Crowd-funding has become an effective way for artists, gamers, entrepreneurs, and techno-geeks to get financing for new projects. There are dozens of sites where creators can post descriptions of their projects in search of investors.
The best-known is Kickstarter, which has raised $240 million for more than 23,000 successfully funded projects in just four years. The project success rate as of 2012 is 46 percent, and 85 percent of people who pledge money actually pay up on those pledges. Obviously, Kickstarter has found effective ways of energizing their constituency.
Here are five lessons to learn from the Kickstarter model:
- “Cool” is cool. Though Kickstarter investors may get something for their investment, that “something” is often symbolic for small investors: a sticker or their name on a list of contributors. The real payoff is the feeling that they are participating in a new, exciting, and different movement. Is there a way to make your customers feel like they’re onto something hip and happening?
- Incentives work. Don’t rely on good vibes to motivate people: Provide tangible benefits as well — but think beyond tote bags and mouse pads. For instance, musicians using Kickstarter to fund a CD might provide MP3 downloads in advance of the album’s release for small investors — or the opportunity to sing backup on a song for large investors. Look for new ways of rewarding good customers or attracting new customers.
- Visuals sell. Every Kickstarter proposal is centered on a video, in which the people seeking funding explain their project, how they plan to proceed, and what the payoff would be for investors. Some of these are quite casual — an inventor talking to a video camera — while others are creative presentations that become viral phenomena. Kickstarter videos are great examples of how a video can be both informative and entertaining. [You can read more about videos here.]
- Relationships matter. Successful Kickstarter projects are based on continued engagement with regular progress reports. Savvy marketers already know the importance of lead nurturing — the Kickstarter model emphasizes that lesson. Make sure you’re not only responding to questions, but reaching out to keep people up to date on what you have to offer.
- Track early, track often. Whether you’re doing formal lead scoring or not, you need to understand what factors move potential customers through the purchase funnel. By looking at reactions earlier in the process, you’re in a better position to correct course as necessary. The numbers from Kickstarter bear this out: A project’s likelihood of success jumps to 52 percent after getting just one single pledge, and to 90 percent once it has received only 30 percent of its funding.
Even if you’re doing financing through more traditional models, Kickstarter’s dramatic success makes it a model worth examining.