6 Secrets For How Small Businesses Can Optimize Crowdfunding By: Slava Rubin| Sep. 26, 2011 The environment for today’s small business is more volatile than ever. Aspiring entrepreneurs are faced with several new challenges: obtaining a loan continues to become more difficult, banks are refuting any application with less than two years worth of a track record, and credit card rates are continuing to rise. Is this the worst of times or maybe it is the best of times? While all this volatility is indeed challenging, at the same time, the marketplace for small business owners is actually more dynamic and exciting than ever. Thanks to the convening power of the Internet, social media, and online transactions, getting capital for your start-up is actually easier than it seems. With crowdsourced fundraising, anyone with a passion, business idea, or cause can post their campaign on an online funding platform to raise capital for just about any goal. At IndieGoGo, we connect aspiring innovators, creators, inventors, and entrepreneurs with the millions of people worldwide who want to be a part of exciting new ventures. From kitesurfing to cupcakes, anyone can create a campaign to fund any dream or idea.
Below are the 6 secrets for how small business can optimize crowdfunding: 1. Prove Demand Through Presales and Mitigate Risk If you are looking for bank funding or venture capital to start your business, often times you will need to prove that you have a good and profitable idea. Through crowdfunding, you have the opportunity to prove demand before creating your product inventory. People who believe in your idea will fund your venture. By gaining this initial foundation, you are easily able to prove the need for your product before it goes into full existence. This first support helps because most institutions are risk-averse and hate being the first money in. Emmy's Organics was initially turned down by many local banks in upstate New York. However, after running their campaign to expand their gluten-free macaroon business, they raised the $15,000 needed to update their packaging, and are now selling in supermarkets making gluten-free eaters happy everywhere. 2. $$$$ Crowdfunding of course gets you money, plain and simple. Whether you raise the full amount, surpass your goal amount, or just barely make it, IndieGoGo allows you to keep every dollar minus a small transaction fee. After word spread about the eMAKER Huxley 4, the 3D printer startup's funding was exceeded by 429%. The eMAKER campaign proved demand by selling 300+ kits and raising nearly $160,000. 3. Test and Refine Marketing Strategy Starting a crowdfunding campaign allows you to test out your marketing strategy and gives you room for trial and error in order to refine it. When someone validates your idea by putting money down, they've also just confirmed your target market. In the world of Twitter, Facebook, and targeted emails, it’s easier than ever to test your marketing message and approach.
With the in.gredients campaign, the Austin based creators were able to test out their idea of the nation’s first zero-waste, package- free grocery store before they opened. Their campaign, which included a creative video and messaging around Green, was used successfully to target the environmentally conscious market. Having fully funded their campaign they are well on their way to the green grocery store they had envisioned. 4. Extra Promotion A bank loan can get you money but it ends there. Crowdfunding opens the door for many more avenues of promotion. Once you have assembled and developed an engaging campaign, IndieGoGo allows you to utilize and activate your social graph through social media. A robust online presence gives a campaign energy and starts the “snowball affect” of participation. As a campaign gains traction on IndieGoGo, we use a custom algorithm to determine its "GoGoFactor", this helps discern which campaigns are featured on the homepage, the site's blog, or in media. The GoGoFactor takes into account over 30 variables including funding, comments, shares and other campaign activity. San Francisco-based Mission Cheese received contributions from 130 sources after sharing regular updates on their progress. After being featured on IndieGoGo’s homepage they were included in several major press outlets. Following all the excitement regarding the new cheese shop, the Mayor of San Francisco included Mission Cheese in a city event that highlighted the city’s emerging entrepreneurs. 5. Curry Serendipity Aggregating a crowd through your campaign efforts sets in motion many unforeseen possibilities. By making an impassioned pitch to the people in your network and beyond, you are able to put yourself out there and discover what opportunities and resources might come your way. In 2009, the Greek economy collapsed, tourism rates plummeted, taxes skyrocketed, and eReaders pinched hard on book sales. As austerity became the new normal in 2010, Atlantis Books found that its methods were no longer sustainable.
Instead of having to close, they were able to raise over $40,000, are thriving, and have started awarding past funders from IndieGoGo their "perk," an overnight stay in the bookstore while traveling. 6. Customer Information and Data Once you create a campaign page, you have direct access to your “customers.” Through the IndieGoGo dashboard you can readily know who is buying into your product which is useful for fulfillment, future marketing, and engaging your customers. Mr. J Medeiros wanted to start his own music label in reaction to how corporate record labels treated their artists. By creating a campaign on IndieGoGo he could see exactly who wanted his CD. If he had gone through a record label, he wouldn’t have had access to this type of information. Now his music has been featured by MTV and he has been able to stay in touch with all his new fans. Crowdfunding has become a highly regarded source of start-up capital for small businesses and causes everywhere. In fact, the White House has started an effort to boost small business growth and drive the nation’s economic recovery through their Startup America initiative. The effort was launched earlier this year to spur entrepreneurship, innovation and employment. IndieGoGo is the only company with revenues under $1 billion that was invited to participate in this partnership and entrepreneurs will have more access to participate this coming September. Small businesses should consider this modern technology and take advantage of how it has helped millions of idea-makers achieve their goals. After all, being an entrepreneur means accepting the challenges and never taking no for an answer. Please follow SAI on Twitter and Facebook.