Crowdfunding for business – how we hit our goal on day 1, and how we could have done better
In my previous blog post How I’m Applying my Online Business Success to Build an Offline Business, one of the key strategies I discussed was using crowdfunding for business funding for my offline business, Black Hops Brewing.
Crowdfunding enables you to front-load cash flow, but more importantly, it helps you build an online audience. I believe that having an engaged audience upfront is crucial to the success of any startup.
Early on at Black Hops we had a chance meeting with Alan Crabbe, co-founder and director of the crowdfunding platform Pozible. We learnt that it was OK to sell alcohol on the Pozible platform (with the right licenses), which is not an option on all crowdfunding platforms. So with the need for additional funds to open, we decided to go for it to see if we could become Australia’s first brewery to launch via crowdfunding.
In this article I’ll take you through the strategies that we used with Black Hops to deliver a successful crowdfunding campaign. However it wasn’t all perfect, and there are a lot of things I’d do differently next time, so I’ve made sure to include the big lessons learned as well.
Must-have inclusions when you are crowdfunding for business
Here are the things that are absolutely essential when embarking on your crowdfunding campaign.
Plan, plan and plan
As the old saying goes, fail to plan then plan to fail. You’re going to need a well thought out plan before you kick off if you want to run a successful campaign.
Here’s an interesting article which compiles statistics from Pozible about their first five years of operation, in which time they’ve hosted over 10,000 projects. It mentions the top reason campaigns fail: not enough planning for promotional strategy.
With the Black Hops campaign, we put together a 10-week plan in Trello with tasks to do every week leading up to and as the campaign ran.
The plan is a public doc that I put together which you can check out here.
Here’s the bottom line: according to Pozible if you hit 30% of your minimum target on your first day of fundraising, then you will be almost guaranteed to hit your target! So make this the underlying focus of your planning.
Your target audience
With crowdfunding you’re relying on people to give you money upfront for a product or service that can be months away from being tangible.
Think through exactly who your target market is for pledging upfront. I have seen quite a few failed crowdfunding campaigns and I’ve often thought to myself “why would anyone buy this”, or “who is going to buy this”?
This is the million dollar question you have to ask yourself. Who do you know that will buy your rewards and why will they buy, why is it interesting or valuable to them? Given you are aiming to hit at least 30% of your target on day 1, that will probably come from people you know. So if you can’t visualize enough people to make up 30% of your target on day 1, then I’d say there is a good chance your campaign will fail.
[ctt tweet=”If you can’t visualize people to make up 30% of your target on day 1, then your #crowdfunding campaign will fail http://ctt.ec/Q71F9+ ” coverup=”Q71F9″]
This is like any other business transaction, it’s not charity. People aren’t going to want to give you money for nothing. There needs to be something interesting in it for them, and something valuable for them to buy.
I’ve seen some campaigns that have no story, are poorly executed and are completely self-serving and I’ve known straight away they would fail. Don’t fall into this trap.
Have a well-designed campaign page
Design is something used by every customer to judge the validity of what businesses are selling, whether you like it or not. If it looks cheap, potential backers will assume that whatever you are making will also be cheap.
As an entrepreneur you need to understand design and with the tools provided with platforms like Pozible, you are able to create really nice looking campaign pages. In our case we had our friend Claire Dryden Photography take some sick looking photos for us, we had nice branding for all of our stuff done by Matt Vergotis and we laid the page out neatly. That’s all it took for a sweet looking campaign page. You can check it out here.
Related: Design 101 For Entrepreneurs.
Make sure that you update the page regularly. Another thing you can do is to change the page description, which appears on the landing page and is different to the campaign update page over the life of the campaign.
Create an epic video
According to research done by Indiegogo, one of the largest global crowdfunding sites, campaigns with a pitch video raise four times more funds than campaigns without one.
When we kicked off our crowdfunding campaign, we put a two and a half minute professionally produced video upfront on our campaign page. Our aim was to use storytelling to engage and educate potential supporters whilst representing as genuine, likable and professional. The video also helps with credibility, and people can see we are the real deal and not just having a laugh.
Choose the parts of your story that you think will connect with your community and focus in hard on that part of the story throughout the video. Also include as much proof as you can. Images of real product, people talking about how good your product is etc. People want to be confident that they are backing a winner. And ideally have a few chopped up or edited versions of the video for sharing on social media throughout the campaign.
With Black Hops we were lucky enough to receive a fantastic opportunity to cross-promote our brand through entertainment giant Activision, who commissioned us to create a beer (Midnight Pale Ale) to tie in with the launch of their online game Call of Duty: Black Ops III. This is a great example of what creating and promoting your brand and story upfront can potentially achieve. Lucky for us, Activision were happy for us to re-use parts of this video in our crowdfunding campaign video and we weaved it into our story
If you have any affiliations be sure to highlight them in your storytelling to give credibility and weight to your campaign.
Putting a good quality video together can be expensive, so we had a mate of ours, Dave Dwyer give us a hand with it and deliver a professional end product at an affordable price. So get help from your friends if you can.
Set up an Ambassador Group
A key part of our crowdfunding strategy was setting up an ambassador group on Facebook. This helped us create an engaged audience upfront, who helped us promote our campaign.
To do this we set up a page on our site telling people about the campaign and asking for their email so that we could notify them when we went live. When people signed up for the email we invited them to join the ambassador group on Facebook. They could help us promote the campaign and in return, we’d make ourselves available to them to answer any questions. We’d also notify them exactly when we launched so they could scoop up the Early Bird reward.
When we launched we notified the ambassador group first, then the people who signed up on the email opt-in page, then we put it out generally on social media and emailed our main email list.
The impact of that process was significant. The ambassador group snapped up most of the Early Bird offers and by the time we emailed the list, there were only a few left. Those went quickly too and by the time we shared it publicly, we were already into the other nine rewards. The impact was we hit 50% of our target in the first few hours, before we even launched publicly.
Offer rewards and incentives to get you to 30%
Look for opportunities to reward early supporters via upfront rewards and incentives.
We employed this strategy with our Black Hops campaign by offering an Early Bird Full Supporter package upfront to our Facebook ambassador group. This package came with many great incentives and we made it a bit exclusive.
The package was set at $100 and we limited it to 40 people. Our thinking was that if we could sell all of these to our closest supporters, we would pass our 30% day 1 target.
This happened and we sold more packages as well taking us past 50% within the first hour.
Try to be generous and creative when it comes to what you offer in return for a pledge. In addition to the Early Bird package we also offered 9 other supporter options, ranging from entry-level $5 and $10 options through to Full Supporter and Legend packages, where we gave a lot to receive a bit more back.
We did a lot of research into coming up with the best mix of reward packages to offer. We had a look what was working for other campaigns and chatted with Pozible about common pledge sizes. Our most popular reward ended up being the Full Supporter, valued at $145 and chosen by 45 people. For this reward we gave them a carton of first batch Beach House Ale, a softcover copy of our book Operation Brewery, a limited edition Black Hops OG t-shirt and a Black Hops sticker.
The $80 pledge option was also well supported, which goes to show that people often go for perceived value over the cheapest option when it comes to pledging.
You can even keep some rewards up your sleeve for half way through the campaign, to get people more excited and back the project again.
With all of these packages considered we ended up passing our full 100% target within 24 hours!
Press and other PR Boosters
Five weeks before our campaign officially launched we got to work with getting the word out. We built a list of influencers that could assist us with publicity and exposure and reached out to a bunch of podcasts.
We also reached out to press outlets and media contacts to help us with exposure. The key to doing this well was to make sure we’d put together a solid press release up front, with good images and an interesting angle for the story: ‘Black Hops aiming to become Australia’s first brewery to launch via crowdfunding’. Leveraging off my existing business reputation and the Black Hops story may have gotten our foot in the door with media exposure, but unless your story creates a buzz then you may as well not bother.
We also tried to be generous and give something back to our early advocates and to the Pozible platform itself. So we backed some other projects on Pozible that resonated with us. It’s a good look in the eyes of the platform and those on there and helps raise your own profile.
We also used Thunderclap, which allows you to send out multiple social media messages simultaneously to create attention for an event or launch. Our Thunderclap campaign resulted in 100 backers sharing the Black Hops crowdfunding launch all at the same time on social media. We made sure this happened a few hours after we released the early bird deal to ambassadors.
Related: WP Curve: The ultimate guide to Thunderclap for product launches
$17,800 earned and major lessons learned
Despite achieving the goal on day 1, there were a number of things we could have done better. In fact hitting your goal on the first day really isn’t as good as it sounds. You want to make the most you can out of your crowdfunding campaign and it’s harder to get people excited once a goal is reached.
Here are some of the things I think we could have done better, which I know would have resulted in us raising more money.
Understanding crowdfunding goals
The challenge with setting goals for crowdfunding is you don’t want to miss your target, but you also don’t want to leave money on the table. It’s well and good to say you need $10k to achieve something. But this is business we are talking about, and for many projects having $100k is much better than having $10k.
This is a tricky thing for you to get your head around, and to plan your communications around.
For us we felt a bit awkward rallying the troops to raise more money after we passed our $10,000 goal. We felt like it was a bit dishonest to say ‘Yeah the $10k we needed is great, but really we need a lot more than that’. This is a hard message to communicate to people. In our case, $10k would pay for our bottling machine. But we were spending hundreds of thousands of dollars on a brewery and every cent we had, would go into making our brewery more epic (and in hindsight we needed a lot more).
So it’s critical that you understand this and understand how this is going to be communicated once you hit your target. This also goes back to the first question of why will someone buy this from you. If it’s just an epic product and you want to sell shitloads of it then the goal might not be much of a roadblock. But if it’s a story-driven exercise where people feel like they are getting behind the idea, this story needs to be carefully managed.
In hindsight for us, we didn’t respond well enough after we hit our goal and didn’t do the best job of communicating what the extra money meant to us. In the end, we raised an amount of money that was good, but ultimately wasn’t enough to prevent us going back to investors for more money, which is really what we wanted to avoid.
If I had our time again, because having stretch goals, or raising money after we hit our goal didn’t really work, I would set our goal much higher. We didn’t publicly announce or really speak about any bigger goals for our campaign, but I was hopeful we would raise $30k to $50k and I think we probably could have if we managed this part of it well. For example, if we had a goal of $30k and raised $10k on day 1, I think we still would have hit the goal and raised at least $30k. We would have pushed harder, and people would have been more motivated by the larger goal which wouldn’t have been achieved till closer to the end.
You can’t really sell anything online without epic photos of exactly what people will be getting. We weren’t really in a position to have photos of the actual product. We didn’t have a brewery yet and we didn’t have packaging for the beers. We did our best with mock ups from designers and nice looking photos, but I think for selling the beer, we would have sold a lot more with professional packaging shots.
Photo quality matters. According to online marketer Jeff Bullas, 67% of online shoppers rate the image quality of a product as ‘very important’ when it comes to selecting and purchasing the product. Further to this, more than half rate a product’s image quality as more important than product-specific information and descriptions, ratings and reviews.
In my own experience, I just know that the way things look online has a massive impact and if we had of mocked up some epic product shots of what people were actually buying we would have sold more.
Deliver regular campaign updates
Make sure you’re feeding out lots of regular campaign updates to your audience. It keeps them engaged and reinforces trust and that you’re going to be successful in reaching your target. It will also deliver confidence that you’ll be a success once you launch.
As part of the planning strategy you need to think through how often you are going to be updating people and what for. Try to rally existing backers together to further support the project and make sure it feels like a live ongoing thing.
We did a few updates throughout the campaign but in hindsight I think we got a bit distracted with other things and probably didn’t do as many as we should have.
It’s always a bit of a tricky one, I’ve been on some campaigns that contact you almost every day and you lose trust in the process, but I think we could have sent a few more.
This also should continue when the campaign is completed. An issue we experienced was some confusion around the difference between an update and a message. We found out after the fact that while we were updating the page, the backers weren’t being emailed to advise them of the updates. So when we thought we were updating people, they weren’t actually getting emails. We are still figuring this one out with Pozible but I’d suggest you export your backers’ email addresses and email them separately to be sure.
Payal account freeze issue
A word of warning, Paypal have a common practice of freezing new accounts while they wait for additional business information. The process of providing the information is painful and they have a lot of silly rules that slow it down (like you can only upload a few MB for files and once you’ve used up your space you can’t remove old docs). It’s dinosaur age stuff and it’s happened to me a number of times so I should have probably known it would happen with Black Hops.
I didn’t think of it at the time but the impact for us was big, with our Paypal payment option being unavailable for a critical week of the campaign.
I’m guessing this happens a bit so I think Pozible could probably warn people about this as well, but in any case, we got it back going and could still take payment directly but it was frustrating and cost us money no doubt.
Stick to your social media schedule
With our Black Hops campaign, this side of things was very well planned, but day to day distractions sometimes got in the way of executing the strategy.
In hindsight, we didn’t really update social media too much during the campaign when I was sort of planning to do it every day or two.
If I had my time again I’d make sure that we stuck to our update schedule, which I’m sure would have delivered us an even bigger pool of funds more quickly.
Prepare for timeframe blowouts
As anyone in business would know, timeframe blowouts sometimes can’t be avoided. It’s part of the risk associated with crowdfunding, and we were honest about the risks, but it would have been nice to have kept our word to our keenest backers in regards to the launch date.
In our case setting a launch date was always going to be difficult to predict, but in hindsight we could have built in more of a buffer and if we had of hit our launch date early, then great! As they say, better to under-promise and over-deliver.
But hey I’ve supported crowdfunding campaigns that ended up being over 18 months late to launch, so I guess we’re not doing too badly!
So I hope that these outcomes and learnings have given you some food for thought if you’re thinking of crowdfunding for business, and as always if you have any feedback leave me a comment below.
p.s. Black Hops will be opening soon, follow us on Facebook and Instagram and check out our top ranking podcast here, (we are 9 episodes into a 10 part series).
p.p.s. I have my free 7 Day Startup Challenge coming up on 12 July, check it out here.
p.p.p.s. I’m running an epic event on the Gold Coast in February 2017 called Starters and Makers. Check this out for exclusive early bird tickets.
Featured image by Unsplash
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