What crowdfunders can learn from the Lean Startup
Lean startups and crowdfunding are more similar than you think. How do you build lean thinking into crowdfunding?
The Lean Statup movement is a triumph for entrepreneurs worldwide. Led by Eric Ries, hundreds of contributors in this movement have provided us with a language to communicate with our employees, investors and customers.
This is exactly what they have given us: a language.
One thing that has always fascinated me is that there are words in other languages (besides English — the only that I currently know) that describe things that we don’t even have words for. Oriental languages in particular may have a single word that describes feelings that takes us english-speakers an entire sentence to describe.
Putting actual linguistics aside, when an author, blogger or entrepreneur turns their art into a movement, their tribe creates a common language to share these concepts between each other and with the outside world. The Lean Startup movement is no different and this is precisely where crowdfunding fits in.
For several months, I’ve hosted arguably the most fun podcast ever made on iTunes: the Remarkable Crowdfunding Toddcast. Okay, fair call…it’s fun for me because I get to speak with some incredible guests about a really hot topic — but I know that there are other podcasts equally as fun. The best part of this journey is understanding the art and science behind crowdfunding.
What is crowdfunding anyway?
Crowdfunding is simply the following process:
- Pitch an idea, create a vision and make promises.
- Ask and collect money based on the merit of your pitch.
- Get started, build your art and change the world.
Now it’s easy to see that you don’t necessarily need a platform like Kickstarter or Indigogo to make this model work. In fact, you don’t even need a computer or the internet.
I recently put a challenge out to my listeners asking very simply: find some backers, raise some money and start a project (in that order).
The order is important. Most of us are led to think that we need to start a project, work really hard, make it perfect, find someone who might like it and discover whether they will pay for it. As an entrepreneur, this model sucks. Lots of time ends up wasted on building something that no one wants because we are too afraid to ask and have our work rejected.
Linking back to the Lean Startup, one of the core principles that we discuss is embracing Validated Learning — conducting small experiments with the aim of learning what is valuable to our intended customer.
With this in mind, what is the fastest way to gather market feedback? In-person crowdfunding.
The fastest way to validate your vision
Most people, including myself before starting this journey, are not aware of the simplest form of crowdfunding. In-person crowdfunding is exactly as it reads — pitching your idea to people, getting real-time feedback and ultimately, cash in advance. The Girl Scouts have been doing this for years. It’s so easy and cheap for someone to tell you “That’s a great idea! Go for it! Change the world!” however the great bullshit filter is cash. If they won’t back you with dollars (even a few), you need to go back to the drawing board.
Crowdfunding is the ultimate tool for initiating and discovering validated learning as you will receive feedback at each stage of the process:
- Pitch the idea to friends and family, ask for them to back you.
- Pitch the idea to stangers, ask for them to back you.
- Pitch your campaign to the press, see if they make time for you.
- Launch an online crowdfunding campaign, what happens?
- Take your product to the rest of the world, was that the right move?
At each stage you will have the opportunity to play with the build, measure, learn feedback loop until it resonates with your tribe. Unfortunately for some, they make the mistake of thinking that Kickstarter is the place to launch your first iteration of build, measure, learn. However, they couldn’t be further from the truth.
To make it easier to remember, I encourage entrepreneurs to work in three distinctive and successive phases:
- Pitching, and lots of it.
- Funding, without shame.
- Scaling, if that’s what you want.
Pitching — throwing away your napkin
We have all heard the typical entreprneurial story from an idea on a napkin to a high-growth, VC-backed startup. Whatever. Throw away your napkin because you’re fooling yourself with what you think success should look like instead of testing your assumptions and validating your results with real feedback.
Just wrote down an idea on a napkin? Great, throw it away and pitch it to a stranger. Napkins don’t care how bad your idea is,but a stranger will if you’re asking for her money. On the contrary, a single stranger will give you a week of enthusiasm to do things you couldn’t imagine, a napkin will clean your face. Once.
In this case, build, measure, learn is actually pitch, measure, learn. No building needs to happen now, but a lot of learning will be the output.
Funding — more than just dollars
What is a crowdfunding campaign worth? As you may have already guessed, much more than just the dollars raised. Congratulations, you have just found your true fans. These people have traded dollars for your trust.They believe in you and your vision to create something meaningful for the world. They are probably also proud to share your campaign with their friends.
This is an asset you can’t buy with $100m of advertising, slimy sales copy or gimmicks. Treat these people like they’re worth 5 times the value they back you with. If you do it right, they’ll let you do it again.
That is the greatest gift as an entrepreneur.
Getting money from your backers, whether it is in person or online is the second phase of your build, measure learn feedback loop. Once again, you don’t build the product yet, but you build visual aides such as photos and videos to help you share your story so that it resonates with your tribe. They don’t like your video or photos? Great, you just learnt something. Create new ones and measure the change in behaviour.
Scaling — closing the feedback loop
So you finished your campaign, now what? Firstly, you need to fulfil your promises and deliver everything you said you would. Many assumptions about servicing costs and passion for the process will be tested in this stage. Once you’re done, you’ll reach a fork in the road where you can choose to pivot your product strategy or stay on track. Lucky for you, you have the feedback from paying customers to tell you whether you got it right or not. Your sources of feedback include:
- Comments and questions throughout pitching and funding.
- A breakdown of backers for different rewards at different price points.
- Changes in backer behavior upon changing the campaign content.
You need to choose whether you love your backers and want to do it all over again with them, or you may wish to take the product to the world to scale outside of your crowdfunding tribe. Or lastly, you may decide that this was enough, the combination of this product, campaign and tribe of people is not you cup of tea. Move on to another project.
The important choice is that you choose. Be certain, make a choice. Live with the consequences.
Welcome to the new world of ideas, funding and entrepreneurship.
The two lean startup principles of validated learning and the build, measure, learn cycle are two examples of lean thinking that can be applied to crowdfunding. It’s no coincidence that crowdfunding is popular today. Every day, someone changes the world.
What change would you make?
Bonus points: What will you do today to change it?
