How to crowdfund your business successfully (hint: it’s about people first)
We recently spoke with Kathleen Minogue, Founder of Crowdfund Better. She talked to us about how Crowdfund Better can help entrepreneurs navigate the world of crowdfunding, including the biggest challenges people face when raising funds through the crowd, characteristics of successful crowdfunding campaigns and how to make the most out of a Kiva loan.
Crowdfund Better offers education and advisory services from a team of experienced professionals who will walk you through the crowdfunding landscape, provide unbiased feedback on whether crowdfunding is the appropriate course of action for you at this stage, and help you create the most effective crowdfunding campaign you can.
KIVA: How can entrepreneurs benefit from Crowdfund Better?
KATHLEEN: Crowdfund Better can help entrepreneurs with questions around whether they are a good fit for crowdfunding, what marketing tools make the most sense, what platform to use, and what funding goals their networks can support.
We help demystify crowdfunding.
The first step is to assess where the business is in its lifecycle, and understand whether crowdfunding is a good fit. So we start by asking the business owner to fill out a questionnaire, which allows us to provide unbiased feedback on the value of a campaign to their business.
This sometimes includes telling entrepreneurs that their business is not ready for a campaign for the amounts they wish to raise, in which case we point them toward resources that can help them get to that stage.
if someone wants to crowdfund, an important asset is to have an email list. This is a common problem, as many small businesses don't have consistent or effective email marketing.
We can connect entrepreneurs with people who can help develop this. Additionally, if we think that the entrepreneur could stand to gain from business development advice, we might connect them with business development centers. Once these fundamentals are in place, we can help build a crowdfunding campaign strategy.
Because we are an impartial third party adviser, we can take an un-siloed view: reaching beyond a particular crowdfunding platform or campaign. If, for example, a business has several financial milestones, we can help create concrete plans to reach each milestone via multiple crowdfunding campaigns, as well as think through what to do after a crowdfunding campaign.
All their network-building has value beyond the initial funding event.
Kiva: Once somebody determines that they are ready for crowdfunding, what is the biggest challenge they face when trying to raise money from the crowd?
KATHLEEN: The biggest challenge is not understanding the social fundamentals beneath crowdfunding. I've come across business owners who don't want to put their face forward and instead, 'hide behind their product'; or owners who don't fully understand social networks and how digital marketing works.
In short, they don't know how to translate the relationship-building they do naturally day-to-day into the digital realm.
Crowdfunding is about people and technology, the challenge is keeping it human through technology.
At Kiva, you talk about social underwriting: building a case for yourself online to show that you can be trusted and that what you are creating is valuable. This is not an overnight process; business owners need to understand that it takes time to create that social trust.
Kiva: What are some common characteristics of successful crowdfunding campaign creators?
KATHLEEN: The first characteristic of successful campaign creators is that they are willing to show their vulnerability to the world, and therefore bring their network into their campaign. There's something I call the 'crowdfunding conundrum': when crowdfunding campaign creators say "I don't want to ask the people I know for money". Those campaigns fail.
Creating social trust requires you to explain to people who you are and what you need. Some people find it very uncomfortable to publicly talk about what they need.
But vulnerability is what allows other people to connect with you, and step in and assist. Everyone has faced obstacles, and they can relate to your challenges.
Often my most successful clients are the ones that walk in terrified. Many have never asked anyone for anything in such a public way. It's important to be transparent and authentic; to let your network stand behind you. This principle applies to Kiva: people want to help*, you just need to bring your network along the journey.
The second important point about successful campaigns is that they take work. I often say: good, fast, cheap; pick two. Business owners that rush into their campaigns without putting in the requisite time and effort tend not to succeed.
Before they start, we ask business owners to reflect on the value of the campaign to their business. Many realize that it's about more than just raising money: they can also build their brand and customer base as well as improve chances of future funding. This makes the campaign worth the considerable effort it requires.
Kiva: How could people fundraising on Kiva best make use of Crowdfund Better?
KATHLEEN: I think Kiva does a great job supporting its entrepreneurs. Where Crowdfund Better can provide support is in helping small businesses use their Kiva loan to put them on the best track for funding in the future. I see Kiva as one of the first steps for entrepreneurs looking to enter crowdfunding: it helps you grow your network, build credibility and develop proof of concept.
You can extract more value from Kiva if you take time to think through the next steps for your business: how will you use your experience with a Kiva loan to approach alternative lenders, and then potentially more traditional funding channels.
For example, the owner of a small craft food business comes to Kiva to raise $10,000 for working capital. This loan might get them to their first milestone. But then they want to expand into a commercial kitchen. That is a great moment to think about pairing a Kiva loan with rewards crowdfunding.
Rewards crowdfunding allows business owners to raise over $10,000 but requires a different level of network-building and marketing preparation. Crowdfund Better can help a business owner create a plan to grow their network and credibility before, during and after their Kiva campaign.
Business owners often look at crowdfunding with tunnel-vision. But sometimes the best fit for a business is actually using a combination of crowdfunding sources, building on the momentum from the first loan and the community support they have built.
Kiva: If you could say one thing to entrepreneurs who want to raise money via crowdfunding, what would it be?
KATHLEEN: Crowdfunding is about the network, not the funding. If you start from the premise that it's about people first, you will be more successful than if you start from the premise that it's about money.
This interview has been condensed and edited.