Just a few years ago, companies that offered crowdfunding campaigns as a method to pre-sell products or to raise money for their next expansion were drastically in the minority, accounting for just $880 million raised in 2010.
The industry has at least doubled every year since, growing to an estimated $34 billion by 2015, according to Masslution.
It’s not just the financial investment that is growing, it is the number of people that are backing crowdfunding campaigns. In 2014, 3.3 million people had backed a project on Kickstarter—and 2.2 million were brand new backers. Now, more than 12 million people have backed a project on the platform, and nearly four million have backed more than one project.
In 2017, with the new and recent equity-based crowdfunding offerings, crowdfunding capital is poised to surpass venture capital investments, predicted Massolution.
And yet crowdfunding campaign success rates are still hovering between 35 and 40 percent (Kickstarter tracks this live and provides it; at time of writing, it was 35.72 percent).
Given that the crowdfunding contributor base continues to grow, how should entrepreneurs and inventors position themselves to ensure they’re raising the capital and awareness they need to succeed?
This is the question that Roy Morejon sought to answer.
An early adopter of crowdfunding, Morejon was leading a small social media marketing agency in 2010 when he saw an opportunity to help companies set up and manage successful campaigns. To tackle this emerging opportunity, a year later, he launched Command Partners, an agency based in Charlotte that works with crowdfunding entrepreneurs close to home and from all across the globe.
In just five years, Command Partners has helped launch 400 products, raising more than $100 million for entrepreneurs and their young companies. Thirteen campaigns have crossed the $1 million threshold, including popular projects like Polygons, a flat measuring spoon conceived by an Indian entrepreneur, and Moonlight, a bedtime story projector for your phone, which has raised as much money after their campaign through pre-sales as they raised during their campaign.
They’ve also helped a good number of North Carolina entrepreneurs. Todd Youngblood raised more than $200,000 to launch the Kyro Sleep Performance System, which is a home-automation device that helps cool your room and bed automatically to improve the quality of sleep. Command Partners is also coordinating what is believed to be North Carolina’s first Title III equity crowdfunding campaign for ITFT, a company building a safe driving product.
Amidst the successes, there have been failures, admits Morejon. A prominent former politician had engaged with the company to launch a book and web project, and despite market research returning a low percentage of success, decided to run the campaign.
“Not every product is a good fit for crowdfunding,” says Morejon. Yet he argues that working with an agency that specializes in crowdfunding campaigns increases an entrepreneur’s likelihood of success.
For first-time entrepreneurs, particularly for inventors, the skill set and laser focus to run and deliver on a crowdfunding campaign is a big challenge. Morejon began the company to ensure that these entrepreneurs had the support needed to bring their ideas to fruition.
In 2016, the company merged with Charlotte-based Enventys Partners, a consumer product development firm that helps inventors commercialize their ideas. This new partnership between the companies has meant that inventors and entrepreneurs can be supported throughout the entire lifecycle of their inventions, says Morejon.
“Everything can be done in house,” says Morejon. There’s an in house engineering team that can help develop and build prototypes in the company’s engineering lab. There’s a legal team that will help secure patents for an inventor’s invention. There’s a design team that will ensure the aesthetics of the products will appeal to the intended consumer base.
There’s the Command Partners team that will conduct market research and help coordinate and launch pre-sales crowdfunding campaign. And there’s a team that will ensure manufacturing and the ability to rapidly scale should the campaign be an overwhelming success. The combined company will also help an entrepreneur communicate with campaign backers and the general public once the campaign is complete, a “must-do” according to Morejon.
There are three reasons that people back product-based campaigns, says Morejon.
First, they might have an immediate need for and interest in the product being offered. Yet that’s not necessarily enough to sway a backer into contributing. A backer also needs to see their contribution to the campaign as a part of the company’s story. And, finally, a backer tends to see a contribution (particularly in an equity campaign) as the first step in establishing a regular communication channel with the entrepreneur and the company.
With this common thread in mind, there are tasks that every entrepreneur ought to consider when deciding whether a crowdfunding campaign is right for his or her company.
Do Your Research
“The advice I would give to anyone launching their product for the first time is to truly do your research,” says Morejon. There’s no lack of good quality information and content, so there’s no excuse for foregoing the research process. A crowd funding campaign is not something you can just simply jump into, says Morejon, “it is a process to bring a product to market.”
Make a Great Video
People back campaigns because they love the product idea or they want to support the inventor and entrepreneur. Most people want to be a part of the story of the product, and the story of the company, says Morejon, and a great video can showcase and tell the story of the entrepreneur and the product. “The video itself is one of those key components in every campaign that truly gets the story across, so it is critical to have a great video that engages and makes people want to invest in you and your product itself,” says Morejon
Have an Open Mind
“It’s useful or helpful to have an open mind because things are going to happen,” says Morejon. Any number of things, expected and unexpected, will happen during every campaign. “It’s good to have an open mind and always have a backup plan in case something happens, good or bad,” says Morejon. This is one personal characteristic, which, if developed, will also benefit entrepreneurs in the long run as they grow their company.
Focus on Excellent Communication
There is an incredible amount of work that happens to prepare and execute a crowdfunding campaign, and there is even more work that must happen after the campaign concludes, says Morejon.
What happens with shipping, manufacturing and distribution of your product? Has the entrepreneur or company thought about what will happen if the campaign is wildly successful? Is the entrepreneur ready to succeed beyond their own expectations or ready to fail, missing their own expectations? Either way, success or failure, the key tenet to crowdfunding is excellent communication with your supporters.
“Always and constantly be communicating with your community,” says Morejon. “Keep them abreast of what is going on, and let them go along in the journey with you.”