Alon Goren, CEO and co-founder of InvestedIn, contributed this article to BusinessNewsDaily's Expert Voices: Op-Ed & Insights.
By now, many people vaguely understand the concept of crowdfunding. Success stories are increasingly in the news, like the Veronica Mars movie Kickstarter campaign and Pebble Watch's $10 million haul. Nevertheless, many campaigns ultimately fail or even devolve into PR disasters. Nothing riles up contributors and investors more than a company that doesn't appear to have its act together.
When conducting a crowdfunding campaign, remember that you can't just take the money and run — you are accountable to hundreds, if not thousands of individual contributors. This is both the beautiful and nerve-wracking thing about crowdfunding. So, when raising money online, be transparent, realistic, and responsive.
Whether you are fundraising for a charitable cause or for your new business, you absolutely must be transparent with your donors and investors. Transparency starts well before any product is manufactured or song is recorded in displaying a well thought-out business plan or other plan for the use of funds, e.g. giving them to a charity. Although there are many more do-gooders and savvy businesspeople than scammers out there, potential contributors should look for full names, verifiable experience, regularly updated social media accounts and other supporting documents prior to giving any money.
When creating a fundraising project, you've got to think about what you are going to give in return for a customer's donation (if the project is for a business). What you offer has to be commensurate with the amount of the donation. Hopefully, you will have hundreds of excited consumers who aren't actually related to you, in which case, you wouldn't find many contributors if you offer your CD in return for $100. In the same vein, rewards should be tiered and even creative, while making the mid-tier higher price points the especially appealing. Exclusive content can be a good idea, too.
Keep in Touch
Depending on which platform you use, regular status updates and progress reports may be required (or at least strongly encouraged). In our experience, fundraisers that pledge to report back to future customers or provide proof of where their earnings have gone stand a better chance of garnering more interest. Hiccups along the way are not uncommon — manufacturing delays, for example — so be clear about any problems that arise and outline a plan of action to address them.
The views expressed are those of the author and do not necessarily reflect the views of the publisher.