Should You Crowdfund Your Next Video Or Album?
Professional keynote speaker Scott Steinberg is a leading expert on leveraging new technology trends to enhance business strategy and family life. A noted industry consultant and bestselling author, the following is excerpted from his new book The Crowdfunding Bible is 100% free to download at CrowdFundingGuides.com, or in eBook form on Apple, Nook and Sony Reader devices.
The practice of crowdfunding, or posting pitches online in hopes of soliciting public donations via the Internet, has been all over the news lately thanks to the exploding popularity of websites like Kickstarter and IndieGogo. Recent success stories such as the Pebble E-Paper Watch ($10 million for an Internet-ready watch) and Double Fine Adventure ($3.3 million for an old-school adventure game) are just the tip of the iceberg, however.
Thanks to the rise of crowdfunding services from RocketHub to Peerbackers and Ulule, entertainers of all stripes – bands, actors, directors, filmmakers, aspiring TV producers, etc. – are also successfully turning to the practice to launch new movies, music videos and more. Considering adopting a crowd funded business model as a way to raise money for your next concert, event, CD single or album? Consider the following before kick-starting any campaign.
You control everything, including costs, timing, delivery, creative vision and execution, marketing and customer interactions.
You keep your equity: Projects and businesses remain 100% yours.
You get to test and prove out the popularity of your model, using as little as a prototype or preproduction materials.
You may also be able to test elements of your product’s marketing approach and how well individual promotional aspects or overarching campaigns resonate with target consumers.
You can sometimes make much more than you ever intended, or asked for. Under traditional investment scenarios, entrepreneurs must typically supply detailed business plans and budgets that justify their funding requests, negotiate the transfer of ownership stakes, and haggle over the actual value of their enterprise. Some companies and projects may require multiple rounds of funding, each of which demands additional negotiations and compromises, with the added risk (and stress) of having to prove the validity and worth of your project at each step. With crowdfunding, if your product resonates strongly with your audience, you may well exceed your funding target. Successful campaigns have raised as much as 4x or even 8x their original funding goals.
Lucky or well-run crowdfunding projects can begin sourcing contributions with as little as a polished pitch – and may exceed funding goals many times over, without having to justify each additional dollar contributed. (Caveat: Such scenarios are not necessarily the norm, but happen often enough to take into consideration when debating which investment channels to use.) Unlike traditional investment ventures, which adhere closely to predefined game plans and budgets, some projects may even grow in feature set, scope and/or ambition with the extra money generated. One point to be aware of, however: As the market for pre-retailing your product develops, the bar will be raised as to what customers expect in terms of “sales materials” for crowdfunding efforts. You should always benchmark your project materials against those of similar campaigns in your chosen field or genre.
If at first you don’t succeed… Should you fail to meet your goal, you lose nothing (other than time and the occasional dent to your public image) and can try again, with an improved plan and presentation. Generally, if you fail to impress investors, you can consider yourself very lucky if they’ll give you a second chance. Bear in mind when considering rebooting campaigns, though: If you are targeting the same customers or audience, they may well remember your earlier campaign, and its failure may have negative consequences.
You can pre-sell your product or service, and depending on the costs associated with it, you may be able to get more than the actual retail value from backers who believe in your project. You’re also mitigating risk and earning capital that can be directly applied towards production and marketing costs at the same time.
An unexpected benefit of crowdfunding campaigns is that you will often receive very useful advice – and even tangible offers of assistance – from backers, who, after all, want you to succeed and will do everything they can to help you get there.
Your backers become your built-in marketing team and crew of brand evangelists, helping to promote your project to all their friends and contacts.
It’s stressful. Talk to almost anyone who has run a crowdfunding project, and they’ll tell you that running a campaign isn’t easy, and that it’s usually filled with unexpected ups and downs – even when successful. On the emotional roller coaster scale, think Space Mountain… not the kiddie rides.
Plotting successful crowdfunding ventures demands a different kind of preparation than traditional product pitches. You’re reaching out to end consumers, not professional investors – a completely different and far more diverse audience. This may require knowledge of consumer marketing, social networks and social marketing techniques in order to converse with these customers, as well as some familiarity with customer acquisition and conversion as well.
It puts you and your ideas out directly in front of the public – and, potentially, the line of fire. Crowdfunding isn’t for the faint of heart or the terminally bashful. There’s also no opportunity to operate in stealth mode, meaning that competitors may be able to capitalize on public knowledge of your company or product.
Success requires investing tireless effort into ongoing social marketing campaigns, and constant self-promotion, throughout the entire duration of the fundraising campaign. If you’re shy, guarded or soft-spoken by nature, you’ll have to get over these tendencies to run a successful crowdfunding campaign – or find someone else to serve as a project spokesperson.
It requires that you be very creative about drumming up interest in your project, and it means you will be constantly looking for new ways to publicize, promote and otherwise call attention to your campaigns and surrounding efforts.
It doesn’t always work. That’s not to say that you should be discouraged about the chances of successfully crowdfunding a project, but you do have to be realistic, and prepare yourself for potential failure. This often means having to have a Plan B – and C, D, etc.
Crowdfunding requires that your project – whatever its theme, scope or contents – be something that interests a sufficient number of people strongly enough to motivate them to part with hard-earned cash. Part of the process of evaluating whether to undertake a crowdfunding effort is to take a careful, critical look at your project and assess the size of the potential audience to whom it will appeal, as well as the perceived value it will bring them. When you are executing the campaign, you’ll have to target this market specifically, and you’ll need to strategize how to engage them where they consume media, news, opinions and insights on a regular, running basis – no small task.
With crowdfunding, you assume responsibility for dealing with an often larger and potentially more diverse set of backers than under traditional investment scenarios – all of whom may have differing expectations and demands. Likewise, few examples exist thus far that illustrate the ramifications of crowdfunded products that have not been released, or where a product was pitched and funded, but a wildly different product was ultimately released. Consider the potential impact to your projects, livelihood and business.
Finally, no matter how interesting your project is, know that you will be competing against other projects – many of which may be vying for the same target audience, share of voice and pool of disposable income. And, as crowdfunding grows in popularity and notoriety, the commercial landscape will become even more competitive.