When the SEC missed two deadlines in implementing the JOBS Act, it seems to only have heightened the buzz of crowdfunding. Locally, we’ve seen crowdfunding-focused events on all the calendars. John Eckstein spoke to a room full of CFOs about what we can expect in the near future. Brian Tsuchiya (of Vim Capital) has been educating Denver and Boulder about how they can register with the state and do some crowdfunding right now before JOBS Act laws go into effect.
The crowdfunding craze has seeped into my free time too. I was enjoying a rare night off at a party and a woman sidles over to me and starts talking shop. “I’m going to do that thing where you put your business online and get donations.” Further discussion revealed that she’s got a new acupuncture practice and a whole lot of student loan debt.
“What are you going to give your backers?” I ask. I was thinking for a $50 donation she could send backers an informative self-published guide about acupuncture or some wellness materials.
“I’m not going to give them anything. That’s the point. It’s a donation.” She quipped.
Unfortunately, this is a common perception about crowdfunding. Folks think they can come up with an idea, a need, or a sob story and other folks will line up in droves to fork over their hard-earned cash. A quick look at Indiegogo suggests that they could be partly right. One group raised $1500 to save hens from slaughter; another $7169 to get heart surgery for a little boy in the Philippines.
You can have a sob story like the doomed hens or you can have a legitimate product such as the Misfit Shine. Either way, you need to get your backers involved and feeling like they are part of something. Even the hen keepers send you a picture of the hen you saved and allow you to name your hen if you wish. $25 for a picture of a lucky hen and the warm feeling of happy clucking? Hey, it inspired the 34 folks who backed the hens.
Let’s get back to Misfit Shine before I wax poetic about the farmyard for too long. This is a product like a Fitbit that allows users to set fitness goals and keep on task using the iPhone as an interface. Sure it’s a great product; who doesn’t want to be more fit? All around popular, it just won second place for best gadget at Las Vegas CES (Consumer Electronics Show). But what I love about this Indiegogo campaign is that they did it right and raised $846,438 with an initial goal of only $100k. The Misfit Shine campaign pre-sold their product through the crowdfunding site. Now 7 days after their campaign closed, we’ll see if they can keep those backers happy. You can already find the excitement wavering on their Indiegogo page with comments like, “I’m with Liran on this one. Getting a bit nervous. How about addressing your backers’ questions?”
Although it remains to be seen whether Misfit will fulfill their backer’s dreams, or take the money and run, there’s a few things that made them stand out. These are the same things we talk about in Pitch Academy where companies learn how to pitch to angel investors.
- Team – They have a experienced team of over 25 people between San Francisco and Vietnam.
- Use of Funds – They tell you where they are in the product development process: the prototype is made, the supply chain is determined. It sincerely sounds like they are honing the product, not bumbling around with an untested idea.
- Promotion Strategy – They have 34 articles written about them which cannot be attributed to dumb luck. This team knows a little something about getting press. My favorite is the article from WIRED about how Misfit failed on Kickstarter only to make a comeback on Indiegogo.
It will be a great success story for Misfit and Indiegogo if the project ends with happy backers and a lot of good press for a new company. We’ll have to wait and see how it goes.
As for using Indiegogo to fund an acupuncture career like the hopeful woman at my cocktail party… There are some projects in the Indiegogo queue right now focused on acupuncture: getting education for an acupuncturist, bringing acupuncture to developing nations, and using acupuncture to help specific people who have been injured. In looking for something akin to the project that came up at my cocktail party, the closest campaign I could find was “Keep Acupuncture Affordable“. This project was designed to help a sliding-scale community acupuncturist stay current with her credentials as the Canadian health regulations change out from under her. She’s doing a service for the community and she’s about to be shut down if she doesn’t get some support in terms of financial backing for a required course. She raised only $1,621 of her $5,000 goal. I can’t be sure, but I’m guessing most of her backers were current clients and friends, not random folks who have too much money in their wallets.
The best thing to do when creating a campaign is to put yourself in the shoes of your potential backers. Why would you fund one project over another? The people backing these campaigns are real folks, just like you, who live on a budget and have to make hard financial choices when they realize it’s time to get a whole new set of tires on the car. You are asking these people to hand over $25, $50, or sometimes even $500 with absolutely no recourse if you take the money and run.
All I’m saying is that people don’t give money randomly or freely. Everyone wants something when they back a project. You’ll be much more successful in crowdfunding through Kickstarter of Indigogo if you can find a way to get your backers to feel connected to your project. Whether it’s naming a chicken, getting a gift box from Alphonso’s aunt in the Philippines, buying the Mistfit product months before it’s available to the public, or even getting an emailed mp3 of a workday meditation from the acupuncturist. There is still no such thing as a free lunch. When people give you money, they want something in return.