2,529 crowdsourcing and crowdfunding sites
Inspired by RJMetrics’ blog post: “The Notorious CEO: Ten Startup Commandments from Biggies Smalls”. I realized that Biggie’s lyrics about how to be the perfect drug dealer fit perfectly with the yet unwritten rules of setting up a crowdfunding platform. Let’s see the ten crack commandments and what they entail for aspiring crowd funders…
The original ten crack commandments by the Notorious B.I.G.
Ten Crowd Funding Commandments
“Rule nombre uno: never let no one know how much dough you hold”
Displaying the target amount and watching the money progress in is the most vital, fun part of crowdfunding projects. But does this rule hold on a company level?
From my personal experience with Sellaband I can assure you that our life became disproportionately more expensive after Sellaband received a €3.5mil investment from Prime Technology. So if you ever receive a big investment, or if your profits start sky rocketing, hush, head down and use the money wisely.
“Number two: never let ‘em know your next move”
The only way to successfully crowdfund your project is by keeping the crowds excited every step of the way. So be innovative and keep surprising your investors: are you an artist? – then post videos of your concerts! Interact with your investors. Keep them entertained. Are you a for-profit entrepreneur? – then send a few working prototypes of your product to your investors, ask them to comment on your blog space. Never, and I mean NEVER sit and wait for the money to come in.
“Number three: never trust nobody”
Crowdfunding platforms have three stakeholders; the one in need of cash, the ones who are willing to support the cause, and the platform that facilitates the whole thing. All stakeholders have different interests, but it’s in everyones interest that unworthy or outright fraudulent projects are filtered out. If your operations are transparent and legit – believers will trust your platform and its content. Trust me
“Number four: never get high on your own supply”
Crowdfunding business models are complicated by rules and regulations that prevent organizations from holding refundable cash (and for valid reasons too!). Fortunately there are numerous intermediaries that can help you channel the money well. For example you can select an online payment provider. My company Africa Unsigned works with Adyen, but just google and you will find more. You can also choose to work with an escrow partner; a third party intermediary between the debt issuer and debt holder whose primary task is to keep the money in an outside account until certain pre-agreed conditions are met. In any case investors need to be assured that their money will be spent as promised and have the option to pull the money out before the project is fully funded if they lose faith.
“Number five: never sell no crack where you rest at”
Sure, as you start off, you promote your project amongst your FFF circles (friends, family and fools). Get them to believe what you believe, get them to help you and sponsor you, buy in on your dream. Eventually, better soon than later, however, you need to move on. Your FFF circle is a good starting point but you will need “real” customers to grow organically. I will discuss how in later posts. It’s crucial for your success.
“Number six: that credit… forget it”
What is the most effective way to get free publicity for your crowdfunding project? Right, fake it until you make it by giving lots of credit to fake investors. I’ve seen it happen, ( and I’m not going to mention any names). Sure, you can bluff your success and get the media interested with “succesfully” funded projects. You might even get them to publish an article or two but, believe me; you’re having a one night stand! A relatively expensive one too. Publicity is volatile, and it just looks really lame if it takes five times as long for you to get next projects funded after you’ve had your first little wave of publicity.
“Seven: keep your family and business completely separated”
Word up biggie, so true. But not specifically for crowdfunding projects so let’s move on to the next.
“Number eight: never keep no weight on you”
Biggy is referring to not having too much cash or product on you, to prevent getting robbed. All crowdfunding projects involve the handling of other people’s money. Unfortunately money gets stolen. Yes, also online. So please make sure your servers are absolutely secure and your payment providers are legit! Thank you.
“Number nine: if you ain’t gettin bags stay [away] from police”
Biggy is referring to talking about other drug dealers with the police. “Snitching” is bad for your reputation. Bad reputation means bad business. One of the most effective ways to ruin your reputation with a crowdfunding project is to change the rules of the game. Our challenge however is that the concept of crowdfunding is still young and dynamic which means most concepts are bound to change at some point in time. Keep these changes as silent as possible until things are set in stone and it is optimal to make the announcement. Handle this well so your community will not start spamming the internet with how untrustworthy you are.
“Number ten: consignment [is] not for freshmen”
Here Biggy is referring to a BIG delivery of product. You should never except it if your market isn’t big enough yet, because the sellers will be expecting a payment. Soon!
Are you dreaming of playing big? Be sure you have the capacity to go big! Imagine YouTube did not have the capacity to serve all the video uploads. How long would they have lasted – a week? Start small, make sure everything works seamlessly. Your platform must work just as well for 5 listed projects with 100 backers, as for 5000 listed projects with 1 million backers… and more…
“Follow these rules, you’ll have mad bread to break up”
By Pim Betist
Pim Betist author of blog Crowd Funding – As we learn, we share and, Founder of Africa Unsigned, also created online label SellaBand, attracting music fans to invest and empower unsigned artists. More than 3 million dollars were invested in unsigned talent and around 50 artists “crowd funded” $50,000 to record and release their album. Nominated Dutch Direct Marketing Man of the year in 2008 and won the title of best speaker at MIA, Holland’s largest marketing conference in 2008. Listed in Management Team as one of Holland’s top 25 creative business people in January 2010.
Pim 'went on to create Africa Unsigned, because I wanted to move more towards music closer to my heart and I was inspired by a Jamaican taxi driver who couldn’t join Sellaband due to a lack of recording facilities and internet access. I chose to focus on the African continent because of the diversity of African music and abundance of highly talented artists.’