4 Rules for Successful Crowdfunding


In today’s interconnected world of social media, online news and blogs, it’s become possible for a creator to be directly connected to his or her target audience without going through government institutions, media companies or other intermediaries.

Crowdfunding extends this principle to the business investment. Through the services of an online platform, large groups of small-scale investors and potential customers can view sales pitches and business ideas. If they are convinced they can then simply donate money or receive rewards based on the level of their investment.

So if you’re a budding entrepreneur looking for investment who doesn’t want to deal with the challenges associated with attracting traditional investors and financial institutions, follow these four rules to help ensure a successful crowdfunding campaign for your business.

  1. Prepare an engaging pitch. You are trying to convince potential customers to fund your products. Therefore you need to demonstrate the selling points of your product through all the tools of social media. A short high-quality video showcasing your idea/product as well your passion and enthusiasm for it is a must. Active blogging, supportive ads through Facebook and Instagram will help immensely in bringing customers. Ideally you will have already gathered enough seed money to operate a website and make prototypes.
  2. Only promise what you can deliver. Entrepreneurs typically go for crowdfunding when they already have a prototype and intend to use investment to go into production. Thoroughly research production costs, delivery costs and potential distribution challenges to set a price and delivery time that is realistic. Your reputation on social media is crucial for success; not delivering on your promises is a guaranteed way to lose investors and ruin your chances for a future crowdfunding campaign.
  3. Offer Cool Rewards. Unless you’re asking for donations, your investors will expect certain perquisites and privileges for funding your business. Make sure you offer attractive rewards like lowered prices, early delivery, additional services, etc., to your investors. In fact, you need to offer a multi-level system of rewards in order to incentivize investors to fund in larger sums. Someone who has put a $100 into your business, for example, deserves a higher level of rewards than someone who has only invested $20.
  4. Have a solid foundation to your business before you crowdsource. Experts recommend that you finance up to 30% of your business beforehand through a close network of friends, family and enthusiasts. After all, even your crowdsource campaign will require money—video production, service fees, marketing and producing prototypes are only some of the potential costs. Apart from this, having a ready pool of funds and promoters will help comfort new investors. If they see a campaign that is already popular on social media and has considerable funds, they are much more likely to see your business as a worthwhile venture.

Even though every successful crowdfunding business is different, every one of them applies the above principles in one form or another. Research each of these guidelines thoroughly and see how you can apply them in a way that is suited to your unique idea or product.