7 Reasons a Crowdfunding Campaign is NOT For You

It seems crowdfunding has become the new go-to cash source for anyone with an idea and the chutzpah to put it out there on the internet.

Here’s how it works.

You use a platform like Kickstarter or Indiegogo to create a page explaining your idea, be it a new product, an artistic project or a business venture.

Then, people come to your page and give you money to help fund said idea. If you collect enough contributions that you reach your funding goal, you get to keep the money.

Genius, right?!

Well, sort of. It is for the 200,000+ projects that have met their funding goal on these sites.

But the harsh reality is that the vast majority of projects put up for crowdfunding fall terribly flat.

And if you do reach your funding goal—heck, even if you wildly surpass it—it can still turn into a nightmare.

These guys raised $13 million for their wacky cooler-meets-bartending-station-meets-sound-system, smashing through the record to become the most funded Kickstarter project of all time.

Then, they ran out of money.

I’m not saying crowdfunding is something to avoid at all costs. When executed correctly, a Kickstarter or Indiegogo campaign can be a great way to secure a small chunk of initial cash for your idea.

What I am saying is that most people severely overestimate the capabilities of a crowdfunding campaign.

Here are 7 reasons crowdfunding is NOT the right fit for your idea.

1. You think it’s the path of least resistance to funding your startup.

When you need to raise money to start a business, you typically have four options:

Bootstrap the cash on your own
Take a loan from a friend or family member
Take a loan from a bank or other financial institution
Secure one or more investors

Crowdfunding threw a wrench in this traditional model, making it possible to raise a ton of cash from dozens or even hundreds of tiny investors, each responsible for a small portion of the funding.

It certainly sounds easy. Plus, crowdfunding is appealing to many because it doesn’t come with the weight of paying back a loan or catering to a board of investors.

In reality, though, taking on an investor or taking out a small loan can actually be much easier than managing the fulfillment demands that go along with a crowdfunding campaign.

We’ve all seen Shark Tank, right? The right investor can open doors, connect you with others who can help with your idea, even serve as a mentor.

With crowdfunding, you’re totally going it alone. You’re responsible for fielding product orders, managing manufacturing, dealing with vendors, fulfilling orders, and—oh yeah—running your fledgling company.

2. You need too much money.

According to the latest Kickstarter stats at the time of this post, the majority of successfully funded projects raise less than $10,000.

Let that one sink in.

I’m willing to bet you were shooting for much more.

In reality, less than 3% of successful Kickstarter projects have raised more than $100,000, while less than one-hundredth of a percent have raised more than $1 million.

Need a few grand to rent video equipment or build a website? Crowdfunding may be the way to go.

But if you’re hoping to build the next Uber, it’s highly unlikely you’ll find that kind of funding on a site like Kickstarter.

3. You want to launch in a few weeks.

So much more goes into creating a crowdfunding campaign than you might expect.

Off the top of my head, you need to:

Create and grow social media accounts
Create and grow an email list
Preferably have a website up and running
Plan, shoot and edit an explainer video
Write the content for your crowdfunding page
Produce all the necessary images and graphics
Come up with a list of journalists, bloggers and influencers
Reach out to said influencers and secure their interest in your campaign

If a potential client approaches me about running a crowdfunding campaign, I advise a minimum of two months’ prep time before the campaign launch date.

4. You plan on “going viral.”

That about sums it up.

“Going viral” is not something that can be predicted or guaranteed.

Sometimes, even incredible content doesn’t make it further than a few hundred shares.

Planning on going viral is as viable as planning to win the lottery; it could happen, but that probability is that it won’t. Sorry 🙁

5. You don’t have one of the following: a list, or a significant budget for audience building.

So you’ve created a badass crowdfunding campaign page.

Now, how are people going to find it?

For most intents and purposes, you have two channels:

Email/social media communication to your targeted list of interested followers, friends, family members and leads. Depending on the amount you’re hoping to raise, this list should be between several dozen and several thousand people.
Paid promotion.

With paid promotion, it’s a literal numbers game.

You’re going to reach X number of people with your ads. A small percentage of those ad viewers will convert to leads—meaning they’ll give you their email address to add to your list.

Then, when your campaign launches, a small-to-medium percentage of your list subscribers will convert into backers who give you money.

The more money you’re hoping to raise, the bigger list you need.

The bigger list you need, the more you’re going to have to spend to build it if you don’t have one already.

It’s kind of exhausting to think about, right?

6. You don’t have the right team in place.

If you’re shooting to raise a relatively small amount of money, i.e. $10K or less, you may very well be able to do it on your own.

If you’re hoping to raise a significant amount, the operation is naturally going to grow in scope and size.

Can you build a website? If not, you’ll need a developer.

Are you graphically inclined? If not, a graphic designer would be a good idea.

Can you shoot and edit a decent video? If not, you’ll need to bring in a pro (or at least a friend with some chops).

You get the idea.

7. Your idea isn’t ready.

If you’re hoping to launch a new product design, Kickstarter requires that you have a working prototype to launch a campaign.

If it’s not a product design that you’re raising funds for, or if you’re using a different platform, you’ll need some kind of “proof” that your idea is viable to convince people to cough up their hard earned dough.

This could take the form of awards you’ve won, trade shows you’ve attended, reviews you’ve received from media, etc.

If all you’ve got is an idea with no social proof, people may not be too keen on giving you their money just yet.

The takeaway

I didn’t write this list to discourage you; I wrote it to help you identify sooner than later that your crowdfunding dreams may not manifest into reality.

Did any of the items on this list apply to you?