Crowdfunding: 4 steps to winning hearts and wallets
Most of us don’t like asking for money.
And almost all of us are afraid of presenting to a large group.
Crowdfunding asks us to both, and that’s tough! Many of the entrepreneurs I advise try to put it off completely, preferring to transition straight from family & friends capital to venture capital.
And that’s a shame, as the money of the masses offers many benefits. It is a rapidly growing source of funding that gives you patient and nonintrusive investors, many of whom may turn into new customers, employees and advisers.
How then do you woo the crowd? The latest research on the topic has been uncovering the psyche of your typical online investor. Recently, information management professors Bretschneider and Leimeister surveyed 300+ investors on the German crowdfunding platform Innovestment
They identify 4 crowdfunding investment drivers:
1. The bragging rights
“I want to impress others”
Crowd investors care about their online image. What do their peers think of them? How are they ranked or perceived within their community of investors? They love being associated with a project they can brag about, or that will give a boost to their online profile.
Can you offer the investor something or someone impressive to invest in? An exciting new technology, a well-regarded management or advisory team, or maybe an ethical angle?
2. The itch
“I support projects that deal with my own needs”
Online backers will prioritise ventures that deal with issues that affect them in their daily lives. They’d rather scratch their own itch first, before helping the (supposed) itch of some hypothetical niche market.
Can you clearly relate the problem you are solving, linking it to someone else’s reality? Can you make the issue real in the mind of a prospective investor?
3. The rapport
“I invest in ideas and people I find particularly likeable”
The crowd is a collection of social beings. It has psychological biases, being more drawn to people or projects it likes.
Can you build rapport through your funding pitch? Perhaps by adding a bit of personality or humour in your delivery, or the stylistic choices you make?
4. The bling-bling
“I aim to get a reward”
Finally of course, crowd capital is eyeing $$$. They do their own assessment of the likely income streams your project will generate, and the risks involved.
Have you clearly stated the returns expected to accrue to your backers? And how you will deal with the challenges involved? And are there any additional incentives you can offer, eg. a product discount?
Fundraising is a people’s business, particularly when it comes to the crowd. Understand their psyche, and you’ll find a fast-track to their wallet.
Source: Bretschneider, U. and Leimeister, J. “Not just an ego-trip: Exploring backers’ motivation for funding in incentive-based crowdfunding” Journal of Strategic Information Systems 26: 246–260
This story is published in The Startup, Medium’s largest entrepreneurship publication followed by 303,461+ people.
Subscribe to receive our top stories here.
