We’ve all had the experience of that glorious moment when a brilliant idea springs to mind. You just know, deep down in your soul, that it’s a winner. Many never take action on their brilliant ideas, but you will. Why? Because you’re an entrepreneur. So what’s the best way to get started?
Creating something new – moving from thought to paper to product – can be a long process, demanding a significant investment of time, energy, and money. Even if you succeed in creating something tangible to offer the market, this doesn’t guarantee that people will want it. What a disappointment it would be if, at the end of all your work, you end up pitching your product to an audience of chairs.
But what if there really is an audience of humans out there, people just waiting for you to speak to them? People who don’t expect you to have a three-act play ready for performance. People who just want to hear your opening monologue. And no, we’re not talking about Shark Tank or Silicon Valley investors. We’re talking about everyday consumers. Enter stage left: crowdfunding, potentially the most effective way of making entrepreneurship happen.
With effective use of croudfunding sites such as Kickstarter, Indiegogo, or GoFundMe, you no longer need to have a licensed business, a finished product, established financers, or pre-existing customers. All you need is a dollar, a dream, and a pitch. And hopefully a good pitch, too.
One of the greatest benefits of crowdfunding is that it allows you to effectively manage the risks of your project. Let’s say you are a filmmaker with a unique movie idea. You could spend months writing the script, then hire a team of filmmakers, sound editors, actors, make-up artists, costume designers and more to make that movie for you. Then, only after you have a finished product, do you try to find an audience for it. Maybe it’s successful; maybe it isn’t. At this point it’s too late to change your mind. You and your financers are now out X amount of money, and you have spent Y amount of time, before you’ve even seen the first ticket sale.
Here’s an alternative. Instead of spending your resources on hiring a team, producing a movie, and marketing it to your potential audience, you can start with the bare minimum. Convince the market they should help you complete your idea. Now, instead of spending X amount of dollars and Y amount of time, you’ve spent a fraction of both, and you already have a strong indicator of whether or not your project will be a success. Best-case scenario? You have Z number of people giving you money to build your final product, people who are now your customers. Worst-case scenario? You have lost a significantly smaller amount of money and effort trying to determine if your project is worth pursuing.
Granted, crowdfunding isn’t right for everyone. If you’re an established company with established customers for your product, you already have proof of success. But for the start-up entrepreneur looking to make it big, it’s more feasible to dream small first. Crowdfunding is a way to test the waters before diving in.
The exact amount you need to invest in your project before launching a crowdfunding campaign varies by product type. For something that is more hi-tech, you likely want to invest in a completed prototype and ensure you have established manufacturers and distribution channels. For something more niche, like an art book or clothing line, you may only need some sample designs. It really just depends on what you believe you need to show people to convince them they can trust you to complete your project and deliver what is promised.
Regardless of how much time and money you choose to invest in a crowdfunding campaign, rest assured that it will be far less than you would’ve invested in the creation of a finished product. And you will see your first potential customer far sooner. So ask yourself: “Am I ready to go to market on my idea? Or should I let the market come to me and tell me they want it?”