Rewards Based Crowdfunding
Rewards based crowdfunding has been an attractive fundraising option for thousands of small businesses and creative projects. And it’s easy to see why—it’s more efficient to prepare, launch, and manage compared to traditional business finance, it can capture the hearts of your customers and snowball in popularity with social sharing, and, best of all, just about anyone can pledge a little cash and back your business.
And though the centralization and sharability that come with a well-crafted crowdfunding campaign can make your job of managing the raise considerably easier and more efficient, it’s by no means a fundraising magic bullet or a hands-off “set and forget” approach. Those founders who successfully attract backers and raise crowdfunding capital do so because they do 2 things very well:
They have a market-validated product or service that fills an unmet need better than any competitors, and
They are able to share that product or service with enough people, anticipating their specific questions and making compelling asks.
What you need before launching your rewards campaign:
As you raise crowdfunding capital, it’s your job to answer your audience’s questions and build their confidence, persuading them to support and share your campaign. It’s up to you to identify some of the specific needs and questions that your customers will have, but there are several universal components to any successful campaign. The good news is that nobody knows your business better than you do, so these are pieces you can start gathering today as you plan your upcoming campaign.
Compelling Pitch – You already know your business inside and out, so now you just have to wrap it in a meaningful package for your potential backers. Your pitch should be a lean, well-rehearsed narrative about where you came from, what you do, and what you need in order to change the world with your product or service. While the goal is to tell a story that resonates with your specific audience, every successful pitch does 3 things:
State the problem – The first and most important part of a great pitch is to identify a painful problem .The more severe the problem or need that you address is, the more valuable your business’s solution will be.
Introduce the solution – Once your audience understands the problem on an intellectual and emotional level, you can present your product or service as its best solution. Remember, be clear and concise—focus on your solution’s big picture, not every last feature.
Define the market size – Once your audience understands the problem and how you’re uniquely equipped to solve it, you need to put the opportunity in perspective. The bigger the market, the greater the potential value of your company is, and the more enticing the opportunity becomes for backers and investors.
Elevator Pitch – Adapt your pitch into a ready and rehearsed elevator pitch, a condensed version that can be delivered in the span of 30 seconds to a minute. In the same way that you never know who you’ll run into and have a chance to pitch to in the real world, you can’t predict how distracted a potential backer might be when they happen upon your page, and you definitely shouldn’t assume you have their full attention. For these situations, it’s best to have a short, 3-4-sentence elevator pitch at the top of your page and keep it focused on the problem, solution, and market size.
Email Pitch – Email marketing is just one of the approaches you should be thinking about for promoting your campaign. Similar to your elevator pitch, craft a brief version of your pitch that the recipient can skim in under 2 minutes, being sure to use these best practices for writing compelling emails.
Company Video – Campaigns that include an overview video have been shown to perform better, and the reason why is understandable: the average user would rather watch a short, well produced video than take the time to read the same content. Invest the time (and production cost) to produce a professional video that features your company’s founder or core team, explains the unmet need that sparked your idea, details your product and how it’s different than anything else out there, shows where your business is at right now, and hints at its long-term potential. This is the sort of content you can build into your campaign that’s not only more likely to get seen, but also get shared online.
Product Overview – Write a detailed description of your product or service, how it works, and why people would want to see it brought to market. Since you’re likely to be offering a per-order of this product as a crowdfunding reward, you should be “selling” the product as much as you’re explaining it.
Rewards – At the heart of any rewards-based raise are, of course, the rewards. Although a small number of backers will support your business solely out of personal affinity or the desire to see you succeed, the vast majority will decide to pledge based on what they get out it. What you offer your backers is entirely up to you (though campaigns on Fundable must have at least 3 rewards tiers), so it’s worth thinking long and hard about what would incentivize your customers. Rewards generally fall into 3 main categories:
Pre-orders – By far the most popular type of reward, this approach simply involves selling pre-orders of the product you’re raising money to produce. This is a great mid-level reward and is a exciting way for backers to experience the impact of their contribution.
Services – If pre-orders aren’t available or don’t fit your business model, you can offer special services in exchange for support. We’ve seen everything from Founders preparing a home-cooked meal for backers, to developers offering to write code for fans and supporters.
Recognition/Swag – A perfect entry-level reward for donations under $20, this category offers backers some sort of personal recognition for their support. This can include a company t-shirt commemorating the campaign or the backer’s name on the company website.
Whatever rewards you choose, it’s best to have at least 7 rewards tiers—a small price point that offers some sort of simple recognition, a mid-sized price point that offers a pre-order, and a large price point that offers special recognition for generous backers.
The Ask – You’re here to raise money, so it all comes down to the ask. Always remember this rule: be crystal-clear about exactly how much money you’re raising, and know exactly how you plan to spend it. Detail is the key here—the more information you can provide, the better. In as much detail as possible, be able to explain how you plan on spending the crowdfunding capital you raise, and explain specifically what milestones it’ll help you reach.
This is a great chance to build backer confidence by showing that you’ve spent the time to chart your business’s course forward. Some common categories we see in rewards campaigns are product development, sales and marketing, recruitment of key personnel, legal and accounting, and operating expenses. You can use these broad categories as a starting point, but be sure to expand upon them where you can. For example, explain which product features this funding will help you develop, or which key team members you’ll be able to hire, and what they’ll do for your business.
In the next chapter, we’ll take a look some of the finer points of a successful equity-based crowdfunding campaign and identify some things you’ll need to compile before you launch.
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