4 Crowdfunding Myths You Probably Believe
Some of us have been in the crowdfunding scene since it first trended early into the decade. We have seen our fair share of investors and crowdfunding campaigns launched, and some things were true of crowdfunding then but no longer apply today. Crowdfunding itself has changed tremendously, diversifying into more niche markets – like equity crowdfunding – and gaining more traction than ever before.
However, some things have remained the same, and one of them is new investors getting things wrong about crowdfunding in general. Some of that is perhaps owed to the novelty of crowd-powered financing, but most of it comes from unrealistic expectations owed to the hype surrounding media coverage of successfully funded campaigns.
To set the record straight, we are here with the four most common crowdfunding myths that perhaps even you believe.
1. Myth: Crowdfunding is Easy
Too many people hear about the immense success of projects like Oculus Rift or Pebble – which have exceeded their campaign goals and were even bought out by large companies afterwards – and assume that every crowdfunding campaign will have the same turnouts. In reality, only a small portion of projects get past their initial funding goals.
While effort doesn’t always guarantee success, it is a significant requirement. You can even argue that launching a crowdfunding campaign is harder in one sense since you have to convince more people than you had to under traditional investment schemes. It is vital that you recognise crowdfunding for what it is: just another way to get your idea funded.
2. Myth: It Takes Zero Euros to Launch
The thing about crowdfunding is, to get people to invest in your idea, you have to invest in your idea first. Marketing expenses, the cost of building a prototype of your product or keeping up with all crowdfunding regulations – many of the successful crowdfunding projects you’ve heard of shouldered these costs out-of-pocket.
This doesn’t even begin to cover the amount of time that you need to put into your project before and during the campaign. The truth is that a crowdfunding campaign can get expensive, especially if you want it to break its funding goals. If you’re looking to launch your campaign, you ought to be prepared to – as the saying goes – “spend money to make money.”
3. Myth: All it Takes is a Good Idea
False. While we firmly believe that good ideas are fundamental to the success of campaigns, there is a swathe of other factors that affect the outcome of campaigns. Did you market before your launch? Did you communicate with your backers regularly? Did you follow through with your promises after reaching your first few funding goals?
There’s also the demand for your idea to consider. It may well be that your project or service can improve lives or revolutionise markets. Or you may have promised your backers attractive returns if you’re doing equity crowdfunding. This doesn’t mean that backers will start coming in automatically. Doing market research and seeing what people are interested in can help you guarantee better turnouts for your campaigns.
4. Myth: Success Requires a Big Social Following
Over the years, people have been growing increasingly concerned over the social requirements of crowdfunding campaigns. There is a grain of truth to this in that social media marketing is a significant component of the most successful campaigns ever launched. However, it’s a mistake to think that these campaigns had a large social media following to begin with.
Nobody begins a campaign with a vast social presence. Rather, the success of many of these campaigns hinged on intense audience-building efforts that made use of social media, and perhaps other channels available to the campaign sponsors, like print and digital advertising. Many of them had to build their audiences from scratch and worked hard to get any coverage they could.
Ultimately, there is more to crowdfunding that having the most exposure in social media. That being said, forgoing marketing and neglecting clear and constant communication with your backers can cost you everything.