The hardest part about being a startup isn’t raising money. It’s knowing who your target customer is, what their problem is, how you can solve it better than anyone else, and how you will get paid enough to make a profit.
Having that knowledge helps you raise money, and crowd funding could make it easier still. But being able to tell the story of who you help, how you help them, and how you make money is just as important for crowd funding as it is for traditional financing.
Kauffman Dissertation Fellow Ethan Mollick studied thousands of projects funded through the crowd funding site Kickstarter to find out what worked and what didn’t. Here are some highlights from his study:
– Build up your social network in advance. Mollick reports that ‘the greater the size of the founder’s social network, the greater the chance for success.’ Facebook is especially important, he says.
– Projects with ‘high-quality, polished pitches’ are more likely to be funded. A high quality pitch includes video.
– Having a project that ties into local geographic interests is more likely to succeed. Mollick uses the examples pitching country music in Nashville, or film in Los Angeles.
– Shorter deadlines are better. According to the report, 30-day pitches have a 35 percent chance of success compared to 29 percent for 60-day pitches. Longer deadlines, he says, imply a lack of confidence in the project’s success.
To watch the SCORE webinar about crowd funding, go to www.score.org/workshops/crowdfunding-alternative-source-financing