Getting financing is often the biggest challenge that most start-ups struggle with to get their dreams off the ground.
When 55% of established small businesses state that lack of financing is getting in the way of growth, what chance does a start-up with no connections or business history have of hitting the big time?
The answer to these problems would appear to be crowdfunding. When crowdfunding, businesses make an online pitch for funding in hopes that strangers will donate, often in return for a share or product incentive. Popular investments can be funded completely by the generosity of fans, as word of their business spreads across the internet.
Crowdfunding means that anyone who’s feeling generous can become an ‘angel’ investor, normally a venturing hobby left to the particularly wealthy or business-minded. Similarly it means that anybody with a creative streak can jumpstart their entrepreneurial vision without applying for loans or formal financing. Have a look at the businesses below that embraced crowdfunding, and saw their projects blow their targets out of the water…
The tech products
This virtual reality headset is now a household name, and is a piece of gaming gear that allows users to completely immerse themselves in a virtual experience. The campaign started great, raising $2.4m, and got even better when it sold to Facebook for $2bn. All of this in the space of around 2 years, starting with zero funding.
3D printers are the latest must-have gadget, but their commercial availability has been limited. The ‘3Doodler’ jumped onto this trend and made it easier for people to own: recreating a 3D printing pen.
It’s the first of its kind, and would normally have taken likely years to get onto the commercial market. With Kickstarter, the two guys who invented it raised over $2m in just over 30 days – despite their modest target of $30,000. Who needs Dragon’s Den?
If you could fit everything you need for a party within a cooler, you can guarantee you’ll be able to find willing backers. That’s what this company did, with a problem-solving product that an Oregon inventor came up with. In just a few days it raised over $2m, and is currently the most funded project on Kickstarter ever.
The entertaining projects
Nobody said business ideas have to be serious.
Experiment.com is a crowdfunding site exclusively for scientific projects. Backers don’t receive tangible incentives, as with most models, but instead get updates on the project or research they have helped support. This featured project was the child of one person’s ambition to establish the perfect chocolate chip cookie recipe. She only asked for $100, but it was an easy way of testing whether her idea was popular (it was – she raised nearly double her request).
Exploding Kittens is a card game that’s now famous for being the most-backed campaign of all time on Kickstarter – that’s 219,382 backers who all want to get their paws on some kitten-themed fun. It was created by some well-known internet comics, who knew they had a fan base but couldn’t tell if their idea would sell. A prime lesson in figuring out supply and demand.
The if-at-first-you-don’t-succeed project
There’s a lot to be learnt from this case study of a microbusiness who knew they had a good idea, but initially didn’t go about crowdfunding the right way and encountered failure.
Like any business pitch, the most important part is grabbing people’s interest – something the savvy Campfire in a Can’s first campaign failed to do. It was cancelled after raising less than half of its target:
Take two: The company hired a professional video designer, reduced their video pitch down to less than three minutes and adjusted their funder rewards. While this time around they asked for a smaller target, they eventually managed to nearly triple it with a total of $124,763 raised. Check it out below:
Think your company could start a successful crowdfunding campaign? Popular crowdfunding sites can be aimed at a generic worldwide audience (such as Kickstarter or IndieGoGo), or have a business investment focus (e.g. Crowdcube, Seedrs and Fundable).
Pick carefully as each site varies in fees (many take a percentage of the profits made), acceptance (some places vet each project before it is accepted onto their site) and audience type. Good luck!