Crowdfunding 101

Since the passage of the JOBS Act, crowdfunding startup companies has become a very hot topic. We built Fundable.com specifically for startups looking to find early stage capital in many cases before they are ready for professional outside capital.

We’re getting a ton of questions from startups about how to use crowdfunding and what makes certain campaigns successful.  So here are the most basic questions answered.

What can you Crowdfund?

Crowdfunding is really about milestones.  If you’re at the pure idea stage, then maybe the milestone you want to crowdfund for is the prototype or MVP.  If you’ve already got a solid MVP maybe you’ll crowdfund to help finance a launch or specific features.

What you should be asking yourself is “what would people get excited about funding?”  The answer usually lies in the aspirational goal you’re trying to achieve. 

Do you want to make email suck less?  That’s fundable.  It’s a problem people hate and would pay to help solve.  But just saying “we need $10,000 to work on an email project” isn’t going to attract a lot of dollars.  Think of a goal that gets people pumped.

How much can you Raise?

Technically there is no limit on how much you can raise, but there are certainly guidelines on where you should start.  Since sites like Fundable.com are all-or-nothing funding, you have to be able to surpass your minimum pledge goals in order to be successful.  That means it makes more sense to start with a modest goal and sail past it.

Align your goal to your milestone.  Sure, it would be nice to raise $500,000 and not have to think about money for a while, but that’s probably not realistic.  Instead, try finding a short term milestone that you can fund and use that as your baseline. 

Typically amounts between $5,000 – $25,000 are easy to achieve within your network and help get you to the next step of the project, where you can raise again if you have to.

How Important is your Personal Network?

Crowdunding isn’t just about putting your idea out there, kicking back, and waiting for the cash to tumble in.  You really have to work your personal and social networks in order to drive the campaign. If you can’t attract backers amongst your colleagues, putting your idea on a crowdfunding site won’t help much.

Stats among crowdfunding sites tend to show that once you’ve surpassed 30% of your fundraise you are 90% more likely to exceed your goal.  But that initial 30% is usually driven by personal relationships that the startup already had prior to the raise.

Consider every possible social network you have – your Linkedin, Facebook, Twitter, and even old school email contact lists.  Then consider the networks of all of your friends.  Every additional tweet, like, and share is another opportunity to drive another backer.

What do you need to Start?

Most startups feature a video explaining the idea, a few images showing what your fundraise will build, and of course some copy that explains the details.  Beyond that you’ll want to consider what rewards you’ll offer people who pledge.  This could range from t-shirts, to pre-orders of the product, to custom versions of the product.

You’ll need to set a fundraising goal and of course explain what your inspirational milestone will be.  After that it’s a matter of working your networks to get the word out there quickly.  Fund raises are time-based so you will likely have 30 – 60 days to complete your campaign.

You can begin working on your profile today at Fundable.com and even wait until later to actually launch your fundraise.  It helps to take some time to prepare your pitch.

So if you’ve got an idea and you’re ready to raise – give us a holler.  We’d love to help!