By Joanna L. Krotz
Obviously a boon for all entrepreneurs, crowdsourced funding offers special benefits for women-led startups. Crowdfunding allows women to bypass entire layers of male funders, who are slow to back women startups. Instead, women entrepreneurs can make their pitch directly to social networks of friends, family, colleagues, and like-minded individuals everywhere and anywhere. It’s pull vs. push.
Available in a widening range of flavors, crowdfunding’s two main types are rewards-based campaigns, or “product pre-sell,” and equity investments, or “securities-based crowdfunding.”
Women-led firms do very well on rewards-based platforms. A survey of more than a thousand Kickstarter campaigns in July 2014 found that women who started projects were more likely to succeed than men. In addition, women tend to fund women, and 44% of Kickstarter backers are female. On the newer equity-based platforms, which require greater investments of risk and money, the jury is still out for women. One early indicator comes from CircleUp, an equity platform that links retail startups with individual investors. CircleUp found that women-led startups have a 70% success rate, compared with 58% for men—but the female-friendly retail space may be a factor.
If you want to get involved in this funding game changer, remember that any form of fundraising is hard work. After that, here’s how to shape a persuasive pitch.
First, select the funding communities simpatico with your idea. There are now dozens of crowdfunding platforms and many specialize, whether in industries, silos, services, for-profit, nonprofit, social entrepreneurship, the arts, or even women-only ones. Research online to find one for your enterprise. Then check what other companies on the platform are doing. To experience the process and fully appreciate what you’re asking of contributors, fund a project yourself with a small amount of money. See if you think it’s well executed and a good fit. Put yourself in the customers’ shoes.
Step 2: Select the Right Type of Crowdfunding
Next, choose which kind of crowdfunding you want, whether rewards-based (easier), equity-based, the newer direct product offering (DPO), a form of a securities-based campaign, or another alternative. Do the homework to identify the type that will work best for your business.
Step 3: Shape Your Pitch
Among its other innovations, crowdfunding reverses the traditional process of designing and building a product or project before seeking financing. Now, if successful, the crowd can validate your product and identify target buyers before market release. You still need a convincing business plan. But with a funding pitch, you’re not so much impressing spreadsheet-types as engaging customers.
Step 4: Formulate Your Plan
- Set the goal by figuring out how much funding you need to raise.
- Build your social networking platform alongside your business plan, well before you launch your campaign. Most crowdfunding will come from fans and followers on social media
- Develop an engaging story. Personality, voice, and storyline count. Humor’s okay, but it better be good. Tell your story simply and share your passion for the social or business value.
- Understand the funding platform rules. Read all the fine print. Is it an all-or-nothing model? What’s your time-frame? What are the penalties for missing your goal and what percentage of the funds does the platform keep?
- Choose your rewards if your campaign is donation-based. Be specific about timing as well as shipping options and delivery. If your campaign is investment-based, remember you’re creating shareholders—and you’ll have to answer to them.
- Keep your pitch concise. Make your video short, clear, and authentic, with a call to action. Typically, pitch videos run no more than three minutes. If anyone watching can’t figure out your project or what you’re asking for after the first 60 seconds, go back to editing.
- Communicate, communicate, communicate. Keep in touch with backers and keep expanding your social network. Answer every question. It’s hard but critical work.
- Stay tuned to developments. Crowdfunding rules are in flux. For instance, many accounting issues are still unclear, such as how sales taxes will be collected.
– Did you launch a crowdfunded campaign? How did it go? Tell us your story.
Joanna L. Krotz, Web radio host and founder of The Woman’s Playbook, is the author of BEING EQUAL DOESN’T MEAN BEING THE SAME—because when men make the rules, women don’t advance. Practical as well as inspirational, this timely guide urges women to start a business as their best path to parity, purpose, passion and prosperity. Krotz has been investigating the payoffs and challenges of small business owners, particularly women-led firms, for years. She’s author of the “Leveraging the Female Advantage” Webinar and contributing author to both “Redefining Sex and Power: How Women Can Bankroll Change and Fund Their Future” and “Women’s Work: Paying It Forward.”
Keep up with Joanna L. Krotz on Twitter at @JoannaLKrotz, on Facebook on her page at The Woman’s Playbook with Joanna L Krotz, and on G+ at Joanna L Krotz. You can also listen to The Woman’s Playbook podcasts.