The Realities of Crowdfunding: Building Relationships During Struggles and Success

A small idea can make a big impact: This is the message at the heart of crowdfunding. There are a few ways to successfully fund your idea. For example, sites such as Indiegogo and Kickstarter help entrepreneurs gain funding from other supporters. But are these middlemen really necessary? What’s to keep you from utilizing do-it-yourself crowdfunding?

There may be setbacks along the way such as changes in your original business plans, and gaining financial support from others isn’t going to be easy. In the end, though, the success is completely yours to claim. Here are some points to consider when going at it solo (with some help from your crowdfunders).

Doing it yourself means fast iteration

More often than not, your first idea is not the one you finish with. For example, look at PayPal (initially mobile-focused), Instagram (previously Burbn, a mobile check-in app), and Twitter (formerly Odeo, a podcasting platform). Each of these companies was founded on one idea, but their creators decided to pursue another. These are perfect examples of how your original plans and ideas aren’t always the ones that lead to the big wins.

Professional investors understand the nature of the “pivot”-changing from one idea to another, based on market research or opportunity-but crowdfunders may not be so understanding. They may be investing because they love your idea and want to use your specific product. Be aware of frustration that may build if you decide to switch it up.

Early on, I recommend tackling your idea on your own without crowdfunding. That way, you can get customer feedback and iterate quickly, rather than seeking funding from the crowd. After you have a fair amount of confidence that your idea is market-tested and will be well received (i.e., won’t be significantly changed), you can look into crowdfunding as an option.

They’re not just funding your idea

That’s right-crowdfunders are funding you as much as your idea, because you’re the person who’s going to make it happen. To help win them over, take time to be articulate in telling your story, and be sure to make a good video. Get personal, provide incentives, develop tangible recommendations, and form close relationships. Also, make it a point to look for examples of what others have done. In order to want to fund your project, your audience needs to first believe in you and the passion you have for your idea.

You can learn from the pros

Crowdfunding is in a nascent stage and there’s a lot to learn about it. I recommend looking for people who have crowdfunded before, successfully or not. By talking with someone who’s tried it, you’ll get a sense for what works and what doesn’t. You’ll learn from their experiences to discover what mistakes not to make, as well as gain invaluable firsthand insight.

Either way, roadblocks are inevitable

Getting funding is only the beginning-and, oftentimes, it’s the easiest part.  Actually completing the project is very, very difficult and requires total commitment. For example, Kickstarter has a success rate of less than 50 percent in terms of projects completed on time. In addition, more than 50 percent of their projects don’t reach their funding goal, so there’s a chance you may not even get funded. You will encounter struggles when building up your idea, and understanding that before diving in is key.

Things will go wrong. You might underestimate how long it will take you to finish the project, how much money you need, or which resources are required. Be prepared for the road to be rough and bumpy. Only take money from others if you are truly committed to fighting, day in and day out, to get your project completed. Crowdfunding can be an efficient way to make your idea happen, but you have to be prepared to pick yourself back up in the face of obstacles and keep pressing on toward your goal.

No matter where you are with your project, it’s imperative that you continue to communicate and be transparent with your funders. Keep everyone who has helped you along the way informed of both your progress and your obstacles. People will not only better understand your goals if you actively communicate, but they’ll support you in ways you couldn’t have anticipated. Taking on the large task of pursuing your business goals by yourself and with crowdfunders is difficult, but rewarding for both parties. In the end, crowdfunding is all about building real relationships-and showing gratitude in success or in failure.

Image Credit: Andrew Magill

About Bhavin Parikh

Bhavin Parikh is the CEO and co-founder of Magoosh, an online test prep company that provides video lessons and practice questions accessible anytime, anywhere for exams such as the GMAT, GRE and SAT.

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