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More businesses than ever before are turning to crowdfunding to attract investors to their startups. What makes crowdfunding such an attractive option? And what can Digital Marketers learn from this latest online phenomenon? Let’s take a look.
Crowdfunding refers to social lending, peer to peer lending and seed funding. Simply put it’s when individuals pledge money to a company that’s pitching its idea. The financial requirements are made clear for all to see, and once the target is met the money that has been pledged then becomes available to the business.
Crowdfunding has become part of popular culture. People are no longer purely interested in aesthetic creativity, but also in the interactive element. Crowdfunding uses the Internet to talk to thousands – if not millions – of potential funders.
It gives businesses and entrepreneurs the perfect opportunity to connect with their potential investors. Rather than seeking investments from a few people for a large sum of money, companies are able to reach out to an unlimited number of potential investors for smaller amounts of money. So what can the Digital Marketing industry learn from Crowdfunding?
Crowdfunding is an effective ways to amplify your business’ message, increase social presence and boost your target audience. By taking the principles used in crowdfunding and using it in their campaigns Digital Marketers can tap into another source of promotion.
There are various different platforms that businesses can raise funding on. So it’s important to find the right one for your crowdfunding goals and needs. Here are some of the most influential:
Kickstarter is one of the earlier platforms and has experienced strong growth over the years due to its successful campaigns. This platform is best suited to creative projects looking to raise capital through donation-based funding.
Unlike Kickstarter which remains focused on creative projects, Indiegogo approves donation-based campaigns for almost anything – from music and charities, to personal finance and hobbyists. Indiegogo has gained a huge international presence due to its flexible approach to fundraising.
Crowdfunder is best suited for those looking to raise investments, not rewards. It has one of the biggest and fastest growing network of investors of all the platforms. Crowdfunder offers an alternative investment opportunity from the likes of Kickstarter and Indiegogo, giving potential investors the chance to enter a more formal arrangement.
RocketHub is a donation-based platform serving a variety of creative projects. The company’s FuelPad and LaunchPad programs help campaigners connect with potential advertisers and marketers and collaborate for the success of a campaign.
Crowdrise is a great platform for donation-based funding for causes and charity. They have established a large network of fundraisers looking for the next big cause to back. Their unique Points System tracks and displays how much impact members and organisations are making through their donations.
No crowdfunding campaign is the same and that goes for its results too. A great product or service doesn’t guarantee success. Like any online marketing campaign crowdfunding requires time and effort to succeed.
Here’s 5 crowdfunding success stories, showing you how a small idea can capture the imaginations of millions, and the lessons that all of us Digital Marketers can learn.
Formlabs raised $2.9m in funding back in 2012 to help make their affordable, high-resolution 3D printer for professional creators a reality. It boasted clear serum and the chance to get some hands-on experience with Form1’s supposedly revolutionary software.
After the startup’s initial success came the patent row. In late 2012 another 3D printing firm, 3D Systems, sued Formlabs and Kickstarter for patent infringement over the use of stereolithography. Formlabs and 3D Systems were reportedly in settlements talks, which were then later dismissed when 3D Systems went on to sue over eight more patents. The Form 1 remains on sale, and has been commended for its detail, ease of use and quiet operation.
Utilising Digital Marketing techniques Formlabs have turned a negative situation into a positive one. The lesson Digital Marketers can learn from this startup is to involve your audience. They maintain complete transparency with their backers and are extremely active on social media. Formlabs post campaign and product updates on Kickstarter and actively participate in online conversations with their backers. This has helped to establish a network of advocates, and created an active online community supporting the startup.
Pebble raised $10.3m in for their “E-Paper Watch” in 2012 from 68,929 backers, making it the most popular, and most financially successful Kickstarter campaign ever. It’s what most people would describe now as a smartwatch, a category that’s now booming. But back then it was ahead of the curve, hence the spike in investor interest. It promised to be customisable with apps and notifications for compatible smartphones and fitness devices.
The first Pebble units were due to be sent to backers in September 2012, but the company missed this deadline, not shipping the stock until January 2013. Since then, Pebble has improved the logistical arm of its business, shipping 400,000 units by March 2014. The second-generation model, the Pebble Steel, has been released and the company has launched its own app store for smartwatch apps on both iOS and Android.
Pebble taught fellow startups about the potential delays involved in crowdfunding. The big takeaway from this startup for Digital Marketers is planning. Every eventuality needs to be thought of. Pebble’s downfall was that they hadn’t probably prepared for the influx in interest and then orders they received. Make sure that your Digital Marketing campaign is rock solid and take the time to ask those all-important ‘What if?’ questions. It could mean the difference between success and failure.
Console makers Ouya raised $8.6m from 63,416 investors back in 2012 for its new Android-based micro-console. It promised to provide an open, hackable device with an expansive catalogue of indie games, all available in a basic version for free. The idea was to make it more affordable to make and then play games.
Ouya struggled to meet its shipping targets. The first consoles left production lines in March 2013, although not all backers got their unit that month, sparking lengthy complaints online. The console was met with mixed reviews. It was simple to set up and as promised came with a variety of games, but the quality was below-par with rival consoles. It took another round of crowdfunding to get the software and gameplay to the standard it needed to be.
Although Ouya launched their product too soon, they did take the time to identify their key audiences to target. Ouya’s onsite blog hosts a wide range of informative and interactive posts all created with their audience of developers, gamers and tech enthusiasts in mind. From developer guest posts and quizzes to company updates and videos, Ouya are placing their audience at the heart of their online marketing strategy. This startup demonstrates the need to ensure that your Digital Marketing efforts connect with your key audiences.
Virtual reality startup Oculus Rift raised £2.4m from 9,522 backers in 2012. Its aim was to raise fund for a virtual reality headset for gaming. Targeting developers for funding they promised early access to the Oculas Rift developer kit. The helmet promised to finally deliver on the past hype of virtual reality headsets.
The first developer kits were dispatched and developers started hacking the headset to make it work for existing games, in addition to new virtual reality experiences. The buzz around the product increased as time passed, non-more so than when Doom co-creator John Carmack joined the company as chief technology officer. In March 2014, Oculus released the second edition of its developer kit with improved features. Then in a shock move the social network Facebook bought Oculus Rift for $2bn.
Oculus Rift became somewhat overhyped, but it was in the press for all the right reasons, hence Facebooks’ acquisition of the technology. A major contributor to the startups’ success is no doubt its separate ‘Share‘ domain which encourages its users and developers to share their creation stories and gaming experiences. This startup clearly identifies the importance of utilising storytelling techniques to create that all-important connection with your audience. It also demonstrates the value of user-generated content which is an incredibly cost-effective way to leverage content.
Hardware firm Bragi raised an impressive $3.4m back in 2014 thanks to 15,998 backers for its impressive wireless headphones. The small earbuds boasted a built-in 4GB music player and music streaming and voice calls via Bluetooth. The Dash is also a fitness-tracking gadget, recording your steps, pace, distance, heart rate and other vital statistics as you go on with your everyday tasks.
The Dash is the 12th most funded project on the Kickstarter platform to date. However, its early bird backers had their orders pushed back two months. The challenge turned out to be a multi-purpose aspect meaning that there was an 8 week delay in delivering The Dash to their developers. The early bird backers weren’t the only ones affected, in the end some orders were delayed well into 2015.
Despite its logistical issues The Dash was so successful because it tapped into a trend that was booming just at the right time. The crowdfunding buzz about the product and Bragi’s social media presence led to The Dash’s rise to prominence. Throughout The Dash’s Kickstarter campaign and beyond Bragi kept backers up-to-date with all the latest development across all their social media platforms, and this in turn attracted even more backers.
From the offset Bragi have clearly demonstrated their USPs and how they plan to shake up the wearable technology industry and that has been a main factor in their success. They created an opportunity for people to be part of something revolutionary and that sparked the imaginations of thousand of backers. This startup highlights the need to amplify the uniqueness of your product and the benefits associated to it.
Crowdfunding may be a relatively new platform, but it’s already proved its worth tenfold. I’m excited to see what further developments the future holds; not only for the innovative projects but for the lessons we can learn from crowdfunding for startups. The possibilities are endless.
Let me know your thoughts on crowdfunding for startups. Do you have any good or bad examples to share? Leave a comment below or tweet me @ruthawalker.
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Last month, we tuned in to listen to our very own Samantha Noble become a radio star. As a guest on Xan Phillips’ The Business on Voice FM, a programme dedicated to promoting the good news stories about business from the Southampton area and beyond, Sam shared her insights into paid media.
The Drum Network has launched a new initiative called ‘Create Britain’ which aims to show the world that Great Britain is still an awesomely creative marketplace, despite Brexit.
Create Britain is an online interactive map that invites businesses from the creative industry to contribute a short video to claim their own pin on the map that links to their video clip. The video clips need to answer one question: ‘What makes British creativity so great?’.