The craze for crowdsource funding has become something of a bandwagon, a very successful one at that. However, herein lies the danger: those that have joined with a “sob story” mentality are getting on the investors’ nerves.
As a result, competition is stiff. A startup that anticipates winning funding in this way must engage in a strategic exercise whose level of sophistication was hitherto unknown in the crowdsourcing world.
Moreover, there are already indicators that regulators might take a keen interest in this sector, not least because of the vast amounts of funds that are exchanging hands on its platforms.
This article begins the conversation on helping would-be entrepreneur to tap into the crowdsourcing world effectively and efficiently.
It is essential reading for anyone who has ever thought of starting a small business today but is worried about finding a willing investor.
Making it authentic, meaningful and relevant
No matter what the industry is or the positional status of the application; authenticity has become a critical ingredient of successful crowdsourcing projects. For example we can consider the interest in modern education techniques.
There is an emphasis on accessible and sustainable education as well as recognition of the role that unconventional methods play in the overall pedagogical exercise. No longer are home-schooled children objects of universal ridicule. Some are slowly beginning to recognize that education can be brought closer to learners using modern technology as an innovative medium.
This ethos ties in with similar trends in the energy industry where sustainability and efficiency have overtaken sheer power as the predominant considerations.
If that does not rock your boat, then you could join the healthcare fray. In the USA, Obamacare has proved to be much more resilient than its critics imagined. However, the problems of universal provision still remain.
There is room for small-scale startups that can provide a personalized service to discerning healthcare users (find here an example). The small-scale is the same principle that has made Uber a key component of modern city transportation. Itis the postmodern disease of thinking differently and lifting the small into public prominence.
Consumers are fatigued by the large person-less and impersonal conglomerates. They want businesses that appeal to them emotionally, at a very visceral level. Crowdsourcing is the perfect avenue to start building this type of relationship.
Disrupting with originality and innovation
It is far too easy (and rather boring) to do what everyone is doing in the same way that they are doing it.
This is what is known as routine in business language and routine no longer sells. Investors and customers are looking for excitement and that tingling feeling that they are part of something bigger than the everyday.
In other words the ideas that you are selling to your audience (potential partner, investor, consumer, regulator etc.) must transform and disrupt the status quo. It is a form of radical entrepreneurship that is not satisfied with the safe options.
Social media is perfectly placed to kickstart the startup but unfortunately many entrepreneurs are still stuck in the “friendship circle” from which they are unwilling to escape.
As a consequence they strain their social relationships to the maximum and put off potential allies with their desperate cries for help. Social media is a gateway to a new world. That world is diverse with billions of people. It is crazy to focus your attention on your limited circle, a circle which you can access at will using traditional means such as conversation.
Failure of Businesses
The failure of many entrepreneurs is directly linked with their attempts to transfer the weaknesses that they have in their normal human relationships to the internet. Hence the insular remain insular while the brash get even brasher under the cloak of anonymity.
It is the savvy ones that understand that social media is a new medium with its own rules, limitations and potential. You have to have the right equipment to play the game as it is. If it does not suit your purposes then you should try to change the game so that it better fits your objectives.
For example there was once a time when the traditional mini cab was virtually a monopoly with no significant threat from any other player.
Now that Uber has new rules, many of the traditional cabs are seeing a downfall. If they fail to embrace social media and the personalized service; their death warrant will unwrap pretty quickly.
Three Rules of Effective Crowdsourcing
If you want to drastically increase your success in attracting and retaining funding; follow these simple rules:
- Shout: If nobody knows what you are doing then they are hardly going to fund you. Get some much needed buzz into your project by engaging in genuine charitable activities and offering attractive pre-sales. This does not mean trying to lie your way into funding because many investors are already wary of unmerited hype.
- Rationalize: The best rationale for investment is its return. Therefore you must be very clear and specific about the type of return you will be offering, its quantity and the timescales involved. There are so many options to choose from profit share, advertising and product giveaways. At the same time you must ensure that you are giving all the information and nothing but the truth because the initial offers form a contract with the potential investor.
- Test: Make sure that there are quality controls on everything that you put out there. Something as minor as poor spelling or grammar can sway a potential investor away from you. Worse still; you could be accused of misleading your clients if they discover that you have made some commissions or omissions which end up costing them money.
Above all you must make it easy for people to invest in you. Do not construct a tedious contact process or take the investor through unnecessary hoops. Crowdsourcing was meant to be an easy and fun way of doing things. Try to follow that ethos in your own projects.