How to Run a Successful Crowdfunding Campaign on Kickstarter

Important steps to run a successful crowdfunding campaign on Kickstarter, which is the platform that changes the game for entrepreneurs...

30 May 2018 169 Views

Written by Hannah Leute

Fund your idea (IStock, 2017)You have an innovative idea for a new product but are lacking the financial resources to turn it into a business? Here is the solution with evidence from a successfully funded startup company called Paper! Learn about the most important steps from young entrepreneurs and run your own crowdfunding campaign on Kickstarter.

 

Paper – young entrepreneurs with a vision

Paper is a Berlin-based fashion label created by young entrepreneurs in October 2016. The small startup began with a mission: change the fashion industry and make responsible fashion appealing and affordable. However, as many new ventures without sufficient business experience they faced the challenge of receiving financial support from external investors (Kleemann, Voss, & Rieder, 2008). With a capital of simply 2400€ the co-founder Sebastian Boll noticed that realizing their dream of introducing a sustainable backpack is “far from simple” (personal communication, 5 November 2017). However, they did not give up and found a solution.

 

Crowdfunding – a game changer

Crowdfunding offered Paper a promising investment opportunity to realize their business idea. It derives from the broader concept of crowdsourcing where the crowd is involved in obtaining ideas, feedback and solutions to develop corporate activities (Kleemann et al. 2008). The Internet and the Web 2.0 enabled this innovative approach to obtain funds since entrepreneurs ask online communities to financially support their projects (Belleflamme, Lambert, & Schwienbacher, 2014). Hereby, project founders raise money by drawing on relatively small contributions from many individuals (Mollick, 2014). Thus, with crowdfunding it is not necessary to seek for traditional sources of financing, work with banks or invest large sums yourself.

The crowdfunding concept (Tocci, 2015)

 

Kickstarter – the largest crowdfunding website

With over 13 million members, Kickstarter is the largest crowdfunding platform on the Web. More than 3 billion dollars have covered thousands of projects in areas such as music, technology, design, art and games (Kickstarter, 2017).  And yours could be the next!

The platform makes it easy for you to establish a crowdfunding campaign and brings you together with a large community of potential investors, also called backers. Besides, Kickstarter follows a reward-based approach where funders receive a non-financial reward for backing a project (Qiu, 2013). Thus, investors do not hold a share of your business and you retain full ownership.

Paper’s success on Kickstarter

Within 30 days and the support of 121 backers, Paper received an amount of 11.130€ (Kickstarter, 2017). In return, the entrepreneurs offered incentives such as planting a tree for a lower pledge, and being the first to receive the product for a higher pledge. After running this campaign, they could finally implement their first product. On top of that, the startup got featured on the Kickstarter Facebook page.

 

How to attract funding for your startup

It is not as easy as it looks. However, considering the following premises you can significantly increase your success rate on Kickstarter.

  1. You need an innovative product

Paper's prototype (Kickstarter, 2017)Projects that signal a higher quality are more likely to be funded (Mollick, 2014). The product should be creative, innovative and thoughtful. Otherwise, Kickstarter will not approve it and backers will not be interested.

Paper’s product, a sustainable backpack, is especially innovative since it is made of a unique paper material which is water-repellent, washable and durable. Moreover, it is completely sourced in Europe and stands out with a functional and timeless design.

  1. Include a well-made video and a detailed product description

Funders remain uncertain about the actual quality since the product is not yet in the market (Belleflamme et al. 2014). To reduce the perceived risk and win the backers’ trust, you must provide rich product descriptions, images and some personal information on the crowdfunding campaign page (Koch & Cheng, 2016). Paper advices to be as transparent as possible (personal communication, 5 November 2017).

Besides, a professional video is considered as a main selling point for crowdfunding campaigns (Mollick, 2014). It is your chance to demonstrate the quality of your product and prove that you are passionate and confident about what you offer. As a result, backers will more likely support you (Koch & Cheng, 2016). Check out Paper’s video here.

  1. Set an appropriate funding goal

Kickstarter follows an all-or-nothing approach. This means that you only receive the pledges if you reach the funding goal (Robertson & Wooster, 2015). In general, backers rather fund small and less risky funding goals because they make their pledging decision based on how much of the project goal has already been funded (Kuppuswamy & Bayus, 2015). However, there are two aspects you must consider when setting your goal:

  • Your funding amount must cover the required capital to produce your product, to deliver it on time and to sustain your business (Mollick, 2014). The entrepreneurs of Paper set their goal too low and had to dig into personal savings to fulfil the promises since their campaign, as many others (Kuppuswamy & Bayus, 2015), stagnated after reaching 100% of funding.
  • You should minimize the time frame of your goal since long durations may implicate that you are less confident about the project (Mollick, 2014). Furthermore, the middle period is not as important since most pledges come in the first and the last week of the funding cycle.

 

  1. Be prepared and show it

It took the founders of Paper six month to prepare. According to the entrepreneurs, it was hard work, but well-worth it in the end (personal communication, 5 November 2017).

As you already know, backers dislike risk. They try to find projects with high success rates (Mollick, 2014). Thus, signal that you thought it through. Besides, careful planning prepares you for a possible crowdfunding success. Always keep in mind that you must fulfil the crowds’ expectations and deliver a great product. Moreover, you must fulfil the reward promises on time, otherwise you must refund the backers (Qiu, 2013). According to Paper (personal communication, 5 November 2017) considering the factors below is crucial in order to avoid project delays and unsatisfied donators:

  • Prototype
  • Marketing and communication strategy
  • Production process
  • Cash flow after your campaign
  • Sales channel of your product (own Website versus external online retailers)

 

  1. Activate your social network

Most project supporters on Kickstarter are one-time backers. To be successful it is necessary to mobilize your friends, family and followers on different social media channels such as Facebook, Instagram and Twitter (Mollick, 2014). Ask your personal network to share your content and push you through the most difficult period in the beginning. The closer you are to the funding goal, the higher the chances of accomplishing your goal and the more backers feel the need to help you finally succeed (Kuppuswamy & Bayus, 2015).

  1. Create a strong community on social media

Spread the words (IStock, 2017)Actively promoting your crowdfunding campaign on social media is important. It creates awareness and interest among many potential investors (Lu, Xie, Kong, & Yu, 2014). Paper`s co-founder suggests starting it before the actual campaign begins and using different channels to expose your project to a broader audience (personal communication, 5 November 2017).

The Web 2.0 and electronic word-of-mouth communication enables you to rapidly reach backers that are not in your immediate network and not familiar with Kickstarter (see picture). Customers who have invested in your project may promote and share it among their own network and thus reach out to more potential backers (Lu et al. 2014).

To make the community share your campaign you must constantly communicate with the crowd on social media and arouse interaction between participants. For this purpose, motivate your audience and offer benefits such as valuable insights and receiving your product earlier than others (Belleflamme et al. 2014). Do not forget: the community is as valuable as the money you raise since they may support you even after the funding process.

  1. Keep your community updated

Regular updates on the project status will support your funding success. It will not only motivate investors but also generate excitement throughout the campaign (Kuppuswamy & Bayus, 2015). Answer your backers’ questions and show them that you are involved in the project at all times (Koch & Siering, 2015). Paper created a blog to answer their backers’ questions. Besides, the company used Instagram to inform their community at least once a day about the current state of their campaign (Paper, 2017).

Paper`s update on Instagram (Paper, 2017)
  1. Listen to your community

You must realize that the backers are your potential customers and crowdfunding serves as a test market for your product (Xu, 2012). Thus, listen to the crowd’s feedback since it provides you with valuable information about the market and your prospects. Paper for instance offered its funders an email address to contact them any time for tips and ideas.

 

To put it all in a nutshell:

  1. You need an innovative product
  2. Include a well-made video and a rich product description
  3. Set an appropriate funding goal
  4. Be prepared and show it
  5. Activate your social network
  6. Create a strong community on social media
  7. Keep your community updated
  8. Listen to your community

Given all these tips, co-founder Sebastian Boll has one more thing to say: “Passion and creativity are the key factors behind our work. Whatever you do, it should embody your full passion and a little bit of dreaming” (personal communication, 5 November 2017).

You are passionate AND have an innovative idea? You understood the eight tips mentioned above? Then what are you waiting for!

Click here and write your own success story. Crowdfund your idea and make it real!

 

 

 

References

Belleflamme, P., Lambert, T., & Schwienbacher, A. (2013). Crowdfunding: Tapping the Right Crowd, Journal Of Business Venturing, vol. 29, no. 5, pp. 585-609, Available Online: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1578175 [Accessed 10 November 2017]

IStock (2017). I Stock by Getty images, Available Online: https://www.istockphoto.com/se [Accessed 10 November 2017]

Kickstarter (2017). Kickstarter, Available Online: https://www.kickstarter.com [Accessed 9 November 2017]

Kleemann, F, Voss, G.G. & Rieder, K. (2008). Un(der)paid Innovators: The Commercial Utilization of Consumer Work through Crowdsourcing. Science, Technology & Innovation Studies, vol.4, no.1, pp. 5-26, Available Online: http://www.sti-studies.de/ojs/index.php/sti/article/view/81/62 [Accessed 12 November 2017]

Koch, J. A. & Cheng, Q. (2016). The Role of Qualitative Success Factors in the Analysis of Crowdfunding Success: Evidence from Kickstarter. Available Online: https://ssrn.com/abstract=2808428 [Accessed 10 November 2017]

Koch, J. A. & Siering, M. (2015). Crowdfunding Success Factors: the Characteristics of Successfully Funded Projects on Crowdfunding Platforms. Available Online: https://ssrn.com/abstract=2808424 [Accessed 11 November 2017]

Kuppuswamy, V. & Bayus, B. L. (2015). Crowdfunding Creative Ideas: The Dynamics of Project Backers in Kickstarter. Available Online: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2234765 [Accessed 13 November 2017]

Lu, C. T., Xie, S., Kong, X. & Yu, P. S. (2014). Inferring the Impacts of Social Media on Crowdfunding. In: Proceedings of the 7th ACM international conference on Web search and data mining, pp. 573-582, Available through: LUSEM Library website http://www.lusem.lu.se/library [Accessed 10 November 2017]

Mollick, E. (2014). The Dynamics of Crowdfunding: An Exploratory Study. Journal of Business Venturing, vol. 29, no.1, pp.1-16, Available through: LUSEM Library website http://www.lusem.lu.se/library [Accessed 10 November 2017]

Paper (2017). Paper.berlin [Instagram]. Available from: https://www.instagram.com/paper.berlin/ [Accessed 10 November 2017]

Qiu, C. (2013). Issues in Crowdfunding: Theoretical and Empirical Investigation on Kickstarter. Available Online: https://ssrn.com/abstract=2345872 [Accessed 12 November 2017]

Robertson, E. N., & Wooster, R. B. (2015). Crowdfunding as a Social Movement: The determinants of success in Kickstarter campaigns. Available Online: https://ssrn.com/abstract=2631320 [Accessed 12 November 2017]

Schwienbacher, A., & Larralde, B. (2010). Crowdfunding of Small Entrepreneurial Ventures, in Cummin, D. (eds), The Oxford Handbook of Entrepreneurial Finance, Oxford: Oxford University Press, pp.369-391, Available Online: https://ssrn.com/abstract=1699183 [Accessed 11 November 2017]

Tocci (2015). Three’s A Crowdfund, Available Online: http://www.tocci.com/2015/03/threes-a-crowdfund/ [Accessed 16 November 2017]

Xu, T. (2012). Learning from the Crowd: The Feedback Value of Crowdfunding. Available Online: https://ssrn.com/abstract=2637699 [Accessed 14 November 2017]

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Students from the International Marketing and Brand Management program at Lund University are the contributing authors for the BrandBase blog.