5 Tips for Raising Capital with Crowdfunding

October 1, 2012

3:00 pm

Capital is the lifeblood for every new tech startup, but many entrepreneurs are turning to sources other than grants, loans, or venture capitalists. Crowdfunding offers a viable alternative for entrepreneurs to raise funds by appealing to a wider audience of potential customers. Done successfully, crowdfunding helps the savvy entrepreneur develop close relationships with future customers without worrying about investor milestones or exit strategies.

Convincing people to invest their money in someone else’s project is no easy task. In many ways akin to running a political campaign, crowdfunding efforts require a high degree of persuasion and creativity to be successful. Serial entrepreneur and technologist John Sosoka spoke to members of the Idaho Technology Council and shared five tips about crowdfunding based on his experience raising capital for SymbeeStars.

1. Set realistic funding goals. After choosing funding goals, keep in mind that different crowdfunding sites use different models for raising capital. For example, Indiegogo allows backers to keep the funds they’ve raised, even if they miss their funding goals. In comparison, funding on Kickstarter is all-or-nothing. Evaluate your funding needs carefully before you launch your campaign.

2. Keep it simple. Sosoka said that his first attempt to explain the concept of SymbeeStars, an intelligent consumer lighting system, was too lengthy and complicated to be quickly grasped by the average consumer. His team pivoted to giving a brief overview of their product and then answering common questions with an FAQ. This helped SymbeeStars capture interest from potential customers while still being able to provide enough background information to answer specific questions.

3. Plan your direct contact list early. Be strategic in narrowing down potential early adopters of your project. Sosoka explained that because 25 percent of a project is funded by an inner circle of your most passionate supporters, it’s vital to build strong lines of communication early on with early adopters.

4. Start pitching key bloggers before your launch. Sosoka explained that narrowing down influential bloggers can help your project achieve “word of mouse” to drive traffic to your funding campaign. Having the approval of key bloggers in the community can help your project gain traction, but pitching them a story and gaining online coverage can take time. Pitching bloggers before your launch puts your campaign in a favorable position to gain attention early on – which can make all the difference between success or failure.

5. Pay attention to offline marketing tactics. Some of Sosoka’s tactics were creating posters and business cards to distribute to offline contacts. Although people you meet in real life may remember your crowdfunding project, giving them something tangible increases the chances that they’ll take action to help your campaign. Through paying attention to offline marketing, you can open the door to potential investors in your own backyard.

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Malcolm Hong is a writer and tech advocate with a passion for innovation. He’s connected to entrepreneurism and technology through his work managing the activities of the Idaho Technology Council, the state’s largest member-driven association that fosters the growth of Idaho’s tech ecosystem. Originally from Hawaii, Malcolm quickly realized that Idaho does a great job of growing startups, not just potatoes. Follow Malcolm on Twitter: @IDTechCouncil

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