7 Ways Crowdfunding Creates a Fail Proof Startup

Kendell Rizzo
Jan 3, 2017 · 4 min read

I could rattle off a ton of cringe worthy stats about business failure rates, but the real zinger is that most of us know why businesses fail: lack of capital, poor planning, market confusion or just a plain bad idea that clients don’t want.

You probably even know how to solve these problems.

Yet year after year one statistic stays the same, the failure rate for new businesses, it’s alarmingly high for a group of people who have access to so many tools for validation and market research.

The issues lie in the execution of ensuring all pistons are firing properly. This is with the assumption that your idea is good. Even if it isn’t it is ok too, but the faster you can subjectively come to that conclusion the better off you are.

You should be married to your ability to create a valuable business, not married to one idea. This is distinction can save your thousands of dollars and years of your life.

If you have a business that can be crowdfunded, you may want to consider shooting for a successful campaign to kick off your product launch.

Seven out of the 10 reasons that businesses fail are eliminated during a successful crowdfunding campaign.

These 7 components will give you a heads up on the others in your industry and help you create a base for your business that will sustain.

1. Validation

When doing your prelaunch you will be reaching out to potential customers and building your email list. This will give you feedback and research that you will never find in a market report. It will help you confirm the need or lack thereof for what you are doing, without wasting any time or money.

2. Speed of funding

Crowdfunding campaigns are like an event. They start, they finish and that is the only time your buyers will be able to purchase at that price or with certain benefits. Unlike an ongoing online business, this brings a level of urgency to your funding. It is a great way to encourage your following to get involved with what you are doing, in a very accelerated amount of time.

3. Customer Feedback and Involvement

Any company, any creative, any author, anyone who creates anything for others will tell you the most important thing you can even receive is feedback from your end user. And not generic feedback but deep down feelings that many people don’t disclose in surveys or group settings (i.e. typical market research.) But with crowdfunding you get the unique opportunity to have one on one conversations with your market. If your company continues to grow this may be one of the only times you get this type of intimate feedback.

4. Access to Capital

We all have ideas, some of them good and some of them not, but a few of them are life changing ideas.

The trick is to find the best ideas the fastest, validate them with your potential market and move to production. If you can drop the bad ideas and validate the great ones, you are going to be successful.

With the internet and ability to connect with others, validating ideas should be easier than ever. Right?

So why aren’t we all filthy rich with our big, brilliant ideas?

Traditional funding takes months of sifting through your personal network, vetting potential investors, and spending your own time and money to get in front of them. With crowdfunding, it’s much easier for you to get your opportunity in front of more interested parties and give them more ways to help grow your business, from investing thousands in exchange for equity to contributing $20 in exchange for a first-run product or other reward.

Crowdfunding gives businesses access to capital like never before possible.

The game has changed. It has never been easier to validate your idea, get market feedback and create sales, in a short amount of time with little to no start-up capital.

And the numbers agree…

In 2000, it cost about $1 million to start a company. Today, it’s below $5000.
As a result, startups and small businesses now account for over 50% of the GDP.

By 2020, the JOBS Act that permits crowdfunding — and the equity crowdfunding opportunities it unlocks — will create $50 billion of available capital.

5. Social Proof

We all know your Mom loves everything you do but what about the rest of the world? Crowdfunding will give you the exposure you need to find out.

6. Sales and Customers

Too many businesses go too long without these. Businesses may have a team of experts and even a great product but without sales and customers there is not business, crowdfunding gives you the sales you need to plan based on concrete, customer driven evidence.

7. Inability to Execute

By nature, crowdfunding campaigns are fast and challenging, because of their quick timelines and demanding deadlines, the team is pushed to their limits to see what the company is made of. The skills learned and the ability to take on projects of this scope will hone your team’s ability to execute in pressure situations.

So, if you’re wondering if your business has what it takes and you are in a consumer facing market, crowdfunding is your best option. You can learn a lot and grow in a short amount of time. It also gives you deadlines to move forward faster than you may be currently. Many startups get stuck in a prelaunch limbo, crowdfunding can accelerate you out of this.

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I would love to know more about what your campaign did to strengthen your business.

Kendell Rizzo

Showing people how to bring their ideas to life www.successfullyfunded.co

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