by Kevin Lawton and Dan Marom (2010)

Introduction

In the book The Crowdfunding Revolution: How to Raise Venture Capital Using Social Media, authors Kevin Lawton and Dan Marom provide a comprehensive guide to the emerging world of crowdfunding. By leveraging social media and online platforms, entrepreneurs can now raise the capital they need to launch their ventures directly from the crowd, circumventing traditional investment channels. The book not only delves into the mechanics of crowdfunding but also underscores its transformative potential for the economy and society at large.

1. Understanding Crowdfunding

Major Point: Crowdfunding is a method of raising capital through the collective effort of numerous individual contributors, typically via the internet.

Concrete Example: IndieGoGo and Kickstarter are prime examples of successful crowdfunding platforms where entrepreneurs pitch their projects to potential backers.

Actionable Step: Identify a suitable crowdfunding platform relevant to your project. Research and evaluate different platforms (such as Kickstarter for creative projects or IndieGoGo for a broader range) based on factors like fees, user base, and rules.

2. The Mechanics of Crowdfunding

Major Point: A successful crowdfunding campaign generally involves clearly defining the project, setting a realistic funding goal, and detailing how the funds will be used.

Concrete Example: Pebble Technology, a smartwatch company, used detailed product descriptions, prototypes, and a transparent fund allocation plan to raise over $10 million on Kickstarter.

Actionable Step: Draft a thorough project description. This should include your project’s purpose, how it will impact users, a detailed plan on how the funds will be used, and what reward or equity backers will receive.

3. Building Your Crowdfunding Campaign

Major Point: Before launching your campaign, meticulously plan every aspect, from your pitch to promotional strategies.

Concrete Example: The book highlights the case of the Veronica Mars movie project, which raised over $5 million by engaging with an existing fan baseand leveraging social media for promotion.

Actionable Step: Build a compelling pitch video and strong visual content. Utilize storytelling to connect emotionally with potential backers and clearly communicate your value proposition. A pitch video should ideally be no longer than 3 minutes.

4. Activating Your Network

Major Point: Your initial backers will likely come from your existing network. It’s essential to engage friends, family, and colleagues to create initial momentum.

Concrete Example: The authors discuss how the “100 Backers” rule can help preliminary projects gain traction. This rule stipulates aiming for the first 100 backers from personal connections before broader promotion.

Actionable Step: Use your personal and professional networks to gather early support. Craft personalized messages and leverage social media to mobilize your close contacts and encourage them to share the project within their networks.

5. Leveraging Social Media

Major Point: Social media platforms like Facebook, Twitter, LinkedIn, and Instagram play a critical role in the promotion and success of crowdfunding campaigns.

Concrete Example: The successful funding of the board game “Exploding Kittens,” which raised over $8 million, partially attributed its success to viral marketing and social media engagement.

Actionable Step: Develop a social media strategy. Regularly update your followers with engaging content, updates, behind-the-scenes looks, and shout-outs to backers. Use scheduled posts, hashtags, and targeted advertising to maximize reach.

6. Creating Engaging Content

Major Point: Content is king in crowdfunding. High-quality, engaging content can significantly increase your campaign’s prospects for success.

Concrete Example: The Coolest Cooler campaign made extensive use of high-resolution images, videos demonstrating product features, and regular updates to keep backers engaged, ultimately raising over $13 million.

Actionable Step: Invest in professional visual content such as images and videos. Frequently update backers with the latest news, developments, and project milestones. Treat content updates as an ongoing dialogue with your backers.

7. Offering Attractive Rewards

Major Point: The type and attractiveness of rewards can significantly influence backer interest and contribution levels.

Concrete Example: The book mentions the Oculus Rift’s campaign, which offered early access to the development kit as a reward, enticing numerous developers to back the project.

Actionable Step: Design multiple reward tiers that offer increasing value. Ensure that rewards are meaningful and exclusive, creating a sense of urgency and desirability. Each reward tier should be clearly explained and should provide a tangible incentive for higher contributions.

8. Understanding Legal and Financial Considerations

Major Point: Crowdfunding involves several legal and financial responsibilities that must be understood and complied with to ensure a smooth and successful campaign.

Concrete Example: The JOBS Act in the United States, which eased some regulations around crowdfunding, is highlighted as a pivotal change enabling more widespread use of this funding model.

Actionable Step: Consult with legal and financial advisors to ensure compliance with local laws and regulations. Understand the tax implications of received funds and maintain accurate records of all transactions and backers’ information.

9. Building and Maintaining Relationships

Major Point: Successful crowdfunding is not just about raising funds; it’s about building a community and maintaining relationships with backers.

Concrete Example: The case of GoldieBlox, an educational toy company that continued to engage with their backer community post-campaign to build a loyal customer base.

Actionable Step: Communicate regularly with backers through updates, addressing concerns, and creating an engaging backer community. Use platforms like email newsletters, social media groups, and blogs to maintain ongoing relationships.

10. Post-Campaign Strategies

Major Point: The end of a crowdfunding campaign is just the beginning of the entrepreneurial journey. It’s critical to deliver on promises and use the momentum for future growth.

Concrete Example: The book discusses the follow-up tactics of campaigns like that of the game “Star Citizen,” which used continued engagement to raise additional funds post-campaign.

Actionable Step: After a successful campaign, focus on product development and fulfillment. Constantly update backers on progress, demonstrate transparency, and actively seek feedback for continuous improvement. Plan for future campaigns or product launches leveraging the existing backer base.

Conclusion

Kevin Lawton and Dan Marom’s The Crowdfunding Revolution opens a gateway for modern entrepreneurs looking to harness the power of the crowd to fund their ventures. By understanding the intricacies of campaign management, leveraging social media, engaging content, and adhering to financial and legal standards, hopeful entrepreneurs can maximize their chances of success in this revolutionary approach to raising capital. The actionable strategies and real-world examples provided in the book serve as a valuable toolkit for navigating the promising yet complex terrain of crowdfunding.