How we raised $40k for Hours with a completely private crowdfunding campaign
It was just a hunch; it was kind of crazy; it broke the rules; but ultimately, it worked.
For the past few weeks we have been running a private crowdfunding campaign to accelerate the development of Hours Cloud — the team compatible web version of our time tracking app, Hours.
Now that the campaign is public I wanted to share some lessons we learned from running possibly the first ever private crowdfunding campaign for a business app.
So here it goes:
1. You can crowdfund a business software startup
I’ve done a lot of research on crowdfunding and I have not seen a single success story for business software — only tales of sorrow and woe, and signs to stay away. The conventional wisdom is that crowdfunding only works for products with mass appeal and impulse-purchase potential. There is no way a company will risk money on software that doesn’t even exist yet.
Despite the evidence against the idea, we tried it anyway and I am happy to report that the campaign has so far blown away our expectations.
We have shared the campaign privately with only 16,000 newsletter subscribers over the past few weeks and up to today it has already generated $38,428.00 from 378 backers — an average of $101.66 per backer.
It might not be Pebble but remember that this was a completely private campaign — no press and no virality potential. I’ll be watching results now that the campaign is public and will post an update once we have those numbers.
2. Exclusivity can be a good thing
It is completely counter-intuitive. You would think that you want to make it as easy as possible for your fans to fork over money, right? The truth is that if something is available to everyone, it’s not really that special. If I was selected as part of a small group to participate in something early, I am a lot more likely to at least check it out.
As we started sending out the first invites, we built anticipation by teasing the campaign on Twitter.
Every day we sent out more invites and we continued to tease it on Twitter.
Instead of sending market-y invitations with lots of screenshots and images, we sent out emails with a personal tone and a direct line to ask us questions (and we received a lot, by the way).
The subject was simply “You’re invited!” While not very informational, it turns out people like getting invited to stuff. 67% of people who we sent an invite to opened the email (four times the industry average of 16%).
We also did another counter-intuitive thing. We made it hard to get in, even for invitees. Instead of a simple link to a webpage, the site required a passcode to get in, which we provided in the email.
Adding extra steps is generally a good recipe for turning people off but let’s look at the numbers:
49% of people who opened the email clicked the invite link.
I’m not an email marketing expert but I think by most standards that is a pretty good conversion rate.
The passcode causes people to realize that this is legitimately exclusive to them — it is special. If something is special, it is worth at least checking out. Out of those people who clicked the link, the overwhelming majority of them took the extra step to enter their passcode.
The campaign being private also allowed us to target it specifically toward our current users. For example, in the video we could assume that the recipients were already active Hours users so we could better speak to their needs (versus the now-public campaign which needs to introduce Hours more generally).
One important note is that exclusivity was not just an illusion. We didn’t send out 16,000 emails all at once and claim it was exclusive. We trickled out invites over 4 weeks through a combination of hand-picking users and sending invites based on how long they have been on our mailing list. Those who got the email first had the real benefit of getting discounted early bird rewards, which ended up selling out much faster than we expected.
3. Companies will invest thousands of dollars for software that doesn’t exist
This one blew my mind. Our early bird packages ranged from $8 to $5000. The $5000 package included $9600 in subscription value, as well as a call with our team but to plunk down that kind of money, companies would really have to believe that the product would solve major problems for them.
Thankfully, they did. It was just a few minutes after we sent out the first few hundred invites. *ding* — the Stripe message popped in on our Marketing slack channel: someone just purchased 10 lifetime memberships for his team for a total of $2500.
Then a week later two companies purchased our top plan. So just three companies accounted for over $12,500 in sales! And that is on top of the dozens of companies that invested hundreds of dollars each in our smaller packages.
So yes, some companies will fund your product early if they think it will really impact their business and if they think they will ultimately get a good bang for their buck.
4. You don’t need Kickstarter
I think Kickstarter and Indiegogo are great and I would encourage you to look into them. Without these sites, this campaign would not have worked because the concept of crowdfunding would be prohibitively foreign to people.
- It allowed us to experiment more, including doing an invite only campaign and allowing a company to buy multiples of the rewards so that their whole team could participate.
- It allowed us to create a mini-site that feels very special, with lots of little animations, sounds, and details simply not possible with Kickstarter.
- Kickstarter doesn’t pay until your campaign concludes. Because we are planning to release Hours Cloud in November, timing would be too late to really help much. Stripe pays nearly immediately.
- Kickstarter and Indiegogo both take a percentage of the funds raised — well deserved since they provide a great platform and audience, but we suspected that their audience was less valuable for funding business software.
We definitely spent a good deal of time crafting the custom website but you have to spend a fair amount of time to create a good Kickstarter video and page anyway and we felt the extra work has paid off really well.
Check out the site for yourself: hourstimetracking.com/cloud
5. Community > Money
Our top goal for running this campaign was actually not the money; it was to build a community of commited early adopters — a group of users who we could bounce ideas off, get feedback from, and who ultimately would help us get the word out on launch day.
That is why every backer gets a weekly update. These updates include an update on progress, a preview of a major feature, and a survey to collect structured feedback.
We used Typeform to create really nice surveys with screenshots and videos and I highly recommend it. The surveys have generated a ton of really helpful feedback.
Check out our first update to get an impression of how we did it (and feel free to fill out the survey).
This is technically part of the last point but this was so big for us that it deserves its own heading.
Starting from the mid-range Pioneer reward package, we offered access to an exclusive Slack community where users could have direct real-time access to the entire Hours team.
This has possibly been the best thing that has come out of the entire campaign. Backers have been extremely active, thoughtful, and excited to be part of the process. We have been getting so many ideas that we had to start a Trello board to organize them all and to continue discussion.
Sure, users can email us any time with ideas but realtime communication between users and the entire team feels completely different.
Something magical happens when you connect users directly with your team: it begins to feel like the two are one and the same.
Now these awesome folks are invested as users, financial backers, and members of our extended team who want this thing to succeed.
Having a group to quickly bounce ideas off in a casual way is going to be invaluable in improving Hours in the coming years. We stumbled upon it through the crowdfunding campaign but this is something we wish we had started long ago.
Crowdfunding is a new adventure for us and we couldn’t have done it without the advice from Dan Counsell’s excellent article on the topic — so big thanks to him for that. I only hope this article might inspire someone like Dan inspired me.
The Hours Cloud campaign is now public. If you or your company tracks time, you should check it out.