Top Crowdfunding Challenges

The ubiquity of positive crowdfunding stories can give people a false sense of how easy it actually is. Getting started using Kickstarter and similar crowdfunding platforms is harder than it looks.

Sang Lee, the Return on Change founder and CEO, claims that success with crowdfunding requires a solid support network and initial groundwork before new entrepreneurs can really get ahead.

All entrepreneurs are going to face challenges when it comes to crowdfunding, even if they’re just after a little bit of startup money as opposed to large amounts of funding through equity crowdfunding. Entrepreneurs will need to find new ways of overcoming the four most common crowdfunding challenges. Four executives involved in the crowdfunding field have decided upon what these challenges are, and the implications for new and ambitious entrepreneurs.

Deciding on the Appropriate Crowdfunding Platform

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Just because crowdfunding platforms all have the same function doesn’t mean that they’re all the same in other ways. When people are only trying to raise modest sums of money, they will probably be able to do just fine with Indiegogo and Kickstarter, which are used by consumers. Some people are trying to raise millions of dollars through crowdfunding, and they are going to need to look elsewhere.

The CEO of Optimize Capital Markets Matthew McGrath claims that finding the investors who are willing to back capital ventures is one of the biggest hurdles for the entrepreneurs that are arriving on the scene for the first time. While there are plenty of investors who are willing and able to do so, the opportunity to find them won’t always come up at the right time.

McGrath strongly suggests that people do their research, since the opportunity cost of choosing the inappropriate crowdfunding platform is going to be very high. The people who thoroughly research the marketplace, the different sectors, and the potential investors are the people who are going to succeed at the right time.

Making Sure the Funding Goal is Realistic

Far too many people have overly high expectations when it comes to figuring out the details of their crowdfunding campaigns. They need to acknowledge that they may not necessarily raise all of the money that they requested by the time the campaign is over, and they may not give themselves enough time.

Shereen Shermak, who is the CEO and fund manager of Launch Angels, claims that entrepreneurs often don’t even know how to assess whether or not they’ve given themselves enough time to raise the amount of money that they’ve requested. They may not know how to judge how much money they need either.

Shermak says that entrepreneurs may still need to go in other directions for the sake of fundraising. Entrepreneurs should think about how much capital they will need to really get their businesses off the ground, and that’s around where their crowdfunding target should be in general.

Generating Attention

Even if a business idea is great, it still might not get off the ground if the entrepreneurs in question have failed to generate enough interest in advance.

Sang Lee recommends getting this part of the process started well before people start advertising their campaigns on social media. People should also try to make their advertising viral, so other people will get the word out at the same time. People need to give their potential supporters specific requests as well, rather than simply hoping that they’ll get to supporting the project.

Finding the First Investor is the Trickiest

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Many investors only want to invest in a project that they know has already attracted investors. Finding the first person who then attracts other people is going to be the hardest part of the process in many cases.

Ryan Feit, the CEO and co-founder of SeedInvest, has said that even investors who are interested in the project will often delay their involvement until they’re sure that other people have definitely signed on for it. The investors are afraid of risking any of their money, so far too many entrepreneurs are stuck with people who are putting their assistance on hold. Feit recommends using an equity crowdfunding platform. Even people that are trying to raise a little bit of money on Kickstarter can experience the exact same set of challenges.

Lee stresses the importance of learning about crowdfunding in general. It is never to early to start raising awareness about a future crowdfunding campaign, and it is never too early to start learning about the industry in general.

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