One of the most difficult things about launching a new product design is trying to find the funds to back your idea. Taking out a loan is risky and you may not even have this as an option. However, there are more and more new and exciting ways to raise money to fund your product idea, and crowdfunding is one of our favourite financing options. This article has been written to help you understand how to crowdfund a product idea and get the most out of it.
How does crowdfunding work?
Crowdfunding is when you raise money from a number of different people, who are donating money because they are interested in your product. Crowdfunding usually comes in three different forms:
- Equity: those who donate money to your product will receive shares in your company.
- Pre Sales/Rewards: Customers can pre-order and receive the product upon release. You can also offer another benefit for donating money. This might be a special offer or freebie, signed or customised goodies, or any other benefit associated with the brand.
- Credit: individuals act as lenders to the businesses. Agreements are drawn up, and interest is applicable, but rates are usually more attractive than at banks.
Benefits of Crowdfunding
Many people worry about giving away a share of their company of product but by using the “Pre-Order” method used on sites such as Kickstarter you can raise the funds needed by simply selling the product to customers.
There are so many benefits to crowdfunding:
- Set Targets: If you need a certain number of sales or amount raised then you can set this as a target. If the campaign does not reach the target you can are not committed to ship the product and can re-evaluate your approach for a second attempt.
- Validation: the fact that people are willing to invest in your product suggests that your idea is well liked if people are willing to pay to see it happen.
- Marketing benefits: first of all, when you advertise on crowdfunding websites, you get free publicity for your product. These sites generate a ton of traffic, so your product gets great exposure. You will also have had to think up a marketing plan before launching your campaign, so you learn great marketing skills along the way too. If this stage is daunting for you, the Idea Reality team has great experience with crowdfunding campaigns and are more than willing to help.
- Feedback: comments from investors or crucial to your product development. Also, negative feedback on your product will also help you change your product for the better.
How to launch a crowdfunding campaign
Your first step is to win over the crowd with an inspiring story about your product and why you need their help. You have to convince them to invest in your product, to invest in you. Idea Reality has great experience in creating powerful sales presentations and product animations, and can put a great campaign together to help you crowdfund your product idea.
Showing a prototype of your design is also essential. You will need to demonstrate the product and inspire confidence. A physical working prototype will provide this.
The biggest crowdfunding websites are Indiegogo, Kickstarter and GoFundMe, so those are great places to start. Think carefully about what rewards you want to offer and ensure that the pledged amount will cover the cost of the reward and still help you towards your product goal.
Once you’ve put together all the details of your campaign, you need to spread the word to as many people as possible. Share the link with all your family and friends and share on social media. Encourage others to share on social media too. You never know whose eye you might catch.
This is an informative article only. The above is the opinion of Idea Reality Ltd and is not to be used without proper professional advice taking into account individual project circumstances.