Crowdfunding opens doors for entrepreneurs

 

Successful crowdfunding 101

• Get personal — backers want to know about you and your project. Show them why you are so passionate about it.

• Get video testimonials — has anyone used your product and loves it? Make testimonials from the users of your products.

• Communicate with your backers both during and after the campaign – answer questions promptly and give regular updates about your progress.

• Think about your thank-you gifts — when someone donates to your project, give them something meaningful in return. And if there are delivery delays, keep your backers updated.


Crowdfund me?

While project-funding is still the norm, there is site called Upstart for crowdfunding people. Backers choose the people, called upstarts, whose endeavors they want to fund such as going to college or learning computer programming, and the investor gets a slice of their earnings in return.

“We’ve had backers fund things like reducing a Harvard Law graduate’s student loan debt so he could take a prestigious clerkship,” said Upstart co-founder Paul Gu. “It’s about investing in a person’s success. Backers give upstarts the money to accelerate that person’s life so they can achieve their goals. The backers, in turn, get a share of that success down the line.”


tasha@bizbytes101.com

Like most entrepreneurs, Lester Mapp is a busy man and if you’ve ever heard of an iPhone bumper made of material used in the aerospace industry, you know why. Mapp, of Aventura, developed the AL13, a bumper case for iPhone 5 and 4/4S.

“I got the idea when I went to a trade show and woke up the next morning thinking about what I wanted in an iPhone case and I got my friends involved to brainstorm ideas,” said Mapp, 27. “We wanted to make a premium case but at a mid-range price, so we also had the challenge of searching for material suppliers and manufacturers that would allow us to make this happen. It wasn’t easy but we were determined and in a few weeks we had a plan and a prototype.”

Mapp turned to the leading crowdfunding website Kickstarter to raise money for his venture. Back in December, Mapp launched his Kickstarter campaign with a goal to raise $20,000 by Feb. 13. From a hotel room in Hong Kong earlier this month, where he was overseeing the manufacturing of the AL13, Mapp shared details of his experience.

“This was our first Kickstarter campaign,” said Mapp, CEO of designed by m. “And I experienced a variety of emotions during the process — humbled, excited and feeling the pressure because someone who has never met you trusted you enough to part with their hard earned money to give you a chance to create your dream. You can ever let that person down.”

Mapp’s case was a hit with the crowd. He raised more than $86,000, over four times his original goal, from 1,426 backers, most of whom he didn’t know. On his Kickstarter page, however, he made sure backers were aware of how he was progressing with his project. When several potential backers raised the issue of signal loss with Mapp’s case, he created a dialogue with them and explained that testing done by his company showed that signal loss is 4 to 10 percent. Last week, he sent an email to his backers letting them know the AL13 was ready to ship. “Working with the backers to develop the AL13 and the Kickstarter staff to promote it was a wonderful experience,” said Mapp.

But for every successful Kickstarter campaign like Mapp’s, there are those that don’t reach the desired level of funding.

“There’s no one reason why a project fails,” wrote Kickstarter’s Head of Community Cindy Au recently on the platform’s blog. “But usually it has to do with rewards that are too pricey, a funding goal that’s a bit out of reach, bad timing, or myriad other things in life that can get in the way of success. That’s just kind of how life is.”

Kickstarter is filled with projects that didn’t quite make it — a guy in Elkhorn, Wisconsin looking for $3,750 to fund a line of Jamaican jerk seasoning but who raised under $500; a guy in State College Pennsylvania that needed $1,000 to fund his new CD but who raised just $100; and a New York production company that raised only $800 of the $8,000 it needed to complete a play. The success rate on Kickstarter is currently about 44 percent, according to the company’s metrics.

“Asking for money is not something every entrepreneur can do successfully,” said Alex Fair, CEO of Medstartr, a crowdfunding platform that is part of a new wave of crowdfunding sites with specializations.

Fair, of New York, started Medstartr in 2012 after trying to pitch his project to Kickstarter. FairCareMD is an online “name-your-price” tool for healthcare services. “They don’t fund healthcare, so I wanted to create a platform where people with great ideas and innovations in that industry can go to crowdfund their projects,” he said.

Rhonda Smith of Miami Beach is finishing up her campaign with Medstartr to raise funds to develop an online educational tool, called i.T.H.R.I.V.E, for women who have survived breast cancer.

“As a breast cancer survivor myself, I wanted to create an online tool that will empower women and arm them with information,” said Smith, who is seeking $8,000 to develop i.T.H.R.I.V.E. Her Medstartr campaign ends Wednesday. Her MedStartr campaign ends Wednesday.

There are more than 300 donation-based crowdfunding sites online, from PeerBackers and Startup Addict for entrepreneurs to OurCrowd for those who want to invest in projects in Israel, there seems to be a site out there that caters to almost any interest. There’s Causes.com designed specifically for 501(c)(3) registered nonprofits to raise money. On sites like GoFundMe, Fundly and GiveForward, crowdfunding is being used to help the victims of the recent Boston Marathon bombing pay their medical bills.

A whopping $2.7 billion was pledged by individual donors through crowdfunding websites in 2012, according to Massolution, a Los Angeles-based research firm. That represents an 81 percent increase from the amount raised industry-wide in 2011.

Most crowdfunding sites make money by taking a small percentage of the money raised. In the case of Medstartr, it’s 5 to 10 percent. Kickstarter takes 5 percent of the money raised and additional payment processing fees that range from 3 to 5 percent. On Kickstarter, if your project doesn’t hit its goal, you don’t keep the money raised; On Medstartr there are two options with different fees. IndieGoGo charges 4 to 9 percent and lets you receive themoney raised, whether or not you hit your goal.

On most sites, backers can donate as little as $1 or thousands. Instead of getting an equity stake in the company, they get a token of appreciation such as a t-shirt, tote bag, the product itself or other thank you gift, based on the level of giving.

And there are new sites popping up all the time, including in South Florida.

Synergist, founded by 17-year-old Jared Kleinert, offers social entrepreneurs a place to find one another, collaborate on projects and raise funds and other support. Kleinert, who attends Spanish River High School in Boca Raton, is also promoting Synergist as the first crowdfunding company to raise money using its own platform. He’s trying to raise $25,000 on his platform, www.synergi.st, to grow his company, and he launched his crowdfunding campaign on Saturday.

“Synergist is about raising funds and opportunities with our site,” said Kleinert, who is working on a system where you don’t have to contribute just cash. “You can literally contribute anything you want — supplies, time, advice, free services that may be needed to get a project off the ground. This approach connects people to a project in a meaningful way.”

For a different twist on crowdfunding, Miami entrepreneurs Pedro Ast and Michael Tsinkler just launched Danggle, a Web app that allows you to ask your friends to help you raise money to buy the things you want, like jewelry, purses, a gadget or a vacation.

“We wanted to take the crowdfunding concept and make it social,” said Tsinkler. “Danggle is all about asking your friends and family to help you buy that great pair of boots, that laptop or those concert tickets you want.”

So what makes a successful crowdfunding campaign?

“First, you need to be a persistent promoter,” said Fair. “You can’t just create a campaign and let it sit. You’ve got to create a buzz among your friends and family, on your social networks and in the media if you can.”

You’ve also got to make sure your backers understand what they’re funding, according to Mapp. “Always under promise and over deliver, be accessible and listen to your backers and of course, you need a great product.”

To keep the buzz going about your campaign, former South Florida newscaster Julia Yarbough recommends reaching out to your existing network of contacts first to promote it. She is raising money for Expedition Denali, a documentary about nine mountaineers who will attempt to become the first all-African American expedition team to climb Mount McKinley in Alaska. On Kickstarter, Yarbough is looking to raise $107,500 by May 10 to produce the film. “Have a large network of contacts ready to go and lined up so that you can email blast out the campaign to as many eyeballs as possible,” advises Yarbough.

Yarbough also suggests getting in touch with large corporations that may be interested in a branding or cross promotional partnerships. She is using this advice to promote Expedition Denali. “It’s worth asking for large donation amount because the answer may be yes — or in fact, you might find a complete sponsor.”

According to Fair, the most successful projects on Medstartr use video to tell their stories. “Invest in creating a quality video to tell the world what you’re trying to do and why it’s important.”

Making sure you use a reputable crowdfunding platform is also essential. “Find out how many projects have been funded through the site and do your due diligence,” said Tsinkler.

For more about crowdfunding, visit The Starting Gate on MiamiHerald.com/business. Miami Herald Staff Writer Nancy Dahlberg contributed to this report.

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