Crowdfunding Guidelines, InventureX, & the Competition

You’re thinking about crowdfunding as a way to bring your idea to life and get your business off the ground, and wondering who can help you. This is a good place start! I don’t have any particular axe to grind, and no services to sell, so I can bring you an unbiased and hopefully informative viewpoint.

This article gives you guidelines for determining the kind of marketing and funding assistance you will most likely need, choosing your platform, and for setting your campaign goal to ensure you get as much as you really need for your business to succeed.

It then evaluates several agencies that promise to assist you with your crowdfunding campaign, including Boost Your Campaign, CrowdCreate, Crowdfund Buzz, and InventureX. The list is by no means exhaustive, but it should help you get a sense of what’s out there. More importantly, this article can help you determine whether or not you need such an agency (hint: you probably do), and what to expect (and require) when you engage one.

Note:
When I first wrote the article, My Crowdfunding Experience, I have to admit that I was wondering if the outfit I dealt with (InventureX) was a scam. As that article details, my experience was less than stellar. And when it was first published, there was a flurry of activity that seemed to confirm my suspicions. Since then, however, the rate of activity has slowed. Significantly. To a crawl, even. And one formerly-dissatisfied correspondent mentioned that the issues might just have been “startup troubles”. It was clearly time for another look, so I included InventureX in this comparison. (They look pretty good, too.)

Choosing Your Platform

There are quite a few crowdfunding platforms to choose from. Nicholas Hargreaves gives a great summary of the 7 Best Crowdfunding Websites for Startups, along with other good advice. Here’s a summary:

1. Kickstarter (30m hits a month) – personal and organizational projects from games to design and tech
2. GoFundMe – popular platform for personal and charitable causes
3. Indiegogo (9m hits a month) – popular for tech, design, travel, and film projects
4. Crowdfunder – equity funding to help startups grow
5. Fundable – helps to raise capital for startups, entrepreneurs, and companies
6. RocketHub – (now part of Crowdfunder)
7. Razoo – charity-driven site for non-profits, individuals, corporations, and foundations.

But there are many more options to consider. Venessa Miemes lists 17 options for “creative projects” and another 23 for business investment, while  Joel Wishkovsky lists no less than 400 options he scraped from the pages of CrowdSourcing.org.

Note:
Joel’s list notes that the first 74 companies in the list explicitly offer equity financing, where you get cash in exchange for a piece of the company. (I plugged the list into a spreadsheet to identify the first 74: From AngelList to WiSEED.)

If your offering has widespread appeal, you may want to go with one of the major platforms that has a big following, like Kickstarter or Indiegogo. But you also need to take into account whether or not you can manufacture rapidly, in high volume. Because a really successful campaign on a platform like Kickstarter that gets 30m hits a month can swamp you with orders. So in some cases, you may be well advised to choose a more limited platform, at least to start.

If you are targeting a niche market, on the other hand, one of the smaller options will likely cost less, and be more tightly focused on the audience you need to reach. At Quora, Linda Ziskind helpfully identifies some of those smaller platforms:

• fashionstake.com – for fashion designers
• cofundos.com – for open source software projects (Josef Davies-Coates also mentions GoTeo for that purpose. (As a former software developer, I am making special note of those!)
• profounder.com– for small business owners and startups
• spot.us – for journalists

An agency can help you decide which platform is best for your project—especially if they have worked in your niche before—but that choice is only the first of many critical decisions that need to be made.

As someone who has spent a lot of time and money going down dead ends, I can tell you from experience that making the right decisions is vital. It’s like finding your way through a swamp. You can go in blind and hope for the best, but you are better off taking an experienced guide!

The Importance of Marketing

As an inventor and author myself, I can tell you that marketing is the name of the game. Like many in those fields, I have great ideas. And I know how to make them come into being. But that simply isn’t enough!

Making a business out of those ideas (or at the very least, an income) requires a serious marketing effort. And marketing, like every other form of endeavour on the planet, requires a “very particular set of skills”, as Liam Neeson would say.

In general, those skills revolve around:

1. Identifying your audience (who cares about your idea?)
2. Figuring how to reach that audience (where do you find them?)
3. Crafting a message tailored for that audience (say it all, but say it in 10 words)
4. Delivering that message (putting it where your audience will see it, repeatedly)

The thing is, I’m a detail guy. You have to be, to solve all of the problems that come up when bringing an idea to life. In my first startup, it took 2 years to come up with an elevator pitch. I’ve gotten better, thankfully. But coming up with a succinct message and follow-on information delivery isn’t something that comes naturally to a lot of us.

And that’s just the start! Once you figure out what your message is and who wants to hear it, you have to figure out how to reach them. So the process of developing and executing a marketing campaign is really different from most of the things an inventor does. It’s like going onto the football field in your basketball uniform. You’re just not equipped to play the game!

Marketing Specialties to Consider

Just like there are many kinds of lawyers, and many kinds of doctors, there are multiple specialties to consider when crafting a crowdfunding campaign. The question you should be asking, right at the outset, is how many of them you can confidently do yourself!

General Marketing

As David Picco wrote in Professional Crowdfunders, the marketing specialities that come into play when creating a crowdfunding campaign include:

• PR
• Social Media management
• Copywriting
• Videography
• Crowdfunding Campaign Manager
• Financial Manager

So another important question is whether or not the crowdfunding agency you are considering offers the services you need.

Influencer Outreach

But perhaps one of the most important specialties isn’t even in that list: Influencer Outreach.

I’ve taken that term from the CrowdCreate case study: How to do Influencer Outreach – Complete Guide. That article is worth reading, because finding influencers just may be the key to crowdfunding success.

How Many Followers Do You Need?

To achieve your funding goal, you’re probably going to need many more followers than you currently have, just to get started. That’s what makes influencers such an important role in the process, for most of us.

Here’s what you need to know:

• When I was in touch with Indiegogo, the kind folks there let me know that successful campaigns generally reach 30% of their target in the first 2 or 3 days.
• With those supporters helping to get eyeballs on the campaign, along with other marketing efforts, the remaining 70% generally comes in over the next 30 days.
• Their other useful statistic was the fact that 3 to 5 percent of the people in your contact list will generally give their support in the first critical days of the campaign.

From there, you can set up a spreadsheet to do the math, using these formulas:

Funding Goal / Supporter Contribution = Total Supporters Needed
Total Supporters * 30% = Early Supporters Needed
Early Supporters / 3% = Required Contact List

Note that in the 2nd line, you are multiplying by .3,
but in the third line you are dividing by .03

If each supporter gives you $100 for what you’re offering, and you need $10,000 to deliver it, then you need 100 supporters in total. But to succeed, you need 30 supporters to act right away in order to meet that 30% target. If those 30 supporters are 3% of your contact list, then your list needs to have 1,000 contacts in it!

Not many of us have that kind of following. But the right influencers do. (And many more, besides.) That’s why social media influencers are so effective for crowdfunding, as well as ongoing marketing.

The Question of Funding

The problem of funding has two stages: How much do you need to get started, and how much do you need to ask for in your crowdfunding campaign.

How Much Do you Need to Get Started?

Given that marketing is so important, and the likelihood that we (as entrepreneurs) are still in the process of acquiring that particular set of skills, it makes sense to engage experts for that critical facet of the business. The question for many of us is how to do it on a shoestring!

If you’re on your third successful startup, you have money in the bank to spend, and access to investors and loans, then you’re all set–and in all probability, you’re not reading this article. But if you have come this far, then you may well need some help.

Which brings us smack up against the “it takes money to make money” chicken-and-egg dilemma. The question, then, is: Who can help us make a business out of our idea, so we can get it out to ever more people?

To help answer that question, the evaluations that follow include funding-assistance options (when available), as well as marketing services.

How Much Do You Need to Ask For?

Presumably, you already have some idea about how much money you need to make your business operational. (If not, it’s time to get to work!) At a minimum, you need enough for production runs, storage, and order-fulfillment, so that when supporters send you their hard-earned cash, you can reward them with your shiny new product in a timely manner.

Let’s say you figured things out, and you need $20,000 to get started. That’s pretty much a shoestring, no matter what it is you’re trying to do. Most projects need a lot more than that to be practical. But let’s start with a modest goal.

The first thing you need to know is that something like 9% of your funding can be eaten up right away by your crowdfunding platform and credit card charges. (Those are amounts The Wall Street Journal identifies for a Kickstarter campaign in The Trouble with Kickstarter.)

If you find a platform that targets your niche, adjust the calculation for their fees, plus the 2.5-3% that credit card services charge. But to keep things simple, let’s just assume that 10% of your funding goes away before you even see it.

If you need $20,000 then, and you ask for $20,000, the most you’re going to see is $18,000—leaving you short of what you actually need! To figure out your funding target then, you need to divide the percentage you actually get (90%) into the amount you need ($20k).

I’d love to show you the math, but this article is already growing too long. So take my word for it: To net $20,000, you need to bring in $22,250. Or (rounding up), if you need $20,000, set your target at $25,000.

But that’s just the start! The costs identified so far don’t include the cost of agency, expert, or consultant you hire to make your campaign succeed. So now you’ve got to do a bit more math. Add up what their fees, figure out how big a percentage that is, and re-compute.

Let’s say the total bill comes to 25% of your funding. That’s not unheard of, for this kind of operation. Plug your number into this equation:

What you need  ⁄  (1 –Agency% –Platform%) = What You Ask For

In our example, $20,000 is what you need. The agency percentage is 25%, and the platform percentage (including credit card fees) is 10%. Together, those two sets of fees total 35% of your gross income from funding. If 35% is the amount taken out, then 100% minus 35% (1.00 – .35, or 65%) is the amount you keep.

In that example, then, you get 65% of the funding that comes in. So if what you really need is $20,000, you need to ask for at least $31,000 ($20k / .65). You can then plug that number into the crowdfunding calculation to determine your minimum outreach.

The bottom line here is to be acutely aware of your fees, so you can factor in the costs of the campaign to be sure you get what you really need for your business to succeed.

Comparing Your Options

At this point, we’ve covered how much you can probably get from a crowdfunding campaign, based on your current list of followers. And we’ve covered how much you’ll need to ask for, to get what you really need.

Odds are that your existing followership won’t quite get you there. Which brings us to the problem of figuring out how to do the marketing and promotions necessary to make your crowdfunding project a success.

Doing It Yourself

One option, of course, is to go it alone. If you want to do that, you can do a lot worse than following the advice given by Andrew Thomas. He raised $600,000 himself, and wound up contributing articles on the subject to Inc.com and The Huffington Post. Among other things, his article has a terrific list of mistakes to avoid.

Here are some other useful resources, as well, brought to you by Crush Crowdfunding, an outfit that offers training, coaching, and even a toolkit for do-it-yourself crowdfunders. If nothing else, perusing them will give you some insight into just how much there is to know about the process! They will also give you a sense of what to expect (and demand) from any agency you tap for assistance:

• 6 Facts About Kickstarter (and why you need to know them)
• 5 Steps to Create a Killer Video (not having one is a huge mistake)
• The 5 Places to Find Your Dream Audience

The initial $500 you give InventureX to begin planning gives you access to a suite of videos that explain the steps to take for a successful crowdfunding campaign. They’re good, and they give you a real sense of the kind of success you can achieve, but they don’t cover the kind of cautions I’ve given you here, so they can make you over confident..

There is also a ton of useful stuff on the internet, including these from Boost Your Campaign:

• Facebook Ads for Kickstarter (a marriage made in heaven, for my money)
• Crowdfunding Explained
• 100 Tools to Launch and Market Your Campaign
• How To: Crowdfunding
• Kickstarter Marketing Tips
• What is the Best Day of the Week to Launch?
• How to Write a Pitch that Turns Readers into Backers

Selecting an Agency for Assistance

So yes, you can do it yourself. But it’s a lot like going through a swamp without a guide. Odds are it won’t turn out well. And even if it does, it will take quite a while to map the terrain and figure out how to get to the other side.

In all probability, then, some sort of assistance will be needed. But just as there are many crowdfunding platforms to choose from, so are there many crowdfunding experts, consultants, and agencies. Which should you choose?

To help answer that question, the remainder of this article examines some of the more prominent options, in alphabetical order.

General Recommendations

• Start by looking at the success stories the organizations feature on their testimonial pages. See which projects are similar to yours. The organization that created those campaigns will have a head start on reaching your
• Don’t limit yourself to the choices listed here. Use the comparisons as a guide when evaluating other services you find. If one of these really is your best choice, then great! But don’t assume that I have automatically identified the best-of-breed candidates. There are simply too many to consider! If you can, get recommendations from people you trust. Then, using this article as a guide, do your own “due diligence” to be sure you get the right outfit for your
• Know in advance that the marketing budget for a project quite naturally depends on your funding goals, and the services you need. For example, a large goal for a product with a small price tag would take a large outreach effort, compared to a project with more modest goals. Similarly, the project might need a short, simple video or something longer.
• Most crowdfunding campaigns last 3 or 4 months, with the “launch” happening somewhere near the middle after the groundwork has been laid.

Some Agencies to Consider

Here are some options to “kickstart” your evaluation process.

Boost Your Campaign

Website: BoostYourCampaign.com
Notable Partners & Promoters: Great Reviews at TrustPilot.

Featured Testimonials: Success Stories

Comments:

• Their starting point is an evaluation of your go-to-market business offering. It can include suggestions for e-commerce, additional investment rounds, and business accelerator programs. (That kind of thing can be very helpful when you are new to the field of entrepreneurship. I darn well could have used it!)
• The review by Melvin Hernandez mentioned that evaluation: “Very helpful and reliable. The first agency that started with a campaign review. They put skin in the game with their custom package and 15% on ads. 460 backers and 235% funded.” (Unfortunately, TrustPilot would not do anything to connect us, so I was unable to find out anything more about his project—which begs the question, How trustworthy is the review? I wish I knew!)
• They have a 3-tiered pricing strategy, depending on what you need.
• The basic plan is pretty much a PR service, and the intermediate plan creates a basic crowdfunding campaign. But a professional video that moves people to act is mandatory in this day and age. The less expensive plans can be worth it if you have already shot a video. Otherwise, you’ll probably need the expensive option.
• The tiers are:
• $750 (one-time fee) – PR Campaign
  Social Media, Influencers, Press Release, Email, Facebook ads
• $1500 minimum (customized, one-time fee) – Basic Crowdfunding
  Landing page design & construction, Pre-launch PR for up to 90-days,
  Pitch + Press Release, Launch PR
• $3500 minimum (customized, one-time fee) – Full Crowdfunding Campaign
  As above, plus: Chatbot Marketing, Social Media Management, Video (script + recording + voiceover)

CrowdCreate

Website: CrowdCreate.us

Notable Partners & Promoters:
Called “The number one community management and growth agency” by Forbes.

Featured Testimonials: Project List (scroll past the case studies to see the projects)

Comments:

• CrowdCreate’s product-funding testimonials are heavy on electronics offerings, with a few lifestyle products (pilates, nutrition) thrown in
• CrowdCreate is located in Irvine, CA. They have a lot of ideas on what it takes to have a good Influencer Outreach They focus on doing it for normal sales and marketing, but I suspect that it is an extremely valuable resource for crowdfunding, as well.
• In addition to an initial short-term contract, CrowdCreate can do a long-term contracts to can keep sending business your way (presumably at a discounted rate).

Crowdfund Buzz

Website: CrowdfundBuzz.com
Notable Partners & Promoters: None listed.

Featured Testimonials: Creative Projects and Equity Funding Successes

Comments:

• Purely a PR agency. Some of the testimonials include pictures with some pretty famous people, so they might be a good way to tap into a celebrity endorsement.

InventureX

Website: InventureX.com
Notable Partners & Promoters: Kevin Harrington (Shark Tank)
Featured Testimonials: Testimonials Page

Comments:

• InventureX specializes in new, early-stage projects, so their numbers aren’t as big as outfits that are running 2^nd and 3^rd-stage fundraising campaigns for well-established companies. (The right choice for may therefore depend on your company’s stage of growth.)
• InventureX testimonials feature quite a few things you’re likely to see in a high-end store like Sharper Image.
• Although many PR practices help to create exposure (for example, interviews and Tweets), Facebook ads and email are acknowledged as the best ways to gain supporters. (So their limited focus on those two avenues is sensible, in my opinion.)
• InventureX has an in-house video studio in Las Vegas. A Creative Producer works with you either remotely or in person. They handle script writing, locations, models, actors, shooting, editing, and free revisions. They just need a prototype and your vision!
• The InventureX funding option is intriguing. On the one hand, it is unique. There isn’t much like it out there. And it is interest-free. If your campaign does well, it becomes a self-funded marketed effort with no extra costs, giving you a way to solve the chicken-and-egg quandary.
• If your campaign doesn’t do well, on the other hand, you’re still on the hook for the loan, and interest will begin accumulating after 18 months. (How much interest? I never did find that out. Is it retroactive? Never found that out either. The outfit offering the loan was somewhat less than fully communicative.) So going in, be aware of the fact that it is something of a gamble.
• Recommendation: Before taking that option, be sure your product will do well in the marketplace. You should have at least a few early customers, and you should see their eyes lighting up when they use what you’re offering. With that box checked, you know you have a winner. (And be sure you can deliver!) The only questions that remain after that are where to offer it and how to craft your pitch—which is what the marketing experts are for.

Rejected Applicants

One indication that an agency is legit is whether or not they will take anyone’s money, or whether they really do have some sort of evaluation process that makes them reject propositions that don’t stand a snowball’s chance in an Arizona summer.

After all, any project they take on has an associated opportunity cost, in the form of time they are not spending with other clients who might generate more income for them down the line.

Although they naturally cannot share details, the folks at InventureX listed some of the business propositions they have turned down in a single 30-day period:

• A purely industrial product that would not appeal to consumers and that only a handful of commercial customers would adopt.
• A mobile app idea in the financial-tech space that would have required a million dollars to develop (an unrealistic goal for crowdfunding).
• A new extreme-sports-simulator ride for surfing. (A cool business idea with a working prototype, but there were too many concerns over the viability of crowdfunding.)

Copyright © 2017, TreeLight PenWorks
Support Eric’s work!: http://patreon.com/ericArmstrong

Please share!