What is crowdfunding really like? Sarah Dugo, the SVP
of Sales & Marketing and also the owner of College Savings Dolls® (a
line of realistic 15" dolls that harness
the power of imaginative play, positive body image, and the child's own creativity
to inspire young girls to save money for their future career goals) kindly agreed to tell us what she learned from her experience. Here is what Sarah learned:
As crowdfunding is fast becoming a viable option for funding both business and non-business ventures, you need to proceed with caution. Heed the old saying, “If it seems too good to be true, it probably is."
As a recent veteran of two mentally draining and physically time consuming crowd-funding sites I learned three things:
1.) Publicity is the key. Once you have begged from friends and family, you have to draw investors from the rest of the world. There truly is no community of investors, as most sites lead you to believe. If you don’t have a fan-base, you have to rely on your social networking skills (no spamming), and create a video that hopefully goes viral, ala the bus monitor incident that reached $703,833. Crowdfunding is viable, for anyone who has a pre-existing fan base and sets-up a pre-order system for new music, toys, or technology.2.) Empathy is needed so that people can feel good about your project. Fast frenzied responses from the world shows an Indiegogo or Kickstarter you are worthy to be on their front page. If you aren’t on the “projects to watch” page you may never get noticed. Even if you are “seen” not all well-intentioned pledges ultimately come through.
3.) Idea plus a market ready prototype is an absolute must. Show supporters what they are investing in, not just an idea or concept. Backers who give you money expect a return on investment; this can be in the form of various levels of thank you gifts-with free shipping included.
The big question is how much is left out of a $25 donation? Well, here is the math:
-$2.50 site fee (10%)
-$2.50 tax (10%-considered income, not a gift)
-$5.00 cost of thank you gift
-$5.00 for shipping
Not the big numbers that you have seen advertised, right?!
With the onslaught of various sites and the passage of the JOBS Act, crowdfunding is the unmonitored wild-west of the internet right now. Will crowdfunding sites become scrutinized like music downloading & auction sites? Time will tell but, I think it is inevitable.