Crowdfunding: Before You Build It You Gotta Lay the Groundwork

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Ray Kinsella, a character in the movie Field of Dreams, hears a voice in his cornfield tell him, "If you build it, he will come." The voice was telling Ray to sacrifice his time and money to build a baseball field in his corn field. Ray listened to the voice and built the baseball field despite being on the brink of financial disaster.

The advice worked for Ray, resulting in the arrival of Shoeless Joe Jackson and a team of forgotten baseball players from a bygone era. Luckily for Ray, the ball players that appeared in his corn field provided Ray with an attraction that generated the revenues necessary to keep his farm and his home.

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In the business of crowdfunding, however, there is no Field of Dreams. In fact, listening to this type of advice when orchestrating a crowdfunding raise is the worst possible advice an entrepreneur can accept. Just because you create a crowdfunding campaign does not guarantee that anyone will participate. In most launching a crowdfunding campaign without first setting up the proper foundation will result in a complete crowdfunding failure.

In our conversations with entrepreneurs we find that too many of them have bought into the crowdfunding hype and believe that their success in raising the money needed to launch their business is dependent merely on setting up a crowdfunding account, telling a good story and creating a good video. In too many entrepreneurs’ minds that is all that it takes to get the money to begin flowing.

Through our radio show and on our Two Men In Your Business YouTube channel we have had the opportunity to meet and interview a great number of entrepreneurs that used crowdfunding in an attempt to launch their businesses. Some entrepreneurs were successful. Others were not. Regardless of the outcome, the great takeaway we have acquired has been that it takes a lot of work to successfully close a crowdfunding raise. In fact, through our observation and inquiry it seems that assuming the Field of Dreams philosophy is a sure way to ensure crowdfunding failure.

The biggest fallacy in crowdfunding is the expectation that the crowdfunding platform will find your investors. While it is true that crowdfunding platforms have accumulated large lists of investors with whom they communicate on an ongoing basis about new and relevant investments, the reality is that the number of crowdfunding campaigns launched daily is so large that it all becomes noise. Investors must generally believe in you personally or your product. Most crowdfunding investors are not sitting around with an itch in their pocket and the need to empty out their wallets.

While an occasional investor may materialize through the crowdfunding site, successful entrepreneurs find, cultivate and direct investors to their specific crowdfunding campaign. Expecting the crowdfunding platform to do the work for you turns your crowdfunding campaign into one more investment opportunity that gets missed or ignored.

Successful entrepreneurs let potential investors learn about the players and the product well before a single dollar is contributed. Successful crowdfunding campaigns have built relationships with potential funders many months before the campaign goes live. Creating a relationship with potential funders ensures investment and encourages funders to share their experience and your product within their social network.

This chapter is focused on providing you with the information needed to set a proper foundation well before going live with a crowdfunding campaign. This chapter will guide you through the steps you should take to ensure that you give your raise the best chance of success. While there are no guarantees or silver bullets in crowdfunding there are certain practices that improve the odds of success.

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Crowdfunding: The Hyper-Democratization of Business Creation

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Today it is not possible to talk about entrepreneurship without talking about crowdfunding. Entrepreneurs have the ability to efficiently tap more financial resources than ever before thanks to crowdfunding platforms like Kickstarter and Indiegogo. By reaching out to the masses and asking each participant to provide a small contribution, entrepreneurs can achieve their capital raising goals like never before.

Before crowdfunding became the ubiquitous start-up funding mechanism that it is today most entrepreneurs were limited to reaching out to their friends and family when it came to raising money for a new venture or to grow an existing business. Thanks to the Internet, social media and the power and influence of the crowd, funding is more accessible to more people than at any time in the history of civilization. Welcome to the age of hyper-democratization of business creation.

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When we hear the term crowdfunding we think about the Internet sensations that enabled needy but worthwhile causes to raise money in small amounts from numerous sources. These crowdfunding platforms are referred to as innovative, flexible and democratic and are viewed by many as a modern-day miracle made possible only as a result of the Internet and social media.

Supporting this notion and topping the list of the most successful crowdfunding projectsever is the Space Combat video game. The Space Combat campaign raised over $83 million from 898,000 supporters. Runner-up is the Pebble Time smart watch campaign which raised over $20 million. Admittedly, without the Internet and social media these crowdfunding feats would likely not have been achieved.

The reality, however, is that crowdfunding has been in existence for centuries and has likely existed going back to the earliest days of man. Crowdfunding raises have been referred to as cundinas in Mexico as far back as anyone we know can remember. And in nearly every corner of the planet there has historically been a form of crowdfunding used in times of need.

Imagine the farmer in the early days who was in need of tools to prepare his land for the planting of corn. Short on capital he spoke to members of the community, stating that without their support the town would go without corn – an essential staple. Through word-of-mouth and some hustling, the farmer raised the monies needed to purchase the tools needed to prepare the land and ensure corn for the coming season. Did the farmer raise $83 million? Not likely. But he collected what was needed and the community benefitted from its contribution.

Today’s crowdfunding efforts are no different. An entrepreneur in need of funding to launch a new company, product or service uses word-of-mouth via the Internet and social media. And like the farmer, the entrepreneur hustles to make sure that the message gets out loud, clear and into the ears of the right people. Ultimately, as will be described later in this book, a crowdfunding campaign succeeds if it results in benefit to the participants.

During a recent crowdfunding workshop we held in Los Angeles an attendee raised the point that the only difference is that the farmer had to work a lot harder to get the money. I promptly laughed and noted that crowdfunding has never been harder. Crowdfunding is far from a sure thing. And contrary to popular belief, crowdfunding can be a bitch.

While the amount of crowdfunded dollars continues to grow, the number of start-ups and existing businesses seeking the crowd’s monies is growing at a faster rate. As a result the competition for dollars is intense and requires that entrepreneurs know exactly what they are doing before embarking on a crowdfunding expedition.

Two Men in Your Business Guide to Crowdfunding provides entrepreneurs with the roadmap needed to plan and execute a successful crowdfunding raise. This book shows entrepreneurs how to prepare for the raise, how to structure the raise, how to get the word out, how to keep the pressure on, how to use tools that work and what to do once the crowdfunding campaign is over.

Each chapter in this book addresses a different topic. The chapters do not need to be read in order – though we recommend it. Also, this book is concise and to the point. The goal is to provide the needed information in a manner that allows the entrepreneur to get to crowdfunding as quickly as possible.

We are confident that this book will provide amazing value. In exchange, we ask that you use the power of the Internet and social media to spread the word. Happy crowdfunding!

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