So, you have an idea for a new product? Or want to scale your current venture? Many aspiring entrepreneurs initially think of banks and venture capitalists when searching for funding to drive their business forward. But the reality is that most new products or small businesses will never receive money from these sources. Approximately one percent of startups get VC funding and many banks are hesitant to lend money to what could potentially be a high risk borrower. Instead, crowdfunding on platforms such as Kickstarter, Indiegogo and Crowdfunder may be the best funding source to jumpstart your new venture.
But how can aspiring entrepreneurs make their product stand out in a sea of projects looking for capital? Here are some tips for you to consider:
1. Start with a product that is authentic
The best products are created by entrepreneurs who actually need and use their product. In other words, they create a product the fulfills their personal needs and then commercialize it to satisfy similar needs in the market. One of the best-known user entrepreneurs is Sara Blakely, founder of Spanx. She simply wanted a solution for looking better in light colored pants and ended up creating an undergarment that resonated with women across the globe. There was an authenticity to her product and a story that generated credibility among consumers.
Being a user entrepreneur lends credibility to the creator, as they are often perceived to be more innovative, capable and committed to the product. This is critical when using crowdfunding. These characteristics help humanize the entrepreneur, making supporters feel like they are connected to not only the product, but also the person.
2. Help your investors feel the passion
Showing passion and optimism and sharing the details of how the product was created will make such campaigns even more effective. One of the best ways to show this enthusiasm is through videos and strong visuals. These can illustrate the usefulness of the product while also demonstrating passion for the product.
While these visuals can go in several directions, the following aspects are the key to success:
- Walk viewers through the details of your product. Why was it created and how was it developed? Share the history of the product.
- Share the positive outcomes that have come from using the product.
- Show how the product is relevant and how your experience will make it successful. If possible, demonstrate your competence and ability to deliver.
As entrepreneurs begin to ask for larger financial commitments, these three elements will be key to showing investors they are a person and innovator that can be trusted.
3. Create buzz from day one
A strong start can’t be underplayed in crowdfunding. Not only does it mean money for a project, it sets the tone and creates a positive perception of the product. Often, investors view significant support as a sign of a high-quality product and are more likely to contribute.
There are a few strategies that will help build momentum early on, including: getting support from family and friends to build an initial funding base; conveying a sense of urgency by setting shorter time limits for achieving financial goals; and building buzz by promoting the product on social media prior to launching.
The most important thing for entrepreneurs to remember as they look for funding is that the more successful a product appears, the more likely people are to support it. Always look for opportunities to highlight the success of the product to ensure investors feel confident about where they are putting their money.
Arvin Sahaym, associate professor
Arvin Sahaym is an associate professor in the Department of Management, Information Systems, and Entrepreneurship. He researches and teaches in the fields of Strategy, Entrepreneurship, and Innovation, and serves as the Ph.D. Coordinator for Management, and Entrepreneurship areas. Arvin’s research examines the real-world phenomena at the interface of Management and Organization, Entrepreneurship and Innovation.
Thomas H. Allison, assistant professor
Thomas H. Allison is an assistant professor of entrepreneurship in the Carson College of Business at Washington State University. A former entrepreneur, he received his PhD from the University of Oklahoma. His research centers on entrepreneurial finance; novel forms of entrepreneurial resource acquisition, including crowdfunding; and the effects of narrative and rhetoric on investment decisions. His work has been published in Academy of Management Journal, Entrepreneurship Theory and Practice, Family Business Review, Journal of Business Venturing, Leadership Quarterly, and Strategic Entrepreneurship Journal.