Why Some Startups That Can’t Land VC Funding Win Big With Crowdfunding http://www.fastcompany.com/3026978/why-some-startups-that-cant-land-vc-funding-win-big-with-crowdfunding

4 Secrets Behind Successful Crowdfunding Campaigns

Before you waste your time reaching out to venture capitalists, use these tools to corral your supporters' financial backing for your startup.

We’ve all heard the success story: Startup struggles to bring investors on board, startup continues to rely on seed funding while gaining traction, then startup launches a Kickstarter campaign, and—BOOM—startup raises an impressive pot of funds from an even more impressive number of backers.

We saw it with Pebble, a watch that displays messages from your smartphone, which raised $3.8 million on Kickstarter. We saw it with Adapteva’s Parallella, a mega-computer chip startup that walked away from Kickstarter with nearly $900,000.

And now we have Eone Timepieces, a D.C.-based startup that failed to square away venture capital funding for its first product, The Bradley, a watch you can touch to tell time. Potential investors were unwilling to fund the physical product in part because it costs far more to deliver than a digital one—a common problem for hardware companies—and because the market for fashion watches is already crowded.

You can guess what Eone did next. Founder Hyungsoo Kim took his vision to Kickstarter and crowdsourced nearly $600,000, more than 10 times the company’s original goal.

So why do these startups, unable to gain traction with investors from the get-go, end up winning big through crowdfunding campaigns? Here are four factors behind these unexpected successes, factors that double as reasons why many VCs reconsider backing them in the future:

1. Storytelling

Companies succeed because they know how to tell their story in a way that pulls us all in. As humans, we tend to feel first and think second. The narrative you tell needs to play on that emotion.

Look at how Eone accomplished just that. They didn’t just tell us why we need a watch you don’t have to look at to tell time. Instead, they shared the story of a veteran who lost his sight while serving his country and inspired us all by winning, against all odds, two gold medals at the Paralymics.

Strong stories sell.

2. Execution

Having an idea is one thing; executing it is another. That’s why so many VCs look to back people rather than projects. Whether a company succeeds depends just as much on the founder(s) as the idea.

VCs might not be ready to back a company that looks to have an uphill climb, but once the founder has proven he can execute an over-the-top crowdfunding campaign, they might be willing to reconsider. Even an idea that might have seemed lackluster for whatever reason initially, when executed well, can become a raging success.


The key to succeeding with any crowdfunding campaign is community. While some startups expect to grow a community during the campaign, those that succeed big-time bring backers with them. Sure, a Kickstarter campaign will raise a startup’s visibility and help the company reach new eyes, but anyone who expects to go from zero supporters to big bucks in 30 days is in for disappointment.

Startups that are able to rally a large group of people around their idea who are eager to commit as soon as the crowdfunding campaign goes live will not only reach their goal, they also have big potential for expanding that community exponentially in the future.

4. Branding

Startups that succeed through crowdfunding are often in the initial stages of branding, but that doesn’t mean it can’t be done well. They key is to make sure all the pieces of the puzzle fit together and complement one another—that the message the startup shares on social media, for example, matches what it tells via traditional media.

At the core of that brand should be the narrative—the emotional connection with your community. If you’ve got that down, you’re sure to succeed.

Matthew Stotts is a partner at Tenor, where he has built consumer and vertical B2B marketing and communications programs for high tech, private equity, consumer, and non-profit clients. Follow him on Twitter @TenorLLC.

[Image: Flickr user USDA NRCS South Dakota]

Add New Comment