The world of fundraising has been turned on its head. A decade ago, entrepreneurs had limited sources for capital—angel investors, venture capital funds and rich uncles.
Today, entrepreneurs have a plethora of options.
AngelList pioneered online funding platforms, which spawned dozens of similar offerings to make meeting angel investors easier. Kickstarter and Indiegogo were the first to make raising pre-sale dollars on your brilliant idea a reality.
To date, over $1,000,000,000 has been pledged to Kickstarter projects, with the average project receiving approximately $20,000—enough to seed the initial stages of most ideas. Indiegogo doesn’t report up-to-date numbers, but, based on historical data, one could extrapolate that close to $200,000,000 has been pledged. It is projected that a total of $5,000,000,000 will be pledged across all crowdfunding platforms in 2014.
Enough data has been collected over the past five years to establish best practices for crowdfunding campaigns. I recently developed a course that teaches entrepreneurs the three key aspects of raising capital on a crowdfunding platform. You can view it here for free.
Raising capital on crowdfunding is a function of “who you know”—and the good news is you can meet nearly anyone using social media. Ask Stacy Ferriera, who at 18 years of age secured an investment from Richard Branson by tweeting him on Twitter. Entrepreneurs are using social media to get the attention of influencers who can move mountains.
The key to crowdfunding is weaving a compelling story through video, images and text. The most successful campaigns use video to highlight the people behind the campaigns and display the passion behind the project. It helps if your campaign is solving a real problem that people care about, such as home security.
Entrepreneurs who provide a passionate solution to a real problem increase their chances of success.
Campaign management is the aspect most entrepreneurs fail to prepare for during their campaign. It is easy to focus on the launch, but many grow tired of campaigning by day 10. The key is to develop a 30-day plan ahead of time and recruit others (interns, virtual assistants, etc.) to carry the load.
Entrepreneurs who understand it is a marathon, not a sprint, are best equipped to meet their funding goal.
Have you tried crowdfunding? What are some of the techniques that helped you get across the finish line?
This post originally appeared on Atelier Advisors. Lili Balfour is the founder and CEO of the SoMa-based financial advisory firm, Atelier Advisors, creator of Lean Finance for Startups and Finance Boot Camp for Entrepreneurs. All AlleyWatch readers are automatically eligible for a 50% discount on either of the courses using the preceding links.
Image credit: CC by Jerzy Polański