With big banks hesitant to give small business loans and alternative online lenders like OnDeck only dealing with established companies, how can ambitious small business owners get their ideas off the ground? The answer is by bypassing the old system entirely and selling directly to customers via a crowdfunding platform like Kickstarter.
Why should entrepreneurs use Kickstarter?
Although they are now established market leaders, companies like Pebble, Oculus and Soylent all began life as Kickstarter campaigns. Instead of trying to convince indifferent bankers or dubious seed investors of their products’ viability, those companies found success by selling their products directly to customers. In addition to getting a lot of attention for disrupting industry paradigms, those companies also entered the market without debt. That’s because Kickstarter backers are not investors, so they don’t get a say in a company’s direction, and they aren’t entitled to any future profits. Successfully launching a project on such a high-profile platform will make your company more attractive to future investors. Since the $34 billion crowdfunding market has so much to offer entrepreneurs, how do you ensure your Kickstarter succeeds?
The three questions
As with every aspect of business, there is no guarantee a Kickstarter campaign will succeed. However, by asking three simple questions, you can increase your chances of becoming one of the 37% of Kickstarter projects that are successfully funded.
- First off, does your product or service fill an existing need in the market? The creators of Magbelt received more than half a million dollars in funding because they have effectively created a better belt to fit every waist.
- Secondly, do you have the resources to mass produce your product if demand greatly exceeds your expectations? Entrepreneurs who aren’t able to scale up in order to meet their campaign promises risk severely damaging their business reputations.
- Lastly, have you determined a realistic campaign funding goal? Project creators who failed to factor in material costs and international shipping rates into their campaign goals have ended up broke after setting new crowdfunding records because they didn’t do their homework.
Go big or go home
Perspective Kickstarter project creators should also make some common sense steps before launching their campaigns. These include small business fundamentals like making professional pitch videos, utilizing social media to raise awareness and quickly responding to media inquiries and customer issues. In terms of the intangibles that separate the failed campaigns from the ones that break records, Dark Energy co-founders Garrett Aida and William Lam have some useful tips. In a Forbes interview about their $170,000 external smartphone charge project, Aida talked about the importance of having grand ambitions. “Many times we think too small. When you feel like somebody is building something important, it is inspiring.” Lam stressed the importance of paying attention to the details. “Although it may be difficult, have a big vision and nail the details at the same time.” The bottom line is people who have underwhelming and poorly articulated ideas will not do well on Kickstarter, so go big or go home.
This article was written by Mario McKellop for Small Business Pulse