Don't Click "Pledge" Till You Read This!!!
Welcome back everyone!
If you're just joining us, please have a quick read of our last Blog entry where we quickly discussed how to get started in crowdfunding.
As a personal story, I was always intrigued with crowdfunding ever since I heard about it and "dabbled" in looking for a campaign to back. My journey there will have to be put aside for another day, but needless to say, I learned a great deal since the early days of Kickstarter and IndieGoGo. Along with what I've learned as well as what we've researched here at LaunchMii, I will be outlining some of the basic things that you should consider and look for in a possible successful campaign to back. We'll focus on Rewards Based Crowdfunding today, as some of these will be pre-requisites for the other types of crowdfunding.
So let's get started!
Ok, I'm going to sound like a broken record, but it needs to be said again...Rewards Based Crowdfunding is NOT like Amazon!!! There are some people (and you can tell these guys are beginner backers or they just like to complain a lot) that go onto forums and comment on campaign pages saying that they haven't received their products or services months after the campaign ended! You back a campaign on these platforms primarily to help get the product to market. Whether it's in the form of pre-orders for the product or to get something else so the company can begin production. Having said this though, there have been some situations where products haven't been delivered for years, if at all. These campaigns give a bad name for the others that are legitimate but may have come across some difficulties since the end of the campaign. But this will also be a topic for another article. But basically it comes down to this...
never risk an amount of money that you are NOT prepared to lose!
Now this may be a fatalistic outlook, but sometimes our emotions gets the better of us. We see that new gizmo that we JUST have to have and we forget to do, what I call, the basic Due Diligence. And that is what we are going to focus on now. This is a basic checklist that I use to scrutinise a campaign before I click the "pledge" button. Keep in mind that this is the basic view and that if I were to start spending larger sums of money, I would dig even further into the campaign (again another article).
SO BEFORE YOUR PLEDGE, THE CAMPAIGN MUST HAVE:
A Video - look, this doesn't have to be a Hollywood blockbuster, but campaigns to me, MUST have a video. It can be an animation, a paid production, something, but not longer than 2-3 minutes The reason for this is, it gives me a quick idea of what kind of dedication and "work" the campaign creators will put into the product as well as the fulfilment of the orders. Research shows us that up to 80% of campaigns with a video will likely succeed in their pledging goals. I've found that campaigns without this crucial form of marketing will most likely not have any of the others in this list...which screams to me to "stay away"!
A Description Of The Underlying "Problem/s" (if there is one) - most products out there are created to "solve" a particular "pain point" (bit of jargon from the industry). Otherwise, why develop or sell the product? This is basic marketing, and lets face it, crowdfunding IS an exercise in marketing. This can be written in so many different ways that I won't get into it. But lets just say, when you're reading the text, there better be something explaining WHY I need this product. Note that I said "if there is one". If the product is a comic book, movie or something 0f that nature, sometimes this may not be required, unless it's to tell me why it is different from others like it...which in it's own way is the "problem".
A COMPREHENSIVE Description Of The Solution Or Product - now "comprehensive" can be a bit subjective since I personally like lots of details, but at least describe the solution to the problem or discuss fully what the product will be. This should describe the quality, materials, tooling, or production process of the product. This sounds like a given, but you would be surprised how many I've come across that have the first two on this list, and the campaign creator misses this detail!
Photos Or Drawings Of the Solution Or Product - I'm a very visual person and so this is important to me. The video above is like the trailer for a movie. It's meant to tease us into opening the campaign to see more. But once I'm into the "meat" of the campaign description, I like to see pictures of prototypes, story boards, examples of drawings, etc. This tells me that the creator actually has something that they have been working on! Kickstarter has a great rule that if there is a product that a prototype or drawing needs to exist before they allow a campaign to go live. Otherwise, there needs to be some declaration within the description that funds are to develop a prototype - but this is where I start to walk carefully in this minefield! Personally, I've stayed clear of campaigns that talk of "funding for prototype or patent", but that's just me.
A Graphic Or Description Of Where Funds Will Go To - if the campaign in question has passed scrutiny to this point, it is here that can make or break my decision to back. Doing one of these takes effort on the campaign creator's part. It tells me that they have thought carefully on where money will be allocated to and how a product will be produced. If I see anything that says "founder salary" or "team salary" I'm turned off right away. If you're a start-up looking to create a company or product, you automatically waive your salaries till you are deemed successful by the public. If a creator is collecting salaries BEFORE they technically produce a product then I do not believe that they are raising funds for the right reasons. This graphic also will let me know if the creator is realistic in their expectations of the campaign. A little bit of industry knowledge of the product helps here, but for the most part, the majority of funds will go into production, manufacture, distribution and marketing.
A Bio Of All Team Members - knowing WHO is creating the campaign is probably more important than WHAT the campaign is about. In the investing world there is a saying "people don't bet on the horse...they bet on the jockey". So for me, I want to know what the person's background is before I consider pledging to the campaign. So I look for industry experience or knowledge primarily. If there is only one team member, this is absolutely a MUST. If there is more people involved, I like to see their experience and industry knowledge. I will not back someone who doesn't have a team in place already if it is a tech or physical product. I believe in entrepreneurs, but without a team or a plan to hire a team, then that person is just a dreamer. So have a look at this in every campaign.
Outline Of Risks And Challenges - at the end of campaigns there is usually a section where the creator can put their risks and challenges. I look for entries in this area because I want to see that the creator has thought of any problems that they would face. This can vary from issues with communications to fulfilment of orders. I want to see that they have thought of potential problems. If there is nothing in this section, I begin to question the creator and the success of providing the rewards should they succeed in reaching their funding goals.
Well there you have it, my initial list of items to look out for when choosing a campaign to back. Please keep in mind that this is my own checklist, but it is not carved in stone and there is now guarantee that if a campaign has ALL of these items that it still couldn't fail or the backer couldn't get burned. To be honest with you, sometimes I will still back a campaign if one or two of these items is not present. But keep in mind that I make calculated risks around this and I remember the cardinal rule...
never risk an amount of money that you are NOT prepared to lose!
So for now, use this initial checklist to keep you out of trouble! And remember...have fun with it! Backing campaigns is exciting and satisfying knowing that you are helping an up and coming business person and entrepreneur! You may be responsible in helping a person or persons achieve their dreams!!
Our next article we'll talk about some other items to look for that may determine the success of a campaign and how to increase your protection from being burned!
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Till then, we'll see you next time!
The LaunchMii Team Blogger!
Image provided courtesy of storyblocks.com