Have you ever heard aspiring entrepreneurs casually say: “Oh I’ll just put it on Kickstarter”. I’ve heard that quite a bit recently and I thought I’d investigate.
People throw around the word “crowdfunding” like a party favor. Crowdfunding is the networking and pooling of individual funds for a project, often in return for a gift. Last year “crowdfunding” and “crowdsourcing” were buzz words, and the popularity of Crowdfunding sites still reign supreme. In a recent count, every niche seems to have its own crowdfunding site.
Crowdfunding seems like a great way to fund your startup without the hassle of investors that want their money back, and with instant validation from potential customers. Kickstarter, which has to date provided $1.4 billion (as of Dec 2014) in funding is always a great case study for the benefits of crowdfunding. But what many entrepreneurs don’t hear about is the flip side. I recently fumbled across YourKickstarterSucks which shows the sad fate of pitches that should never have been posted to begin with. If you think crowdfunding is the best method for gaining some traction on your business idea, consider the following: a subset of projects on Kickstarter completed their round without receiving a single pledge, and some do not get funding because they don’t reach their goal – an unfortunate #entrepreneurfail.
The only way a project will be a good candidate for crowdfunding, is if the target investors and donors are both willing and able to align with the project conceptually and financially.
Now, say you do identify a project that makes sense to crowdfund. Here are some guidelines about posting a project on a crowdfunding site to maximize the returns for both your venture and the investors:
- Be realistic about the total goals
- Make project crystal clear, concise and super easy to communicate
- Show evidence of potential future success – through past sales or market research
- Provide compelling gifts for investors/donators
Good luck with whatever funding route you take! Let us know how it went in the comments below.
This was originally published by #entrepreneurfail: Startup Success.
Last year, I was working on a business that I was convinced could be bought by a huge media conglomerate. In fact, before I had a business model, funding, prototype or even a single customer, I was ready to sell the business! Needless to say, the business didn’t work out. My passion was focused on the wrong place. And I’m not the only one. Many entrepreneurs I speak to are looking for an exit strategy much earlier than even their entrance strategy.
I read an article by Mark Cuban many months later and the second line struck me:
- Don’t start a company unless it’s an obsession and something you love.
- If you have an exit strategy, it’s not an obsession.
Who is Mark Cuban? If you haven’t seen him on Shark Tank, or aren’t a fan of the Dallas Mavericks, just know he a billionaire who built his way up. And, yes, in retrospect, that business I was working on was not an obsession – making it an #entrepreneurfail.
From my experience, here is a checklist of red flags to warn you that you may be too interested in an exit strategy too soon:
- You are more interested in selling the business than in creating what your business needs to sell.
- You haven’t talked to a single customer, but are sure that future owners of the business will.
- You are browsing potential investors of the company, before creating a proof-of-concept yourself.
- You don’t want to learn too much industry knowledge since it won’t be needed after you sell the company.
This post and comic were originally created for www.entrepreneurfail.com