Crowdfunding Guide - How Does Crowdfunding Work

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Crowdfunding Success Code

Introduction
Crowdfunding.
The word drums up all kinds of visions for the average person. Small
startups exploding in popularity overnight. Companies on the verge of
financial collapse being saved by a capital injection received through
crowdfunding.
Crowdfunding came into popularity at a time when it was desperately
needed. As traditional loans became nearly impossible for new
companies to get and angel investors became much pickier about their
investments due to the burst of the dot com bubble, crowdfunding saved
the start-up world by providing a way for these new and emerging
companies to find the funding they need.
In fact, crowdfunding’s brilliance lies in a couple of small features:
1. Companies typically do not have to pay back their funding. They
receive donations rather than loans. This can be extremely
beneficial for companies in the start-up stage, because paying back
loans often cripples new companies that need all their cash for
operating capital.
2. Because funding is spread out between hundreds, or even
thousands of investors, no one individual or company is taking any
risk in the company’s potential failure.
3. Unlike traditional investing, you won’t lose any of your company to
investors. You won’t have to give a venture capitalist any control
Crowdfunding Success Code

over your company, nor will you have to give anyone any stock. You
keep 100% control and ownership.
Crowdfunding is a win-win situation for both those seeking funding and
those providing it. Those seeking it get the funds they need for their
project, while those providing it get the satisfaction of knowing they are
helping a fledgling company or product while potentially receiving an
interesting benefit from the project’s founder.
If you’re seeking money through crowdfunding, there are some things
you need to be aware of. The most important thing to keep in mind is
that if you don’t meet your funding goal, you won’t receive anything at
all.
Remember that, because it bears repeating.
If you don’t meet your funding goal, you won’t receive anything at all.
If you set a goal of $10,000 and you only receive pledges of $9,999, you
won’t receive a dime. It’s an unfortunate situation, but it’s
understandable. It’s done this way for a couple of reasons.
1. It weeds out uninteresting projects, because those projects that
aren’t likely to succeed will probably never reach their funding
goals. People know an interesting idea when they see it.
2. It prevents people from asking for more money than they really
need. The more you ask for, the more risk you’re taking that you
won’t reach your funding goal, thus not getting anything at all.
In this report, you’re going to learn the secrets to setting up your
crowdfunding project in order to give you the best possible chance at
meeting or even exceeding your funding goal.
Crowdfunding Success Code

You’ll also learn how to use crowdfunding to promote a product before it
even comes to market, potentially selling out your first run before you
ever get past the prototype or development stage!
So let’s get started.
Crowdfunding Success Code

Getting Started
Different sites have different rules, but the basics of setting up your
crowdfunding project are pretty much the same no matter which system
you’re using.
Here are the basic steps to setting up a crowdfunding campaign:
Create your initial project, including a detailed information sheet
about yourself and your project and how money you need to
complete the project. It’s a good idea to include details about what
you’ll use the funding for, being as specific as possible.
Set a time limit for raising funds. This is usually anywhere from 1 to
90 days. The longer it runs, the better chance you have of meeting
your goal, but it will obviously take longer to receive the funds.
Promote the project in order to receive the most possible backers.
When backers contribute money, the funds will be placed into a
temporary escrow account.
Once the project has run its time limit, if it has reached its goal, the
donations will be released from escrow.
Crowdfunding Success Code

Popular Crowdfunding Sites
The first thing you’ll need to do is decide which site you want to use to
generate funding. There are dozens of popular sites these days, and each
has its own set of pros and cons you’ll need to weigh.
Let’s take a look at a few of the most popular and interesting
crowdfunding sites that are currently available.
Kickstarter
>> http://www.kickstarter.com
Kickstarter is perhaps the most popular crowdfunding website. It
launched in 2009 and has since been used by thousands of people, to
rise funding from millions of individual backers!
Crowdfunding Success Code

Here are some interesting facts about Kickstarter:
Creators keep 100% control and ownership. They do not have to
give up any ownership of their company, nor any share of their
profits. All funds are donated by backers with no expectations of
monetary gain.
Kickstarter accepts pretty much any kind of creative project you
can think of.
Kickstarter charges a 5% success fee, but you’ll only have to pay if
your project is fully funded. So keep this in mind and account for
the fee when you set your funding goal.
Crowdfunding Success Code

CrowdCube
>> http://www.crowdcube.com
CrowdCube, a UK-based crowdfunding solution, is different from your
average crowdfunding system. Rather than offering donation-based
funding, CrowdCube works more like traditional investment, where you
must either give up a percentage of your equity to backers (Equity Pitch),
or pay investors back loan interest (Mini-Bond Pitch).
Here are some facts about CrowdCube:
You must give up a percentage of equity to investors or pay back
bonds.
You must have a business plan and financial forecasts available in
order to be investment ready.
Crowdfunding Success Code

CrowdCube is a good place to try if you’ve tried other funding methods
and haven’t been able to reach your goal. Because you’re relinquishing
some equity in your company or future profits, it may be easier to get
funded.
IndieGoGo
>> http://www.indiegogo.com
IndieGoGo is very similar to KickStarter. It’s a bit more geared toward
creative pursuits than other sites, but they still accept physical products
as well as creative projects like movies and books.
Here are some facts about IndieGoGo:
You keep 100% ownership of your company.
The success fee is 5%, which is lower than some others, However, if
you don’t meet your goal, the fee is still 5% unless you chose the
"Fixed Funded Option" which has no fee - but you do not get to
keep any money.
Crowdfunding Success Code

There is a 3% processing fee for payments from credit card and
PayPal.
Unlike other sites, you still get to keep any money you raise, even if
you don’t meet your goal. However, if you opt for the Fixed
Funding option, you must reach your goal in order to keep any
money.
RocketHub
>> http://www.rockethub.com
RocketHub is a unique system, because it allows you to raise funds
without worrying about whether or not you meet your goal or paying
huge fees. They are a lot more friendly to smaller ventures.
Crowdfunding Success Code

Here are some facts about RocketHub:
Free to launch a project.
You keep all the funds you raise, even if you don’t meet your goal.
Fastest payouts in the industry. They pay on the first Friday after
your project ends. It takes approximately 5-10 business days in
most cases.
Lower fees than most other sites. 4% success fee if you reach your
goal, or 8% if you don’t, plus 4% credit card processing fees.
Potential to have A&R fund your project.
Crowdfunding Success Code

Setting Goals
Setting your goal is a critical element of any crowdfunding campaign,
because most sites require you to reach that goal before releasing any
money to you. If you don’t meet your goal, you get nothing, and backers
receive their money back.
Why do they do this?
The main reason is to ensure that only quality projects get funded. For
example, if you ask for $5,000 to publish a short story, they don’t want
that to get funded, because there’s no reason anyone should spend that
kind of money to publish a short story.
They also want to ensure you don’t ask for more than you really need.
You might need to ask for $500 to publish your short story (to hire an
editor and cover artist and maybe a bit more for initial marketing), but
asking for $5,000 would be completely unnecessary.
When you set your goal, figure out, in detail, how much money you think
you will need. You can then add around 25% on top of that to cover any
unplanned expenses and to cover success fees, processing fees, etc. If
you think you need $1,000 total, you can ask for $1,250. If you think
you’ll need $10,000, ask for $12,500.
Crowdfunding Success Code

Video Presentations
One of the most important things you can do to really generate interest
in your project and increase your chances of meeting your funding goal is
to create a really killer video presentation.
Projects with video presentations are much more likely to get fully
funded than those without video, because video is interesting, engaging,
and can present your project in a way that is much easier to understand
than text and pictures alone.
Here are a few tips for creating an effective pitch video:
Focus on the most important elements of your project.
Keep the video between 1 and 5 minutes. People will get bored if
your video is too long.
Let people know why they should invest in your project, and what
you feel it means to the world to get it out there.
Try to be a little relaxed and fun. If you’re all business, people are
less likely to be interested. If you’re friendly, more people will want
to invest in you.
Use music and pictures to connect with your audience. Try to select
media that really fits with your project’s theme.
Highlight the benefits you’re offering to backers, and let them
know exactly what they’ll get if they fund you.
Crowdfunding Success Code

Explain that if you aren’t fully funded, you get nothing, so ask them
not only to contribute, but to share your project with others!
Different platforms will have different requirements for video, however,
in general:
Videos must be 500MB or less
Must be MOV, MPEG, AVI, MP4, WMV or FLV format
Here are some resources that you can use to create a video:
>> http://www.Camtasia.com
>> http://www.fraps.com
>> http://www.CamStudio.org
Mac users can use:
>> http://www.ShinyWhiteBox.com
>> http://www.AmbrosiaSW.com
Crowdfunding Success Code

Promotions & Generating Buzz
Once you’ve created an interesting project with a great video
presentation, it’s time to get eyeballs on it. This means doing a lot of
promotion, and hopefully generating a little viral buzz.
Rewards
One of the most important things you can do to get people interested is
to offer interesting perks to people who donate money.
Here are a few ideas that will help you create great rewards:
Offer interesting perks at all levels of funding. If someone only has
$5 to contribute, offer to place their name in your movie’s credits
or on a special page on your website.
Give backers at certain levels an advanced copy or pre-release
version of your product.
Offer limited editions or signed editions of your product.
Create special rewards for international backers.
Remember to stick with the rules. Some sites don’t allow certain
types of incentives like coupons or gift cards.
Crowdfunding Success Code

Social Media
Don’t forget to use social media to generate interest. Ask everyone you
to know to share your project on all of their social media accounts, and
consider making social media accounts specific to your project.
Here are some ways you can generate buzz:
Create a Facebook page for your project.
Create a Google+ page for your project.
Create a Twitter page for your project.
Use Pinterest to pin images relevant to your project.
Create videos and encourage people to share them.
In order to encourage people to share your project, you might want to
hold some contests on Facebook or other media sites. You could give out
gift cards, advance copies of your project, or other gifts. Just be sure to
state that the giveaway has nothing to do with the crowdfunding sites
itself, because you cannot hold any type of giveaway like this on your
project page itself. Most sites prohibit this. Instead, hold it on your own
page or blog.
Be sure to make social sharing one of the conditions of entry!
Crowdfunding Success Code

Conclusion
Crowdfunding is a great way to get funds for your business or project,
but always remember that if you fail to meet your funding goal, you
won’t receive anything.
For this reason, it’s vital to estimate your true funding needs as closely as
possible. Never ask for too much, because the more you ask for, the
more likely it is you won’t reach your goal.
I hope that you’ve realized that crowdfunding is as much about
marketing as anything else in business. You need to market your project
and yourself to potential backers, and you need to use marketing to
attract viewers to your project, too.
Don’t just put up a project and expect people to flood to the page to give
you money. Unless you have a truly revolutionary project or product,
you’re going to have to put in some time and effort to get your funding.
Use the tips and tricks in this report, and you’ll be well on your way to
getting your first project fully funded!
Now get out there and get funded!
Crowdfunding Success Code

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