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4 Crowdfunding Mistakes for Social Entrepreneurs to Avoid

This article is more than 10 years old.

A few weeks ago, I ran into an entrepreneur who said, “I tried raising money on [a crowdfunding platform] but it didn’t work.” I’m sure he’s not the only one who's had that experience. Crowdfunding isn't a magic well of money.  It’s just a new way to raise it.

Recently, I’ve connected with a number of successful social entrepreneurs and crowdfunders to learn more about common mistakes that social entrepreneurs make.

  1. Unrealistic expectations: Andrea Lo, CEO of Piggybackr, observes that a big crowdfunding mistake is “Unrealistic expectations in relation to setting high goals and expectations for press. People anchor to the long tail of projects they hear about in the media that raise millions of dollars.  The reality is the average project raises just a couple thousand dollars just from friends and family.  When reality doesn't meet expectation, crowdfunders and supporters alike lose momentum.”  She concludes, “It's better to reach a lower goal and exceed it rather than set a really high goal and not even get close even if you raise the same amount.”
  2. “Build it and they will come”: Piers Duruz, Founder of KickstarterHQ (not affiliated with Kickstarter, Inc.) notes that a common mistake is “Taking an ‘If you build it (a project page on a crowdfunding site) they will come,’ [approach] without putting any thought into marketing it.”

    Image via CrunchBase

  3. Marketing: David Boyce, Founder and Customer Experience Officer at Fundly, notes that “Crowdfunding is a very powerful mechanism for funding social good, but many social entrepreneurs overestimate its power.  The biggest mistake I see social entrepreneurs make with crowdfunding is to underinvest in marketing their campaign.  It is tempting to believe that if you have written brilliant copy about an incredible initiative and uploaded that copy, along with photos and videos, onto a gorgeous crowdfunding page, people will be impressed and begin to fund your venture.  What people, exactly, are going to do this?  You have to get the word out before anyone at all sees your campaign.  It's like throwing a party.  You can get the right caterer, DJ and venue, but if you don't send out invitations, you won't have a very good party.  And if you don't keep the momentum building toward the date of your party, you may also not have a great party.” He concludes, “You have to market like crazy to throw a good party, and you have to market like crazy to run a good crowdfunding campaign.”
  4. Small donations: Chris Camillo, a Texas super angel, author of Laughing at Wall Street and the producer of an upcoming documentary on crowdfunding, says a big mistake he sees is “Not actively soliciting small dollar pledges. An actively engaged donor who pledges just $1 while making a personal plea on your behalf to their 1000 person Facebook /Twitter network could turn out to be more valuable than an inactive donor who pledges $50.”

There are some projects that may not be a good fit for crowdfunding. While some want to put a positive spin on this, like Kristopher Young, Founder and Executive Director of PROViDE, a non-profit that has had both success and failure in crowdfunding, who says, “If it is for a just cause, has been thought out and formalized, is sustainable (socially, economically, ecologically), it is a project or enterprise that can be perfect for crowdfunding.” The implication, however, is clear: some projects aren’t a good fit.

Here are some keys:

  1. Social engagement: As Chris Camillo notes, “Crowdfunding is social funding.  If an enterprise does not have the wherewithal and bandwidth to properly engage its donors on a social level by communicating personal gratitude, campaign progress and ROI (or ROD - Return on Donation) - it puts its brand, customer relationships, and reputation at risk.”
  2. Existing nonprofits: Andrea Lo, notes that crowdfunding is “not great for nonprofits who are already fundraising all the time and think this is going to just unlock a new audience of donors.  Not the case, unless you're doing new things like empowering your volunteers to more deeply engage, or are launching a campaign around a specific initiative.”
  3. Complex projects without visual appeal: According to Yasmine Rezai, VP Marketing and Campaign Strategist for Health Tech Hatch, “Social projects or enterprises that require extensive explanations or proof and that do not easily convert into a 1-2 minute visual pitch make it hard for the crowd to engage.  Future backers need to be able to quickly and easily grasp what you are trying to accomplish and why you need their help to reach your goal.”
  4. Boring, limited and commonplace: Piers Duruz suggests that there are three kinds of projects that don’t work well in crowdfunding: a) “Boring topics. (At least topics you can't think how to raise passions around),” b) “Projects whose scope is strictly limited to a very small geographic niche,” and c) “Well known topics that people have largely grown weary of hearing about already, with no new angle.”

There are things you can do to avoid crowdfunding mistakes:

  1. Friends of friends: Yazmine Rezai suggests that you “Craft your pitch with a friend of a friend in mind.  These are the people most likely to (1) open the link that your mutual friend has forwarded, (2) back your cause if they like what they see, and (3) forward to their friend if they love what they see.  Consider a $25 contribution level as the second of no more than six tiers of contributions and be sure that the reward is enticing to friends of your friends.  If you are a banker planning to ask your banker friends to back your campaign once it's live, it's safe to assume that your banker friends have more friends that are bankers.  If, on the other hand, you are an artist planning to ask your artist friends, then you should consider rewards that are enticing to other artists.”
  2. Marketing: David Boyce offers this advice, “The path to successful crowdfunding is through excellent marketing.  Marketing, marketing, marketing.  More marketing, better marketing, and more marketing again.  And the key to marketing is to clearly define what is in it for the donor – why would she want to give to this campaign?  Solving this puzzle effectively can help you convince lots and lots of donors to support your cause.”
  3. Create urgency:  Boyce suggests that you “Create a time-constrained, project-based campaign, where the success of the campaign is measurable, and the project that gets funded as a result is observable.  We have seen this work over and over among our customer base. Example:  "Help us raise $50,000 so our school can open its doors."  In cases where this urgency or specificity just isn't evident (like funding for research), you can manufacture the urgency by creating an event and recruiting people to participate:  ‘I'm running a 5K to help beat cancer.  Help me meet my goal of raising $1,000 and support me on my run.’”
  4. Be comfortable with “no”: Andrea Lo points that you need to “Be comfortable with failure.  Realize you have to work hard and get several No's before you get Yes's whether it is for press, large investment, or widespread support.”
  5. Raise money through traditional means first: David Boyce offers this final bit of advice, “Raise most of the money (at least 2/3) through traditional means first, then put the last bit out to the crowd to help "tip” the campaign.   This is an effective strategy for many capital campaigns, ranging from churches to schools to universities.  People like to be part of a winning team, and if the finish line is in sight it is easier to join in and help push the effort successfully across the finish line.”  Alex Budak, Co-Founder of StartSomeGood, agrees, advising you to “Invest time up-front in crafting your campaign and your marketing strategy.  Though it's tempting to put all of your energy and focus solely in the days your campaign is live, refining your campaign, rallying your supporters and preparing a really strong outreach plan before you go live will allow you to start strong and position your campaign for success."
Please help me continue this conversation by commenting below, on Twitter at @devindthorpe and on FacebookGoogle+ and at my personal website yourmarkontheworld.com.