STARTUP - How I reached my crowdfunding goal in 10 days
Updated: Jul 19, 2019
or the lessons I learned from crowdfunding my app
In Spring 2018, my cofounder and I raised just under $200k with the help from family and friends who decided to support our bootstrapped startup, Jack and Ferdi. Celebrations, hiring plans, new features ... We were set to finish the year and that felt good.
As we were working on that round, we had considered a few other - non mutually exclusive - options to raise money and ultimately help us get our app out. One of these options was crowdfunding. We ended up conducting a crowdfunding campaign 2 months later and here are the lessons I have learned from crowdfunding to launch my product.
1. What kind of crowdfunding is right for you?
Crowdfunding is NOT asking for donations...
First things first, when you crowdfund, it is VERY important to understand the following: people are NOT donating to support your campaign. Your project, company, website or app is NOT a charity (if it is, then rewards-based crowdfunding might not be the best way). People who back your campaign are buying a product. My friend Beth Santos once told me that I should own the confidence to talk about what I do. This is not a little project, this is not a small cute idea. The way you talk about your business is the way your business is perceived. If you say it is small, people will see it small.
... nor is it about sharing equity
Or not always. Make sure you know what kind of crowdfunding you want to do before you get started. Let me explain. Crowdfunding can take many forms, among the most common ones are:
Reward-based crowdfunding (this is what we did here): this kind of campaign allows backers to contribute money to a campaign and to receive a reward in return (early access, your name on the company website, etc.). This is the most used by businesses.
Equity-based crowdfunding: this kind of campaign is highly regulated by the SEC. This is when you allow backers to get a little chunk of your company is return for a financial contribution. These campaigns allow companies to sell securities to the public (stock, convertible notes, etc.) in order to raise capital, and to see those securities to the crowd. Here the backers become investors.
Donation-based crowdfunding (for charities or personal): this kind of campaign allows backers to contribute to your campaign while not getting anything in return (other than gratitude). Think of the GoFundMe campaigns you see popping when a natural disaster occurs.
Debt-based crowdfunding (aka crowdlending or P2B and P2P lending) : this kind of campaign allows backers to directly loan small amounts of money in exchange for a financial return, as stated in a commercial loan agreement. One platform that does it is MyOptions.
Simply put, businesses use the first 2 kinds mostly (equity- and reward-based campaigns) and the first one (reward-based) is (by far) the easiest to launch because it is less regulated. In this article, I share my experience from rewards-based crowdfunding, although some principles can be applied for other types of crowdfunding.
WHAT WE DID: We went with a reward-based campaign. We already had completed a FF round and had diluted our ownership a little. Plus, equity-based crowdfunding can be a great option if you campaign in the country of your (potential) investors. Most of our network of supporters was in France at the time, which would have made it a bit more complicated for us as an American company.
2. Which crowdfunding platform is THE ONE?
Before you ask, no! They are not all one and the same.
Kickstarter: "all or nothing". With this, it is important to know that if you do not reach the fundraising goal you have set, you do not get any of the money you have raised. It may sound crazy but it particularly makes sense for manufacturing: some projects just cannot see the light of day if they are not sufficiently funded.
Fee: 5% of contributions goes to Kickstarter
Payment processing fee: 3-5%
If funding is not successful: no fee
Indiegogo: anyone can crowdfund on Indiegogo, and it is more open to a variety of projects than Kickstarter. Note that if you are a charity, Indiegogo waives the platform fee (but not the processing ones, which are typically by a third party such as Stripe or Paypal)
Fee: 5% of contributions goes to Indiegogo
Payment processing fee: 2.9% + $0.30 per transaction
No all or nothing rule
Also offers "in demand" (post campaign) as well as equity-based crowdfunding
Fundable: made by founders of startups, hands-on campaign management and hosting. Think of it as an "all-in-one" solution.
Fee: $179 per month to create and manage a fundraising campaign
Payment processing fee: 3.5% + $0.30 per transaction
iFundWomen: supporting the Female Founder economy. It offers coaching services and a private accelerator class every quarter (frequency to be confirmed). They also have a huge private Slack for people who raise on their platform which was great for a) connecting with fellow founders b) exchanging tips for success and c) reaching the coaches
Payment processing fee: 2.9% + $0.30 per transaction
All or nothing possible but flexible funding also available.
WHAT WE DID: My company is a PBC (public benefit corporation), I am the female cofounder and we have a huge social mission. We ultimately loved the proximity iFundWomen offered, the community, their footprint in our hometown (Boston), the coaching and the fact that you can launch "incognito" (more on that below).
3. Success brings ... more success!
You may think "duh", but that is so right (and unfair at the same time). Basically, the more you get contributors and hence contributions, the more potential new contributors will be exposed to your campaign (that is true for all the crowdfunding platforms that I know). Algorithms are proprietary but have some commonalities: they will bring you to their homepage if you are successful (whatever the metric - or combination of metrics - is like average amount raised per day, time to reach 50% of the goal, average amount of backers per hour, etc.).
How about an incognito launch?
What this means is that the moment you go live, your network better be ready to contribute in the first hours of your campaign! This is where "incognito" mode comes handy. iFundWomen offers this mode which is basically a period during which you campaign is not "Google-able" nor on the main page of their website. Only you and iFundWomen know you launch then (and hopefully your early backers). The goal of this soft launch is to counter this algorithm and give you enough time to get started and receive contributions from your best friends and family (basically the ones who will most likely contribute either way) before you show your campaign to acquaintances (or dare I say, strangers).
Think of it this way: Monday morning, you arrive to work with a lot of email to go through. One of them is from that neighbor/friend of a friend/cat-sitter/kickass entrepreneur (select one) who is asking for your help to fund her business idea. You feel generous and click the link. So far she has raised 0 dollar and has met 0% of her crowdfunding goal. At least 50% of the people who make it that far and barely know the person, let alone the project, will close the window and move on with their day. Now imagine you click the link and find a page that has already raised 30% of the goal. There is a "this is where the cool kids hang out" effect and you are a lot more inclined to contribute.
So do a soft launch if you can and launch publicly after having raised some sort of success.
WHAT WE DID: We launched incognito a week before going live and have reached 50% of our goal when we went public.
Set a goal that gets you where you need and ... "makes sense"
Here is the beauty of it: you can adjust it! That's actually what we did at Jack and Ferdi. We set our initial goal at 10k$ and once we reached it, we adjusted the stretch goal to 12k$. A big and ambitious goal is certainly tempting and if you have the network needed to make it happen, by all means go for it. However, I think it is important to follow these rules when choosing the goal:
Map your network: that's probably the best advice I got from Karen Cahn, founder at iFundWomen. List your entire network (family, friends, followers, alumni networks, LinkedIn network, Facebook contacts, church, alumni, I even made a list of all the landlords I've had in my life, etc.) and try to get a sense of how much everyone would contribute if they do. The total amount of dollar obtained when doing that is an overestimation of how much you could raise. Overestimation because not everyone will contribute and there are probably some mistakes in the network estimates. I removed 20% of that amount to set a tentative goal.
Pick the minimum dollar amount needed to reach the milestone you are working on (for us it was $10,000 to complete our beta test ready app development).
If the 2 previous amounts don't match, you can try to come up with rewards that don't cost you too much but will encourage people to contribute more. Ultimately, you may have to increase your network reach and decrease your goal dollar amount to make it work.
Get ready for a stretch goal: traction gets exciting for you as well as for your followers! And you'd be surprised how easy (or easier) it gets to get backers to help you cross the finish line in comparison to getting them to help you raise your very first dollar. Keep that momentum! Explain to your network what you'll do with the extra money if you manage to reach a stretch goal.
WHAT WE DID: If you had asked me how much I wanted to raise, I'd have said 100k. Because why not, right? That's the trap I urge you not to fall into. The question is not how much you want to raise, but how much can your network contribute to that will be enough to help you reach your milestone? (I know, that's a long question but trust me, that's the one!). Instead of a $100,000 and after much talking to the dev team, we realized that $10,000 was our minimum to reach in order to get our beta test-ready app on the market. We prepared for almost 2 months before feeling ready (or as close as can be, because it was still a very intimidating process to jump into). We launched incognito on a Sunday night and remained incognito for about 5 days. We went live with over 50% of our goal reached and reached our goal a week later. We raised our goal (stretch goal) and reached it once, missed the second one by a few hundred dollars.
4. Your campaign is your first real market study
While the coaches at iFundWomen or Fundable have very complete guides for you to prepare your campaign, one thing I can emphasize on is that your campaign is going to help you study your market without breaking the bank. This is a fantastic test: do people get it? For this alone, crowdfunding is an amazing opportunity to test your idea. Make it count!
Build rewards to make people excited
You know your audience better than anyone else. What are they into?
Not sure? Engage with them on Social Media and make them a part of your success story. Followers love behind the scene shots; this is a great way to leverage Instagram stories for example. Ask them to help you chose the design on your new shirts or stickers.
... and proud to support your venture
Do you give back to the local community? Did you start this company to fix a problem that's close to your heart? Make the story personal. Your supporters want to help, but even more, they want to be proud to have backed you.
Plan to communicate
Communicate! Ultimately, a crowdfunding campaign IS a communication campaign. Plan a full communication strategy with daily posts on the media of your choice (preferably these where you get the most interaction/impression/engagement). Social media scheduling platforms like Hootsuite or Buffer (or many others) offer free plans and I personally love them. They allow you to schedule posts across many social media forms for several weeks at once. You can also use the free version of Canva to make your posts and stories shine! On top of that, add a spontaneous layer of communication. For example, thank your backers with Instagram stories every night before going to bed or share the progress of the campaign in a newsletter on Mailchimp.
WHAT WE DID: Our featured reward was the product we are building. We mainly sold early and premium access to our app and that worked pretty well. I used my personal Instagram to personally thank our backers. For any physical reward we had to ship (postcards and stickers mostly), I systematically included a personalized thank you note, which (I have been told) was very much appreciated. We also shared our progress in a newsletter every week (even though we reached our goal quickly, our campaign was live for 3 weeks). In this newsletter, we also featured 2 rewards every week to explain to our backers (and potential backers) the rational behind the choice of a specific reward.
That's it! Now it is time for you to take a leap of faith and start planning your campaign. Network, plan, build and kick some serious butt! I believe in you. Will you?