Category Archives: Marketing

Startup Surprise! Crowdfunding is Not Free

NotFree

As Milton Friedman once said, “There is no such thing as a free lunch”… and this certainly applies to Crowdfunding.

Crowdfunding has come on at such a rapid pace, many are still trying to understand how to correctly crowd-fund. The allure is for good reason: Crowdfunding grew from $16 billion in 2014 to $35 billion estimated at the end of this year. So officially, if this trend keeps up, Crowdfunding will pass VC investment which is estimated at $30 billion. Some say that Crowdfunding will double over the next few years which would mean that Crowdfunding would surpass all other forms of venture or angel funding and approach north of $75 billion in 2016.

Now before we all declare this as easy money, we need to understand what goes into a crowdfunding campaign. In this article I’m going to talk only about rewards-based Crowdfunding (versus equity, or debt), but this could apply to donations based Crowdfunding as well.

I get a few calls a week from small companies that want to use Crowdfunding as a vehicle to get their company off of the ground. Sounds fine at the outset. What most do not realize is Crowdfunding is not a “list it and they will come”, no more than “build it and they will come” (referring to websites) back in the late 90’s was true. Most crowdfunding sites require no upfront investment and take their fees out of the capital raised. So many are fooled thinking that Crowdfunding is therefore free. This could not be farther from the truth. While it is certainly true that there is very little investment in listing a crowdfunding campaign, there are dozens of activities in addition to tools and paid services that need to be deployed for an optimal campaign.

Fact is that if you’re going to run a successful rewards-based Crowdfunding campaign, you need to deploy a massive marketing campaign. This article is not designed to go in depth into all aspects of running a crowdfunding campaign, but here are some of the things you need to think about that will take money and our resources:

Staff – you will need staff to reach out to all of your constituents across all possible mechanisms. This includes social media, email lists, friends of friends, and more. Additionally, staff will need to quickly address any and all incoming comments or questions to make sure that your crowdfunding campaign is successful. On average, successful Crowdfunding campaigns run 30 days to 45 days. So if there is any delay in your communications, you’re wasting valuable time while the project end date is coming. We recommend that you think in terms of having a minimum of 3 to 4 full-time staff members working all angles of constituent communication during Crowdfunding. While they’re not communicating, they will be posting articles and other interesting blog posts to keep the crowd engaged and active. You will need this team available for about 90 days.

Ads – when Crowdfunding, you should really prepare and launch your initial outreach 45 to 60 days before your campaign starts. Additionally, you should use advertising mechanisms to increase your reach. Statistics show that 50% of your crowdfunding constituents and dollars will come from Facebook. So running Facebook ads to find new fans, friends and likes is a smart move. You’ll probably want to have $2000-$5000 for Facebook ads to bring more people into the fold so that when your campaign starts you hit the ground running with maximum participation.

Tools – you should deploy some tools to help manage your crowdfunding campaign. These include email systems like Mailchimp, social media tools like Hootsuite, PR tools like InkyBee or PR Web (don’t forget that you will need money for press releases as well), communication tools like Aweber, and more. There are dozens of crowdfunding tools and picking the right tool for the right job is important. But nonetheless, you should budget at least $1000 for these tools and between $300-$400 per press release.

Website and Social Site Design and Build– you will need to budget for website development and social site development. You’ll need a good developer or a team to build out all of your online properties. These costs can range from under $1000 up to $10,000 depending upon the type of sites you have and the teams you use. Professional web and site development firms are more expensive than individuals but generally their more reliable.

Video Production -every great crowdfunding campaign requires a rock-solid video. It needs to be informative, interesting, and well produced. Depending upon your skill set, your staff and your associates, videos can cost a few hundred dollars all the way up to $10,000 plus. It just depends on the quality.

Contests and Sweepstakes – I was speaking with a few crowdfunding experts who recommend running contests or sweepstakes prior to launching a crowdfunding campaign. These are designed to generate more traffic and engage users beyond all of your existing constituents. If you choose to do this, you will need money for prizes that could include things like an Apple Watch, and iPhone, and/or prizes like free products. So you will need money to buy these in order to give them away.

Crowdfunding can be an amazing way to generate capital. But realize that if you’re going to run a crowdfunding campaign, you should probably budget about $10,000 to start. If your staff are all volunteers, or working for equity only, you can probably look at a smaller budget of between $5000 and $7500. Without this investment, you campaign could be suboptimal and unfortunately it is difficult to circle back and run another campaign after you’ve gone through communications with all of your constituents. So this is, for the most part, a one-time chance, and you will need to get it right the first time. When done right, Crowdfunding can generate hundreds of thousands and even millions of dollars. Think of crowdfunding like an intense marketing investment.

And as Henry Ford once said, “A man who stops advertising to save money is like a man who stops a clock to save time.”

What can be Crowdfunded?

We get asked a lot about the types of businesses that can be crowd-funded. It seems these days that nearly anything is crowd-fundable with the right set of campaigns and on the right platform.

For instance, Kickstarter, one of the most popular crowdfunding campaigns has a list of items or companies that cannot be Crowdfunding on their platform.

Of course illegal or illicit businesses cannot be Crowdfunding. Pornography, drugs, cannabis paraphernalia, weapons, and even financial or money processing businesses are usually not crowd-fundable.

Here are a list of Crowdfunding categories:

  • Art
  • Comics
  • Crafts
  • Dance
  • Design
  • Fashion
  • Film and Video
  • Food
  • Games
  • Journalism
  • Music
  • Photography
  • Publishing
  • Technology
  • Theater

If your business falls in the above, then you have a chance at Crowdfunding. Make no mistake that Crowdfunding takes an enormous amount of work as well as a little bit of capital. For instance, we recommend that you spend some money on Facebook ads to help generate more audience. Additionally you want to hit all of your social media very hard to make sure that everyone you know can help your cause.

We offer Crowdfunding consulting and execution. If you’re interested please contact us.

 

 

 

Startup Validation – Ignore This at Your Own Peril

Plan A better

I see this mistake all the time… Build your product and automatically customers buy it at the exact price you originally intended.

Wrong.

Many entrepreneurs make a fatal mistake of believing that just because they see the vision and value for a given product, the rest of the world, or at least enough market share to support their company, will see the same. This could not be further from the truth. Now in some cases, people and companies get lucky, but we may as well not deal with luck here, rather solid market insight which should provide a more predictable outcome.

Test Test Test

When you are thinking of launching a product, and you’re in the visionary state, begin to discuss the idea with some trusted, confidential advisers. Find smart business people who can give you their opinion on whether or not it’s a good idea, or will suggest changes that might make it a great idea (I have a whole section on advisers and advisory boards here). I find entrepreneurs are very protective of their intellectual property, which is justified in many cases, but when you’re thinking about whether or not a product will work in the market and sell at the price you need to justify your margin, you need to figure out if this is feasible ahead of time. Entrepreneurs that go about it backwards, launching, taking capital, hiring (and thus taking on liability), and find that their product could flop in the market.

Once you have run your ideas by your initial advisers, and you’ve received enough positive feedback  to proceed, the next  and immediate step should be to reach out to prospects and ask them if they would have a confidential, early-stage conversation with you. Talk with your would-be customers to understand if your product is going to add value, and even better, what changes or enhancements should be made, and what price is acceptable?

Don’t Fool Yourself

One of the biggest mistakes I see with entrepreneurs is even if they get the product right, they don’t have any indication of what the customer will pay. It’s easy to fool yourself when customers say they would love to have it. It’s harder to fool yourself when after customers say they want it, you then ask them if they’re really willing to pay the price you want to charge. Everybody wants the Ferrari, but most don’t want to pay the cost. So you have to be careful here. When asking for feedback from your prospects, be sure to discuss pricing. Tell them that it will be X amount to purchase the product, or per month or per year, and really understand if they are willing to pay that price for that value. Many entrepreneurs don’t want to have this conversation because they aren’t sure how to do it.

Make It Hypothetical.

Ask them in a manner that allows them the ability to creatively imagine how they would use the product and subsequently ascertain the value, and then compare that to the cost. Something like this might work, “suppose I could bring this widget to you that would change your life in this way. It would make it much easier and less expensive for you to do business, and it would have a return on investment estimated at this. Would you pay $1200 a year for that?” By using a supposition, the customer feels relieved that they don’t have to commit to anything because it is all imaginary. However the insight you gain is valuable.

Ask Enough People

Be sure that you take the above scenario to enough customers and advisers to gain the feedback you need. Using social networking or business networks like LinkedIn, reach out to people and ask for a phone call or presentation. Don’t rely on email to gain your insight as it’s impersonal and asynchronous. But rather talk on the phone or meet in person because you might learn more through the customers intonation and tone, than you will from their words.

Competitive Information Avoids Competitive Decimation

Or, we find that we have a great idea for product but we didn’t know that a company like Google might be developing the same just to launch it for free. Look at what happened with digital maps and mapping. Google Earth, and Google maps essentially put many companies out of business. By giving away mapping for free and then integrating it everywhere, mapping companies got blindsided. I’m going to guess, and I don’t have proof, that there may have been some mapping companies that were thinking about launching right around the time that Google gave maps away for free. I’m hoping that those companies sought advice, and made the appropriate changes so that there wasn’t significant loss.

By testing in the market, and speaking with your advisers, you may gain competitive information which would lead you to a new approach for your product, or may have you scrapping the product altogether. You’d be amazed at what your customers or potential customers might know about other solutions. Your advisers may have insight on potential competitive products.

 

Be a Marketing Madwoman

By aggressively reaching out to dozens of potential customers far before your product is ready, you accomplish all of the above but additionally, you are seeding your market and you can re-approach the same prospects when your product is in beta or ready for market. You might want to try rewards-based Crowdfunding for your product. I worked for the company that successfully launched a crowdfunding campaign prior to raising their series a round of capital. They pre-sold the product and then shut the campaign down once they hit the numbers they needed and this proved there was demand for the product at specific prices. Again, you’re reducing market risk if you have prepaid orders. For more on Crowdfunding click this link.

Investors Love This

I recently I spoke with the company who successfully deployed the above strategies. They went out to over 100 customers, gained enough positive feedback and validation that when they went to investors, they actually had prospects who would give them hypothetical testimonials. In other words the prospects were so excited about what was coming, they were willing to let an investor know via phone that they would buy it when it was ready if it delivered on the product marketing promises, and was at the discussed price. Of course the investors found this extremely valuable and investment capital flowed easily to this company. Generally investors look to reduce risk and increase upside. When you can reduce market risk, then you’re left with technical risk management risk and a few other types of risk. By using the above strategies, you’re making it easy for investors to invest, customers to buy, and most importantly you’re justifying that you should launch.

Negative News Can Be the Best News
You might also find that you cannot get customers to care about your product. Or they care but they’re not willing to pay the amount you plan on charging. Better to know this early so that you don’t waste an enormous amount of time and effort, along with investor capital. It’s critical to understand your customer traction and the earlier the better. Again my suggestion is to got your customers before you even start building your product to understand whether or not you should launch the company. The fact is that 90% of businesses fail. By deploying early market validation strategies, you can be part of the 10% that succeed.

Rewards Crowdfunding

Rewards Crowdfunding can be a viable form of financing for some companies, and some products and services. The best way to determine if your product or service could be funded by the crowd is to go on popular crowdfunding sites and look for similar products or services. Once you find products or services that are similar to yours, you’ll be able to determine if it’s worth the investment in time and resources to run a crowdfunding campaign.

Make no mistake, a successful crowdfunding campaign takes a lot of time and resources. Most of the crowdfunding campaigns you see that have been successful, will have multiple team members and/or outside resources driving the entire campaign. Once in a while, a company gets lucky with a product or service, and it goes viral. But in most cases, especially with the amount of campaigns out in the market, you’ll need to deploy resources to get this done.

This article is not about all of the detail on how to run a crowdfunding campaign, but rather a high level overview so you can determine if you would like to take on the task. There are many sites and articles which will give you more detailed information on crowdfunding.

Your first objective is to determine goals of the campaign.

Here are a few goals for you to think about:

  • Funding – how much money are you trying to raise in the campaign?
  • Social traffic – you need metrics on how much traffic you’re trying to drive to the campaign and to your website.
  • Media coverage – how much media coverage are you looking for?
  • Engagement – this could include social media engagement, website registrations, user acquisition and more.

Next, you need to figure out how you’re going to measure success. Once you lay out your goals and objectives, be sure to have measurements in place so you can adjust your campaign along the way. Most crowdfunding campaigns last 30 to 60 days, so you won’t have a lot of time between making adjustments. Generally, you should adjust your campaign on a daily basis in order to ensure that you get the right results.

Here are some metrics to measure:

  • How many new backers did you reach through social media?
  • How many online mentions did you get based on your campaign?
  • How much traffic came to your crowdfunding site?
  • How many new users and followers did you generate?
  • And of course, how much funding did you raise?

Once you have set your goals and objectives, and your measurement plan, now you can design your strategy or crowdfunding.

You will need to think in terms of the following areas:

  • Public relations: PR is a huge part of crowdfunding. You have to be willing to launch press releases each week during the campaign. These releases if interesting, will get picked up by news media and other sites which will help drive traffic to the campaign.
  • Social media: crowdfunding at its heart, is a social exercise. You’re going out to people you don’t know and hoping to socialize them to your product or service. You need to have active Facebook, Twitter, LinkedIn, Instagram, Pinterest and Google + sites set up. Then you’ll need to socialize these sites and drive traffic back and forth between your social media sites and the campaign. I call this a social media ecosystem that includes all of your web properties, including your campaign. While it is running.
  • Advertising: you also may want to consider Google ads or Facebook ads to help drive traffic. Of course, this includes budget, but if you spend money on marketing, and it is done effectively, you will get a return via purchases of your product or service.
  • Videos: putting together a solid video is probably the most important part of any crowdfunding campaign. In fact, most crowdfunding sites like kick starter, require a video to be done before they will accept you on the platform. You’ll need to put together a solid script for the video and a reasonable production. The video should tell the audience about the product or service, benefits, etc.

Crowdfunding can be a viable source of exposure and revenue for your company. If you’ve never run a campaign before, be sure to study all that you can, or hire, professional who can help. Feel free to contact us anytime for advice as we have run crowdfunding campaigns successfully.

Here are a list of top crowdfunding sites:

  • https://www.kickstarter.com/
  • https://www.indiegogo.com/
  • https://www.crowdfunder.com/
  • http://www.rockethub.com/
  • https://www.crowdrise.com/
  • https://somolend.com/
  • http://www.appbackr.com/
  • http://invested.in/
  • https://www.quirky.com/

Marketing 101

If sales is the lifeblood of your organization, then marketing is a vital organ. My feeling on sales and marketing is that without solid marketing including lead generation, and effective articulation, then sales will be nascent. These days, consumers of all types whether business or individuals, are fickle and will jump from a given product or service as soon as it’s convenient. In order to capture and keep their attention, it’s very important to deliver the right marketing messages to the right group of people, at the right time, in order to allow your sales processes and programs to be effective.

There are a variety of ways to market and here is a partial list: online marketing, print marketing, media such as television and radio, telemarketing (either live people or active dialers), outdoor/large marketing such as billboards (both print and electronic) or movie theater ads, grassroots marketing and more.

What is the single most effective form of marketing?

There is little doubt that the most important form of marketing is word-of-mouth referrals. We won’t spend a lot of time here because it is fairly obvious that if a friend, family member or business associate provides a positive reference on a product or service in which you may be interested, their opinion will be a factor in your decision making process. The best way for you to control word-of-mouth referrals, is to simply put out a product or service that adds value to people’s lives. I know this sounds trite. However there is no amount of dressing that you can put on a bad product or service to make sure that people provide a referral. So in the end, you need to have a quality product or service for which people are happy to pay and willing to refer to their friends.

Pay attention to areas like quality with your products, and customer service with your services. You want to make sure that whomever decides to exchange their hard-earned money for your product or service, they are ecstatic and tell their friends. Also we won’t waste a lot of time talking about what happens if someone is upset with you, your company, your products or your services. We’ve all heard the stories that if someone likes your product they may tell 10 people, but if they don’t like your product or had a bad experience, they might tell 100. I think you know what to do from here.

What are the steps I should take in thinking about my marketing program?

Step one– you have to identify the target group of people whom have the best possibility of buying your product or service. In seems obvious, however I find so many companies that build a product or launch a service without knowing who in the world would end up buying a product or service. on other pages, we will go into a variety of methods to identify

Besides referrals, what forms of marketing should I use?

This answer depends, and can only be decided upon after you create an entire marketing program to optimize your marketing dollars.

There are volumes of materials, sites and marketing experts on the web. Our best advice is to hire a good marketing manager or consultant, then let them help you develop solid marketing plans.