How to raise venture capital through crowdfunding

We quiz Scott Steinberg, co-author of the new book "The Crowdfunding Bible," about raising money using sites such as Kickstarter

By Angela West, PC World |  Business, crowdfunding, startups

Steinberg: Pick your battles: It pays to be a big fish in a small pond. Different sites may be better suited to different products. Kickstarter has the largest audience, and products like consumer electronics or anything that would benefit from more of a mainstream audience can do well there. Micro RZA is better suited to science and technology efforts. A project that may have problems standing out on some of the larger sites may get better visibility on IndiGogo or RocketHub.

You have to think about where you'll have the best opportunity to stand out from the crowd and what your product is. This is all a part of the vital research you have to do before the campaign launches.

Next: How to communicate with backers, and more

PCWBC: If the project is successful, how do you recommend handling communication with backers?

Steinberg: It's important to realize that your product home page on the crowdfunding site you choose will become a dead link. Create a community and migrate them to a sustainable headquarters, such as a website or a blog. Stay in constant contact through social media channels, e-newsletters, whatever you can do.

You need to keep backers up to speed and appraised of where a project sits. They're not just backers, they're your supporters and brand evangelists. These people are emotionally invested in your success. They will help you create buzz and spread awareness, not just for your current project, but for future projects as long as this one is successful. Have a plan before you launch for how you're going to take care of communicating with your backers, whether it's hiring a PR agency or making sure you answer every email yourself.

PCWBC: How much funding should you ask for?

Steinberg: Be reasonable about estimating product costs. Ask yourself what the minimum viable product is that you can offer without adding extraneous expenses. I recommend a cushion of about 20-30% on top of your estimate since things happen. Set your funding amount as low as possible; the more reasonable it is, the more likely that you'll get backers. Offer incentives for extra money raised, such as adding features or expanding the scope of the product. Check before you start to see if the crowdfunding site you pick will let you go over your target.

PCWBC: Should you really "leave the attorneys out of it," as Warballoon Studios is quoted as saying in the book?

Steinberg: I don't want to give any legal counsel either way, since I'm not a lawyer. However, I would recommend that companies looking to get into crowdfunding incorporate to give themselves all of the legal protections that they can get before they begin a crowdfunding project. It's affordable, simple, and it gives you a front-line of protection. You should also clearly spell out ownership rights.


Originally published on PC World |  Click here to read the original story.
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