crowdfunding, ask clay

How did crowdfunding come out of nowhere? What changed?

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This is the fifth post in our 30 Day Ask Clay Crowdfunding Q&A.

I’m answering a new question every day in June.

Submit your question by going to CrowdfundingHacks.com/AskClay, where you can see all of the questions and all of my answers.

Full Transcript

Hey everyone…this is Clay Hebert from CrowdfundingHacks.com…and today’s question is…

How did crowdfunding come out of nowhere? What changed?

I know it seemed like the concept of crowdfunding is pretty new and these platforms like Kickstarter and Indiegogo seemed to come out of nowhere over the last few years.

But the concept of crowdfunding is actually far from new.

Way back In 1713, Alexander Pope set out to translate over 15,000 lines of ancient Greek poetry into English. It took him over five years to get it right, but it was worth the wait: a translation of Homer’s Iliad that still exists. In exchange for a shout-out in the acknowledgements, an early edition of the book, and the delight of helping to bring a new creative work into the world, 750 subscribers pledged two gold guineas to support the job before Pope ever put pen to page. Yes, in 1713, Alexander Pope crowdfunded his translation.

70 years later, in 1783, Mozart wanted to perform three recently composed piano concertos in a Viennese concert hall, so he published an invitation offering manuscripts to those who pledged. Mozart’s first campaign actually failed, but a year later he tried again, and 176 backers pledged enough to bring his concertos to life. He thanked them in the concertos’ manuscript.

And in 1885, the the Statue of Liberty had no pedestal on which to stand in New York Harbor. France had given us the statue and the United States was just responsible for building the pedestal, at a cost of $100,000. But nobody wanted to fund the project… until Joseph Pulitzer (who would create the Pulitzer prize in his will), used his newspaper, The World, to launch a unique crowdfunding campaign to build the pedestal, save the project and keep the Statue of Liberty in New York City.

So we know the concept of crowdfunding isn’t new. So what’s changed?

Well, what’s changed is that the internet that connects us all. We don’t live in an industrial economy anymore, we live in a connection economy. You want proof?

Uber, the world’s largest taxi company, owns no vehicles.

Facebook, the world’s most popular media owner, creates no content.

Alibaba, the most valuable retailer, has no inventory.

And Airbnb, the world’s largest accommodation provider, owns no real estate.

Like no technology in history, the internet allows us to find and connect with each other.

If you’re Lee Miller and you want to make a new kind of device that allows you to play with your cat when you’re not home, you can find not just cat owners, but cat owners that love design and have some disposable income.

If you’re Satya Tweena and want to save New York City’s last hat factory, you can find the people that care about that and want to buy a hat to help you save that.

If you’re BSX Athletics and want to build the first ever wearable lactate threshold sensor, you can find the super serious athletes who care about tracking that.

The connection power of the internet, that’s available to all of us, is something Alexander Pope, Mozart and Joseph Pulitzer could only dream of.

The internet connects us all and makes the crowdfunding model exponentially more dynamic and accessible.

Sometimes what seems new is actually very old.

As always, you can submit your question or see all of the crowdfunding questions and my answers at http://crowdfundinghacks.com/AskClay

End Transcript

crowdfunding, ask clay

Why do some terrible ideas get funded, while some great ideas fail?

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This is the fourth post in our 30 Day Ask Clay Crowdfunding Q&A.

I’m answering a new question every day in June.

Submit your question by going to CrowdfundingHacks.com/AskClay, where you can see all of the questions and all of my answers.

Full Transcript

Hey everyone…this is Clay Hebert from CrowdfundingHacks.com…and today’s question is…

Why do some terrible ideas get funded while some great ideas fail?

This is a great question. As a creator who has either had a failed project or someone thinking about doing a campaign, it can be frustrating to see what you perceive as “lesser” ideas succeeding and what you perceive as “great ideas” fail to hit their funding goal.

The answer can be found in the following statement:

“Crowdfunding is not a meritocracy, it’s a marketocracy.”

Yes, marketocracy is a word that I made up, but that’s OK. People make up words all the time. I highly encourage you to make up some words of your own.

I’ll explain what it means.

The Merriam-Webster definition of a meritocracy is:

a system in which the talented are chosen and moved ahead on the basis of their achievement

So if crowdfunding was a meritocracy, the “best” ideas would raise the most money and the “worst” ideas would fail.

The problem is, the concept of a “good idea” is very subjective.

Let’s look at The Coolest Cooler.

To some people, a cooler that has a blender, a solar panel and an iPhone charger is ridiculous. To others, it’s literally, the “Coolest” cooler they’ve ever seen.

The Coolest Cooler campaign raised over $13.2 MILLION on Kickstarter, but what most people don’t know is, the first time out, The Coolest Cooler had a funding goal of $125,000 and they missed their goal. They only raised $102,000 and because they missed their goal, they got nothing. Zero. Zilch.

The second time out, there were a few minor changes to the cooler, but it was essentially the same thing! So what changed?

Their marketing changed.

The second time out, Ryan Grepper and his team completely revamped how they marketed and promoted the campaign.

They did the pre-launch marketing right and blew past their funding goal in a matter of minutes. Then they continued to promote the campaign effectively, targeting the people who they knew would be interested.

Same idea. Same basic product.

Completely different marketing. Completely different outcome.

Now even great marketing can’t save a horrible idea that nobody wants. It’s important to have a great product, but in crowdfunding, it’s about finding and reaching the people that care desperately about your idea. And then ignoring everyone else.

So to recap…

Crowdfunding is not a meritocracy, it’s a marketocracy.

It isn’t just the “arbitrary” quality of your idea (which is different to everyone), it’s also about the marketing…finding the small group of people who love your idea and building permission to market your campaign to them.

So with a nod to Merriam-Webster, if we were to define a marketocracy, it would be

a system in which campaigns succeed due to the combination of a great idea (to certain people) and the creator’s ability to find and market to those people (and ignore everyone else)

There…we didn’t just make up a word, we defined it.

As always, you can submit your question or see all of the crowdfunding questions and my answers at http://crowdfundinghacks.com/AskClay

End Transcript

crowdfunding, ask clay

Is My Idea a Good Fit for Crowdfunding?

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This is the third post in our 30 Day Ask Clay Crowdfunding Q&A.

I’m answering a new question every day in June.

Submit your question by going to CrowdfundingHacks.com/AskClay, where you can see all of the questions and all of my answers.

Full Transcript

Hey everyone…this is Clay Hebert from CrowdfundingHacks.com…and today’s question is…

How do I know if my idea is a fit for crowdfunding?

To be clear, for this question and this series, we’re talking about rewards-based crowdfunding.

To know whether your idea is a good fit for crowdfunding, there are three things to consider…

1. A successful crowdfunding project is

A creative project, with a beginning and an end, in which something new gets made and shared.

If you think about everything from The Pebble Watch and The Coolest Cooler to an independent film to a deck of cards, all of those things are creative projects with a beginning and an end in which something new gets made and shared.

2. Read the crowdfunding platform (by that I mean Kickstarter and Indiegogo) categories and guidelines

I’ll link to them here:

  1. Kickstarter rules (and prohibited items)
  2. Explore Kickstarter categories
  3. Indiegogo’s Terms of Service
  4. Explore Indiegogo categories

If you were thinking of making a documentary, what would you do? You’d (hopefully) go watch some documentaries and learn about how they’re made. It’s the same with crowdfunding.

Yet, I’m always amazed by how many people come to me that haven’t even browsed the Kickstarter and Indiegogo categories or read the guidelines and browsed and backed some projects. That’s the best way to really understand and get a feel for what kind of projects are good for crowdfunding.

The platform categories (and Kickstarter even has sub-categories) are pretty specific. Your project will likely fit cleanly into one of those…and if it doesn’t, it may not be a good fit for crowdfunding. And lastly…

3. Who is going to back you? And how are you going to reach them?

This gets more into the marketing of the campaign, which we’ll touch on later in this series but if you have no idea who is going to back you, or if you have no permission to market to those people, then crowdfunding isn’t going to magically bring you a bunch of traffic and backers. Crowdfunding platforms like Kickstarter and Indiegogo can amplify an interesting project with good marketing, but they’re not going to fund your project just by posting it there.

So to recap…

To know if your idea is a fit for crowdfunding…

  1. Ask yourself, is it a creative project, with a beginning and an end in which something new gets made and shared?
  2. Familiarize yourself with the platform categories and guidelines
  3. Know who are you selling to and understand how you can build permission to talk to them and let them know about your project.

You can submit your question or see all of the crowdfunding questions and my answers at http://crowdfundinghacks.com/AskClay

End Transcript

crowdfunding, ask clay

The Different Types of Crowdfunding (and which is right for you)

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This is the second post in our 30 Day Ask Clay Crowdfunding Q&A.

I’m answering a new question every day in June.

Submit your question by going to CrowdfundingHacks.com/AskClay, where you can see all of the questions and all of my answers.

Full Transcript

Hey everyone…this is Clay Hebert from CrowdfundingHacks.com…and today’s question is…

What are the different types of crowdfunding?

This is an important question because the four different types of crowdfunding all get lumped under this umbrella term of crowdfunding, but they’re actually very different.

This is also an important question, because the rest of this series focuses almost completely on one of those types of crowdfunding.

Depending on where you look online, you’ll see different answers and sometimes different terms, but the way I break it down, there are four distinct types of crowdfunding.

  1. Rewards-based crowdfunding
  2. Donation-based crowdfunding
  3. Equity crowdfunding
  4. Debt crowdfunding

Let’s look at each one in a little more detail.

1. Rewards-based crowdfunding

In rewards-based crowdfunding, backers contribute typically small amounts of money (typically between $1 and $1,000 but sometimes more) in exchange for a reward. This reward is often, but not always, the item being produced, such as a watch, an album or a film.

Kickstarter and Indiegogo are the two most popular rewards-based crowdfunding platforms but there are LOTS of other platforms.

While some of the tips and strategies apply to other forms of crowdfunding, this series focuses almost completely on rewards-based crowdfunding.

2. Donation-based crowdfunding

In donation-based crowdfunding, donors generally donate small amounts (again, typically between $1 and $1,000, but sometimes more).

Like the name suggests, in a lot of donation-based crowdfunding, there isn’t always a reward beyond the gratitude of the project creator or beneficiary (and possibly a tax deduction). Donation-based crowdfunding is typically used to raise money for a non-profit or a cause, like drilling a well or building a school in Africa or for a personal campaign like an individual’s treatment or medical bills.

GoFundMe and Crowdrise are two popular donation-based crowdfunding platforms but there are lots of others. You can also do donation-based crowdfunding on Indiegogo and even Kickstarter but you have to be within each platforms guidelines. For instance, on Kickstarter you can’t promise to donate funds raised to a charity or cause.

3. Equity crowdfunding

In equity-crowdfunding, investors give larger amounts of money (at least $1,000 and often a lot more). When investors give the money, they don’t get a reward, but instead, a small piece of equity in the company itself.

As a result, equity crowdfunding is typically used to raise money to fund the launch or growth of a company, not just initiate a creative project or cause. Often, these companies go on to raise money from angel investors or venture capitalists.

AngelList and Crowdfunder are two of the most popular equity-crowdfunding platforms in the United States, but there are lots of others. Fundable, EarlyShares and CircleUp are other popular platforms in the U.S. and and Crowdcube and Seedrs are popular in the U.K. and Europe.

There are actually three different kinds of equity crowdfunding, there are specific terms and regulations. Basically it gets more complicated, but this series is focused on reward-based crowdfunding, so we’re not going to go into all of that here.

And last but not least…

4. Debt crowdfunding

In debt-crowdfunding, it’s not “backers” or “donors” who give money, but lenders (sometimes these lenders are called investors).

Unlike other forms of crowdfunding, it’s NOT an exchange for a reward or equity. The investors don’t get a reward and they don’t get a piece of equity in the company, but instead they make a loan with the expectation to get paid back the principal plus interest.

So it’s a lot like loan from the bank, but instead of borrowing one larger amount of money from one bank, you borrow smaller amounts of money from multiple people.

Debt-crowdfunding can be used to raise money for lots of reasons, like credit card refinancing, debt consolidation, home improvement, a car or other reasons.

So to recap…

  1. In rewards-based crowdfunding, backers give a small amount of money in exchange for a reward.
  2. In donation-based crowdfunding, donors donate a small amount of money in exchange for gratitude and the feeling of supporting a cause they believe in.
  3. In equity crowdfunding, investors invest large amounts of money in a company in exchange for a small piece of equity in the company.
  4. And in debt crowdfunding, lenders make a loan with the expectation to make back their principal plus interest.

Those are the four types of crowdfunding.

You can submit your question for the series or see all of the questions and my answers at http://crowdfundinghacks.com/AskClay

End Transcript

How to crowdfund (my interview with James Altucher)

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Last week, as I was making coffee and heard the familiar “beep” of a new chat message, I smiled when I saw the message from was my friend James Altucher.

Someone had asked James, “What’s the best way to crowdfund to raise money for my project?” for Ask Altucher, the daily Q&A podcast that he co-hosts with his wife Claudia.

James asked me if I’d jump on the show for 10 minutes and explain “how to crowdfund”.

Only 10 minutes?

As I was setting up my microphone, I was wondering how I could cover anything useful about crowdfunding in only ten minutes.

We did it anyway and ended up riffing for 25 minutes. We covered a lot of great stuff, including:

  • Why creatives have trouble asking for money (and why crowdfunding is the perfect solution for that) (4:15)
  • When the concept of Kickstarter was conceived (and why it didn’t get built until years later) (5:14)
  • How much money you should try to raise in your crowdfunding project (5:40)
  • One of the biggest myths about crowdfunding (6:12)
  • How the current largest Kickstarter project ever…actually failed the first time (6:28)
  • How to get people to keep contributing once you hit your goal (7:40)
  • One specific way to get the press to cover your project (8:45)
  • The biggest myth about what press does (and doesn’t do) for your crowdfunding project (9:30)
  • The one tactic you should steal from infomercials (9:50)
  • How design impacts your crowdfunding success (11:00)
  • How people view crowdfunding projects (12:20)
  • One of the biggest mistakes I see in crowdfunding (and what to do instead) (12:50)
  • How Matt Kepnes (Nomadic Matt) tripled his crowdfunding goal, even though his app only cost $1 (14:00)
  • What kinds of rewards reduce production and shipping costs (15:00)
  • How to make a great crowdfunding video (including what to address in the first 10 seconds) (16:25)
  • Why you should think “bottom-up” not “top-down” when promoting your project (18:10)
  • How Mike Del Ponte segmented and use his personal address book to find initial backers for his project (18:45)
  • The FIRST thing anyone who is even thinking about doing a crowdfunding project should do today (19:30)
  • How Kittyo used this trick to find 13,000 pre-launch emails and was funded in 36 minutes, 200% funded on the first day and raised over $270,000 (20:45)
  • How I got started helping people with crowdfunding (23:00)
  • Why good crowdfunding is good marketing (24:00)

Click the player below to listen directly or click here to open the episode in iTunes.

Ask Altucher: Ep 170 What’s The Best Way to Crowdfund?

The Power of Instant Media

It’s worth noting how quickly this all happened.

  • James pinged me on chat…
  • 12 minutes later, we were all chatting on the air.
  • Less than 24 hours later, the episode was live in iTunes and Stitcher for anyone in the world with an internet connection to listen to, for free.

No filters. No scheduling.

No gatekeepers who can say “no”.

Just James and Claudia, generously and instantly shipping their art for free, while building trust and permission with an audience who wants to hear from them.

You have this same opportunity. We all do.

Enjoy the holidays. Enjoy the your time with your family. Laugh. Play games. Have some egg nog.

But it’s worth spending some time thinking about what kind of media you can create?

What kind of art can you ship to start building trust and permission with people, so when you launch your crowdfunding project, they’re not only already on-board, they’re actually excited to hear from you?

Leave a comment below.

Enjoy the episode, and happy holidays!

See you next year!

– Clay

Crowdfunding Strategies and Tips: Audio Interview with Dan Martell

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In this audio interview with my good friend Dan Martell, we cover..

  • Why good crowdfunding is good marketing (0:50)
  • The difference between crowdfunding and crowdsourcing (and the simplest way to remember the difference between the two) (1:18)
  • How the concept of crowdfunding isn’t new at all but what changed to allow crowdfunding to blow up in the last few years (2:50)
  • How Kickstarter almost got started back in 2001 (4:40)
  • What you can’t do on Kickstarter than you can do on other platforms (6:00)
  • What to consider (and what not to consider) when choosing a crowdfunding platform (6:55)
  • The differences between the four different types of crowdfunding (6:55)
  • The only time you should use a “roll-your-own” crowdfunding platform (9:30)
  • The biggest mistake I see in crowdfunding (10:12)
  • The best way to test and validate a crowdfunding campaign (11:18)
  • Why (and where) you should publish your crowdfunding video months before your campaign launches (12:20)
  • How Lee Miller built a landing page that converted at 40% and gathered 13,000 pre-launch emails, was fully funded in 36 minutes and raised over $270,000 (13:10)
  • When crowdfunding projects typically get funded (14:30)
  • How to craft the perfect title for your crowdfunding campaign (15:20)
  • The way people view crowdfunding projects (16:55)
  • One critical element for your crowdfunding project (17:30)
  • The most important part of your crowdfunding video (18:40)
  • The key elements of your video (19:25 + 21:20)
  • The brilliant opening line of the video that helped Jake Bronstein raise over $1M (19:55)
  • The best way to end your video (22:50)
  • How to price your reward levels (24:35)
  • The one DUMB reward level everyone uses, but that you should delete from your campaign (and why it never works) (26:10)
  • The unique reward level that nobody uses that you should use instead (27:05)
  • The difference between “top-down” marketing and “bottom up” marketing (and which one you should use) (28:15)
  • A unique way to use Facebook to promote your campaign (30:15)
  • How to use Twitter to find people interested in your campaign (31:55)
  • How to use a little-known Google trick to find out what press and blogs covered similar projects to yours (34:28)
  • The best way to get your project featured by the crowdfunding platforms (37:45)