you have a unique and timely innovative idea like ours was.
Author's bio
Jacky Yang is the Co-Founder and CMO of Chasing Innovation, a pioneering Chinese company creating cutting edge underwater drones. Founded in 2016, the company aims to become a leader and innovator in robots and solutions for underwater applications. The brand was founded due to the market need for a consumer-grade underwater drone. Within the first year, Chasing Innovation completed its first crowdfunding campaign raising over $500,000 and achieved mass production delivery. Yang grew up with a keen interest in electronics, which lead him to major in Electronic Science and Technology at Beijing Jiaotong University. He also attended the University of Electronic Science and Technology of China where he focused his studies on Microelectronics.