Crowdfunding is not yet a household term the way smartphone, streaming media, or peanut butter are, but it's getting closer. Whether you've been asked to support a friend's project, heard about record-breaking fundraising efforts by the Pebble watch and Veronica Mars, or considered your own campaign, awareness and acceptance of using the Internet to ask friends and strangers for money to fund a creative business is at an all-time high.
There's still a lot of confusion, though, about what makes for a successful campaign, and less than half of all crowdfunding efforts meet their goals. For the AOL web series Funded, I profiled 10 businesses, which together raised nearly $12 million from more than 100,000 backers. Their experiences can teach us a lot about how to best take advantage of this new method of fundraising, marketing, and community building.
Backers aren't customers: "They are copilots," says Josh Stansfield, whose app-powered guitar called the gTar raised more than $350,000. During the 35-day campaign, he introduced new reward tiers for developers after some expressed interest, and in the homestretch, he promised backers the option of choosing the gTar’s color and pick guard if they helped him meet his stretch goal.
Julie Uhrman, CEO of Ouya, maker of the video-game console that was one of the most successful Kickstarters in history, got invaluable input from its community of funders about the features it wanted to add to the product. The Ouya team added an Ethernet port and reconfigured the button design on the controller based on suggestions. "Kickstarter moves product development into the public," Uhrman says.
Invest in marketing as much as the product: Roman Mars is a public-radio veteran and creator of the 99% Invisible podcast, which raised $170,000 to support its continued production. "The problem with radio is we ask [for money] by stopping the show," he says, frustrated by several pledge-drive fundraisers. Rather than adopting that "we hold you hostage until you pay us" attitude, Mars suggests that the instincts used to make your product also apply to your campaign. If you’re trying to fund a media project that is beautiful and humorous, make your pitch beautiful and humorous. If your product is sleek and cutting edge, your video and project description should be as well.
It's about more than the money: Several campaigners agreed that dollars raised represented only part of crowdfunding's benefit to their businesses. After Hollywood executives told Issa Rae that she needed to make her show, The Misadventures of Awkward Black Girl, "whiter," she says the greatest value of her $56,000 campaign was the validation that came from audience support. After hitting his initial $42,000 goal, Mars added a participation challenge, setting and meeting a threshold of 5,000 backers who were encouraged to give any amount, making his project a listener drive as well as a fundraising one. For Organic Transit, based in Durham, North Carolina, CEO Rob Cotter says heightened awareness of its solar-powered vehicle was worth far more than the $225,000 it generated from presales.
"People support crowdfunding campaigns either because they want to be cool and first to support something or because they want to be a part of something larger than themselves," says Gaston Frydlewski, cocreator of the Hickies shoelace-replacement system. In both cases, supporters are taking a risk on your crazy idea. Respect that commitment, and make your own commitment to run the best campaign possible.
A version of this article appeared in the November 2013 issue of Fast Company magazine.