Getting Started with Crowdfunding

Thanks to services like Kickstarter, RocketHub and Indiegogo, crowdfunding is becoming an increasingly popular way for people like musicians and filmmakers to raise money online for their projects and go from struggling to successful.

Crowdfunding works in a very simple way: People have an idea for a project but they need funding so they go to a crowdfunding site and put up a short video or something similar to explain what they’re trying to do. Visitors will then be able to look at the project and decide if it’s something they want to support. If so, these visitors can then give a cash donation and help fund the cost of the project and project creators offer some kind of reward such as physical memorabilia or experiences.

While some may remain sceptical of the concept, it can and does work. One example of a successful case of crowdfunding is that of Ed Petterson and Giuseppi Logan. Logan is a saxophonist and contemporary of jazz legend John Coltrane. He was discovered homeless in New York after disappearing from the public eye for 30 years. Songwriter and producer, Petterson, tried approaching several record labels to produce and distribute an album by Logan but was promptly turned down. Petterson then turned to crowdfunding and was able to raise the necessary funds.

Petterson’s campaign is just one example of how crowdfunding is catching on, particularly in the recording industry. According to the New York Times, over $38 million has been raised through Kickstarter for music related campaigns in the last three years. Even those already signed on to major labels are turning to the power of crowdfunding. One such musician is Amanda Palmer of the Dresden Dolls. Palmer recently used Kickstarter to raise $100,000 for a new record, book and tour; currently, the project has raised over $690,000.

Not a Miracle Cure

Crowdfunding has been proven to work; however, people do need to remember that not all projects are created equal. Simply creating a project and waiting for the money to roll in isn’t going to work and anyone interested in using the power of crowdfunding has to put in some work as well.

A recent book, The Crowdfunding Bible, give a few tips on how to go about using crowdfunding successfully:

  • Research successful and failed campaigns to see what projects and marketing strategies worked and why.
  • Budget conservatively up front and leave a 20-30% margin for hidden expenses. Ask for the minimum funds necessary based on this budget to make it seem more realistic for those interested in funding.
  • Remember your target audience. Are they online? If they are, where do they live? How are you going to grab their attention?
  • Make sure you can initially pitch your project in under 20 seconds and then build a running promotional campaign on this with on-going marketing activities throughout the project duration.
  • Have rewards which grab the attention of your fans while keeping them affordable to almost any budget.
  • Communicate with your backers and fans constantly to keep them supporting you.

Ultimately, crowdfunding may allow you to achieve your dream project independently, but it’s not easy and anyone considering it should be prepared for the hard work involved to reach the end of the rainbow.

Categories : Entrepreneurship  |  Tags :