How to Raise Venture Capital Through Crowdfunding
PCWBC: If the project is successful, how do you recommend handling communication with backers?
Steinberg: It's important to realize that your product home page on the crowdfunding site you choose will become a dead link. Create a community and migrate them to a sustainable headquarters, such as a website or a blog. Stay in constant contact through social media channels, e-newsletters, whatever you can do.
You need to keep backers up to speed and appraised of where a project sits. They're not just backers, they're your supporters and brand evangelists. These people are emotionally invested in your success. They will help you create buzz and spread awareness, not just for your current project, but for future projects as long as this one is successful. Have a plan before you launch for how you're going to take care of communicating with your backers, whether it's hiring a PR agency or making sure you answer every email yourself.
PCWBC: How much funding should you ask for?
Steinberg: Be reasonable about estimating product costs. Ask yourself what the minimum viable product is that you can offer without adding extraneous expenses. I recommend a cushion of about 20-30 percent on top of your estimate since things happen. Set your funding amount as low as possible; the more reasonable it is, the more likely that you'll get backers. Offer incentives for extra money raised, such as adding features or expanding the scope of the product. Check before you start to see if the crowdfunding site you pick will let you go over your target.
PCWBC: Should you really “leave the attorneys out of it,” as Warballoon Studios is quoted as saying in the book?
Steinberg: I don't want to give any legal counsel either way, since I'm not a lawyer. However, I would recommend that companies looking to get into crowdfunding incorporate to give themselves all of the legal protections that they can get before they begin a crowdfunding project. It's affordable, simple, and it gives you a front-line of protection. You should also clearly spell out ownership rights.
There also may be legal protections already in place for your product, such as copyright and trademark protection, that you don't need an attorney's help with.
PCWBC: What do you believe are the most valuable insights from past campaigns?
Steinberg: The first and most obvious thing you need to do is clearly spell out what your project is, what makes it unique, and why you are right for the job. Differentiate yourself at a glance. Be clear about what you're offering. Have a familiar brand, personality, or product image attached, if you can. Popular projects are coming from wildly original and different ideas, or you are seeing old franchises making a comeback because they can be done more affordably through crowdfunding. When setting financial goals, be reasonable about it; have the sense of how big your target market is.
The Crowdfunding Bible is available for download at no charge. There is also an option to purchase a paper copy of the book through Lulu.
Next: The publisher has provided an excerpt from the book.