Crowdfunding and Inventions, some myths/canards

Crowdfunding: a widely misunderstood topic

An extremely good way to understand Crowdfunding is to look at campaigns, both successful and failed. There are lots of example of both. Look at lots and lots of historical data, empirical data, all kinds of data.


BUT:  that data may be MISLEADING.  It is important to be certain of interpreting the data properly. Below are some uncomfortable, unpleasant truths about CrowdFunding.


REVIEWING CROWDFUNDING CAMPAIGNS BY OTHERS, STUDYING, DOING ONE’S HOMEWORK

1) This is excellent for getting an idea of why other campaigns failed.  A lot of very useful information there, accurate reliable information. Much less likely to be subject to mis-interpretation.


2) However, such reviews are not as effective as one thinks for getting an idea of why other campaigns succeeded. That is a very different question, and some of the campaigns that appear to have met their goal, in fact did not meet their goal. Their campaigns actually stunk. However, some participants “fake” success by channeling their own money through straw-donors.



3) How many of the campaigns that succeeded, still never actually delivered a working, usable product? There is no easy to look this up.  But it’s a hugely important, critical statistic that gets totally overlooked


In other words, just because they got their "ask" (goal)?  That means the campaign “succeeded”?  NO, NOT AT ALL!  NO!


4) The crowdfunding campaigns we can see are not the end of the story.   How many campaigns never launched at all?  Because during the “seeding” process (see below), the people realized that their product did not have sufficient market potential to move the needle. Nobody wants it!  


Researching expired or pending crowdfunding campaigns does not show how many people were saved from embarrassment by proper pre-launch seeding and polling. 


Quite wisely, many of the most astute observers never launched at all! Yet, searches of existing crowdfunding campaigns will not find these examples of excellent, intelligent crowdfunding planning.  But this (catching mistakes early, identifying and <painfully> facing down weak ideas early) is perhaps the most important single lesson of crowdfunding!


5) A big misunderstanding of Crowdfunding is what people offer in return for donations, the specific “swag”, etc.  Lets say someone is making a new style of bicycle motor, and they want to crowdfund it.  That inventor “thinks” they must offer a finished motor, ready-to-install, on the bicycle, in order to attract Crowdfunding donors.  


This is so mistaken, so wrong in so many ways, on so many levels. This misunderstanding greatly increases their chance of failure, and also leads to having angry donors flaming them on the Internet.


6) 90% of donors must come from entities one has not met personally, and must be totally outside one's existing circle of acquaintances. Enticing and inducing this audience of unknowns requires skillful planning and a significant amount of painstaking effort.


There is a lot to this, and a lot of myths/canards about this.  To heck with your 10%, you have to make yourself attractive to that 90%!


7) It is a good idea to “seed” one's potential crowd for at least 3-4 months prior to launch, and potentially longer than that. And “seeding” costs money. And the seeding also costs time and effort and careful, painstaking research and an awareness of that specific market's thresholds and interests.  


8) You must be careful what you ask for, very few campaigns exceed $25K in donations. Some do, yes, but very few. If you need more than that, crowdfunding may not work well for you.  


Here is a real problem:  most small businesses need more than $25K.  And these people read about someone raising >=$100K (e.g. potato salad guy), and thus discount this well-established fact based on a false extrapolation from a very rare situation to their own much less rare situation. IOW, these >=$100K campaigns are statistical outliers.

 

I also try to get my clients to please watch the YouTube videos of 1) Clay Hebert  2) Danae Ringlemann 3) Eli Regolado. Theses cut through a lot of the myths. They are free, and helpful, a good Crowdfunding education.


Yes these persons are selling something (professional seeding and CF management).  But what they are selling needs to be done, either you do it or your hire someone.  But without proper seeding, a CF campaign will fail.  Repeat.  Will.  Fail.