From pilot to inventor: a Kickstarter success story
Have you come up with a brilliant business idea but have no way of funding it?
They have changed the way start-ups finance their projects, opening opportunities for those who struggled to find capital. The other benefit of crowdfunding is the reduced financial risk if you don't reach your goal.
There are four types of crowdfunding: reward-based (in exchange for funds, the backer receives a reward, which could be the item being developed); equity-based (investors receive a stake in the company in exchange for funding); donation-based (money is donated to support a cause and the donor may receive a thank-you); and, finally, debt-based, where the business borrows money from a lender such as a peer-to-peer service.
"Crowdfunding is an incredible way to test your market and gain product validation for little cost," says successful Kickstarter Shane Thompson.
"This infers you know who your market is and are fairly confident you have product-to-market-fit."
Thompson - a Qantas pilot who became frustrated with tangled electronic cords during his travels - designed a stylish 12.5cm leather roll that neatly houses cables, earphones or any other small devices.
He launched his Kickstarter campaign on November 11, 2015, with a goal of $6000. It was completely funded within 11 hours. To date, 444 backers have pledged $31,893 - an incredible result considering the average campaign with a $10,000 funding goal over 30 days will have only a 35% chance of success.
So what made his project so successful? "There is a lot of work to do before you head down the road of running a successful crowdfunding campaign," Thompson says.
"For those who don't know what to do, begin by building an audience and learn the rest while you are building an audience.
"Building an audience means giving your target market things of value. For free.
To do that, you need to know where they are - both online and offline. Make your offerings small - word or video blogs, bits of research, advice, Instagram pictures (make sure they are your own or you at least give the photo attribution). "Once you have that running nicely in the background, and assuming you've done appropriate beta testing to see if your idea carries weight, it's time to create your campaign.
"Focus on a professional but genuine video - backers want to see a person, not a brand. Complement the video with quality photos and copy that tells your story succinctly but powerfully."
Thompson has a few final words of advice. "Always have faith that your idea is made up of you, and you are unique. If your campaign doesn't reach its funding goal, it basically means it didn't have enough eyes on it or you didn't have product-to-market fit - so you go back to the beginning, dust yourself off, ask questions, learn and iterate.
"There are no sure things in life but you sure as hell give yourself a better chance of achieving your version of success if you are out there giving energy to it."
Other tips include picking the right length of time for your campaign and using social media to promote your product. If you reach 30% of your goal in the first week, your project is most likely to succeed.