A successful campaign takes a lot of prep—and upkeep along the way
Natalia Rodriguez, co-founder of Jiva Cubes Jiva Cubes
Want to launch a crowdfunding campaign? You’d better get started yesterday.
The popular perception of fundraising sites like Kickstarter is that entrepreneurs can cut out a lot of the legwork of landing money. But experts say that’s far from true.
A successful campaign takes plenty of advance planning—as well as constant involvement along the way—to keep backers happy and new supporters joining on. A halfhearted effort could not only make a cash drive stall out, it also could do lasting damage to an entrepreneur’s standing with customers and potential investors down the road.
Here’s some advice from pros and entrepreneurs who have made the process work.
Form a Company
As you plunge into fundraising, it’s smart to make sure that you protect yourself by creating a formal business entity, such as a limited-liability company. With a structure like an LLC in place, anyone who sues you can only receive assets from your LLC, not from your personal wealth, says Tom Murphy, senior partner at McDermott Will & Emery LLP in Chicago.
Ms. Rodriguez has run two successful campaigns for her products Jiva Cubes
Beyond that, having a company structure shows potential clients you’re a professional. Samantha Rose, founder of GIR: Get It Right, which launched two Kickstarter campaigns in October 2012 and September 2013 for silicone spatulas, says if you’re trying to get your product into stores, retailers will expect you to have a business entity, such as an LLC or corporation, in place. Forming a corporation also makes the process of filing taxes at the end of the year easier, she says.
Find Backers First
On Kickstarter, which launched in April 2009, people seeking funds set a deadline within 60 days of the start date and a goal amount for funding. But campaigns should start gathering support even before they launch.
Natalia Rodriguez, co-founder of Jiva Cubes, which makes cubes of instant coffee and hot cocoa, found this out after a failed campaign in March 2012. She didn’t get enough backers on day one—and thus her project didn’t gain any momentum.
When she made a second attempt in May 2012, she asked the initial backers to lend support early on in the second campaign and to tell others. Forty of the original backers came on board, and that strong initial presence placed the project on the Kickstarter home page, thus attracting more supporters.
She reached $1,000 within 24 hours and the $15,000 target of the previous project on the fourth day.
“The name of the game is to get on these front pages where people are going,” Ms. Rodriguez says.
For her third campaign, Ms. Rodriguez reached out to even more potential backers in advance by contacting bloggers who covered her target market—travelers, moms and students. That effort brought in $82,012.
Keep Talking to Backers
Scott Heimendinger, co-founder of Sansaire, launched a Kickstarter in August 2013 for an at-home sous vide machine—a method of cooking that heats food to a precise temperature. During his campaign, which hit its funding goal of $100,000 in 13 hours, he spent seven to eight hours a day addressing comments from backers and fine-tuning the prototype.
“It makes them feel like the project is alive,” Mr. Heimendinger says. “It makes them feel like there’s a human being on the other end.”
If existing backers are unhappy, then they can voice concerns on the creators’ comment page, thus dissuading others from backing the project. Backers can also decrease or cancel their pledge at any time in the campaign, except for the last 24 hours.
Another reason for entrepreneurs to keep talking: Midway through the campaign, projects often hit a lull in new backers. That’s why it pays to plan surprises, like testimonials from well-known individuals in the field, rewards or small project announcements, says business consultant and speaker Scott Steinberg.
Keeping backers updated can also keep them happy if things go wrong after the campaign is over. Kickstarter creators have been infamously plagued by delays in shipping and fulfillment. Both of Ms. Rodriguez’s completed Kickstarter campaigns for Jiva products have been behind schedule, and at the end of the most recent one, she and her co-founder had to fly from Miami to Colombia to package about 250,000 cubes themselves.
But by keeping the backers updated at every turn, Ms. Rodriguez says that they were able to keep the backers happy. “We got so much respect for that,” she says. Still, Ms. Rodriguez advises, “Always create a buffer of at least an extra month.”
Mr. Heimendinger has had a similar experience. He experienced delays with his Sansaire product due to malfunctions in the back cover and a patent complaint, since resolved. But the situation has been helped by open communication with the backers—who have responded well to the updates, he says.
“If you sum it all up, it probably tilted in the positive direction,” Mr. Heimendinger says.
Think Long Term
Keeping up the flow of backers can also lead to business opportunities outside of the site. If the campaign is successful, and especially if it has a large number of backers, it can be “a ticket to [venture capital] meetings,” says Jeffrey Bussgang, general partner at Flybridge Capital Partners in Boston, adding that associates regularly look through the site for popular projects.
“We want to see what has momentum,” he says.
However, if a campaign fails, Mr. Bussgang says, getting funded by venture capitalists becomes very challenging. “It’s hard to erase those initial failures,” he says.
Ms. Huston is an editor of The Wall Street Journal’s Accelerators blog on startups. She can be reached at email@example.com.
Source : The Wall Street Journal