Crowdfunding has become the go-to resource for entrepreneurs looking to launch new products and businesses. It’s an incredible tool to gather support and test ideas on a smaller scale, before moving ahead full-force on a business. That said, it also requires entrepreneurs to put in plenty of work in order to be successful.
Recently, there has been a lot of buzz surrounding rewards crowdfunding projects that are failing to make good on their promises – delivering rewards late, if at all, and unable to detail their plan to supply the products pre-ordered by backers. Some would say that it is crowdfunding’s biggest problem to solve, and has led to heated discussion over who is to blame when a backer is left high and dry without the rewards they were promised.
The good news is that it doesn’t have to be this way. There are now thousands of successful crowdfunding campaigns to learn from, and plenty of entrepreneurs willing to give advice in hindsight. At Fundable, we’ve distilled that knowledge into one key takeaway – extensive preparation is the key differentiator between crowdfunding success and failure.
Here are a few ways for you to be successful during your crowdfund—and most importantly—continue to grow and thrive post crowdfund.
1. Create a Solid Business Plan
Sure, the traditional paper-bound business plan is gradually becoming a thing of the past, but that doesn’t mean that the requisite process of due diligence, planning, and gathering information is any less useful than in years past. Creating a thorough and structured business plan can be your saving grace during a crowdfund, when it’s easy to become overwhelmed by the wave of press, pre-orders, and buzz surrounding your launch.
It’s important to stay true to the principles, product road map, and structure that you’ve created in your business plan so that you can continue to function as a real business post crowdfund. It’s also important information to have on hand if you’re approached by interested investors during your crowdfund.
2. Gather Your Fans, Friends, and a Following Months in Advance
I can’t emphasize enough that a vibrant, highly-social network is the key to success, in crowdfunding and business in general. It’s not something that you can manufacture overnight. It takes real relationships, cultivated over time, to create a community that you can leverage to support you as you launch your campaign.
Audience aggregation tools like Launchrock are great platforms to begin utilizing in the months leading up to your campaign. Whether you’re asking a list of friends to share your launch on Twitter, or giving your Facebook fans the opportunity to pre-order your product first, you’ll be happy to have a group of people who love and support what you do.
3. Lockdown Distribution and Production
Even if you’ve completed a business plan, it’s important that you have a precise plan to deliver what you’re promising, down to the last bolt. Manufacturing can be a complicated and expensive process, so it’s important to find help if it’s not something you’re familiar with.
For this very reason, Fundable recently partnered with hardware manufacturing powerhouse, Dragon Innovation, to pair crowdfunding projects with manufacturing expertise through the Dragon Certification program. Whether you work with a mentor, investor, or a comprehensive program, a production plan will keep backers happy and help you determine a realistic fundraising goal to cover manufacturing expenses.
4. Consider a Follow-on Equity Crowdfund
Having experienced investors in your corner can be a phenomenal way to not only speed up your production capabilities but also to gain real working capital. Money from investors doesn’t require any products or rewards in exchange, so it can be used as purely functioning capital.
Equity crowdfunding can be a powerful way to capitalize on all of the buzz and traction from a successful rewards crowdfund, because it gives investors real and recent milestones to get excited about. Seed and angel investors often come out of the woodwork during a successful crowdfunding campaign, and a follow-on equity crowdfund can be a great way to gather investments while the excitement is still building.
If you’re even thinking about launching a crowdfunding campaign, then it’s time to get started building a foundation of support and intensive planning. With the right preparation, crowdfunding can turn a business idea into a profitable, scalable business.
As the founder of Fundable, I spend most of my day working with entrepreneurs and giving advice on how startup funding works. If you’d like me to give you a hand, I’m easy to find – email@example.com.
Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.