How does crowdfunding work - the 7000 word guide [updated Feb 2021]

Crowdfunding Fundamentals

In this chapter, I’ll explain what is crowdfunding and how does it work, the different types of campaigns and platforms and additional crowdfunding basics. Interested in crowdfunding for nonprofits, raising money for your movie or product on Kickstarter or Indiegogo, or for your company on other platforms? This guide is for you.

How does crowdfunding work?

Crowdfunding is the process of raising money from a large number of people in order to fund a project, a company, or a cause. In some cases, the funders do so as an altruistic donation, while in other cases, they get rewards, equity in the company who raised the money, and more.

In most crowdfunding campaigns, you will see a goal amount, which is how much money you want to raise (some crowdfunders manipulate it, we’ll get to it), how much money has been raised so far (you will see a visual indication like a progress bar and a number in most cases), how many people backed the crowdfunding campaign and how much time is left for the campaign.

The main risks of crowdfunding varies between the different types of crowdfunding campaigns, but are generally two.

The crowdfunder won’t use the money for the purpose it was raised (a scam of some sort).
The crowdfunder won’t be able to provide the perks/rewards on time, or ever, for various reasons.

These are not common at all, and therefore get more attention on the media.

Types of crowdfunding platforms

There are four (4) types of crowdfunding platforms that are generally categorized by what the backers get in return for their money.

Reward-based crowdfunding - in return for their money backers will get some sort of reward. It could be a book with a personal dedication in a crowdfunding campaign to publish a book or tickets to the premiere in a crowdfunding campaign for a movie production. Kickstarter, Patreon (and Patreon alternatives) and Indiegogo are well-known reward-based crowdfunding platforms.

Donation-based crowdfunding - people who back these kinds of campaigns are more donors than backers. They do it for the cause, to raise money for a sick person, or to save animals. This is crowdfunding for nonprofits. Most donation-based campaigns are flexible campaigns. You’ll find such campaigns on platforms like GoFundMe and Indiegogo which also offers the flexible model.

Equity-based crowdfunding - this type of crowdfunding enables businesses to raise money from the public in return for equity in the company. The backers get shares. In the past, if a company wanted to raise capital from the public, it had to issue a prospectus (expansive) and go public. (there are some exemptions though). Only established companies could have done that. But in recent years many countries passed special laws that enable companies to do so through crowdfunding platforms. Republic, Seedinvest, Crowdcube, and Wefunder are a few examples of such platforms.

Lending-based crowdfunding - this type of crowdfunding is different from all the above. People can get loans from the public instead of banks in return for interest. LendingClub is an example of such platformsץ

Now that we have covered how crowdfunding works, it’s time to see how the platforms think.

How Crowdfunding Platforms Think

Before we get into how to write a crowdfunding campaign, how to create a great video etc., I want to give you a sneak peek into how crowdfunding platforms think. I can do so because I founded and operated a crowdfunding platform for 8 years (worked with thousands of campaigns, reviewed many more). These are 6 thighs the platforms review (especially reward and donations based platforms):

Are you serious? Most crowdfunding platforms make money only if you do. If you don’t raise money the crowdfunding website doesn’t make money and its reputation is damaged. In a sense, a crowdfunding platform is betting on you since it provides you with tools, support and resources for free (it’s free to upload a project and get support in most platforms). Obviously, crowdfunding websites prefer to bet on people who take their crowdfunding campaign seriously. If someone submitted a campaign and it doesn’t include most of the elements I’ll mention below, there are two main options: (1) The crowdfunder didn’t do research as for what’s needed; (2) He/she did the research but didn’t feel like taking the time doing a good job (or couldn’t). Since marketing your project is a lot harder than building it, the crowdfunding site knows this specific crowdfunder isn’t a good bet.

Reliability - You want to crowdfund also from people who don’t know you yet. To have someone like that backing your project, you need to be reliable. If you don’t show yourself in the crowdfunding video and don’t link to at least one active social media profile, it raises questions from the platform and potential backers.

Video - A crowdfunding video increases your (and the platforms’) success rates by 40% (although it also indicates the crowdfunder is serious and serious people raise more money). If I see a video in which you talk about this specific campaign and show yourself to the world, you get more points. Please don’t upload a video you or your organization made for other purposes.

Text - Usually a video won’t include all the information regarding your campaign. People would like to know more about you and the team, your goals in this campaign and how you came out with your goal amount. They also like to see graphics. If you write one paragraph, it doesn’t look serious to the crowdfunding website and to potential backers.

Rewards (or levels of support if you don’t offer rewards) - In reward and many donation-based crowdfunding platforms you can offer rewards or create different levels of support. If the platform gets a campaign without perks or with perks you didn’t really spend time optimizing, it doesn’t look serious. You can check other crowdfunding projects in similar domains. Below I offer our subscribers free access to 300 crowdfunding reward ideas.

Your goal amount - Most crowdfunding platforms you’ll submit your campaign to probably saw many similar campaigns. They have at least a reasonable ability to understand, from previous similar crowdfunding projects, if you are asking for too much money (or not enough, but that happens less). It is also a problem because by asking for too much, you significantly decrease your chances to meet your crowdfunding potential.

Crowdfunding platforms want to host as many crowdfunding projects as possible, but it usually takes us 3–10 seconds, based on the project you submitted, to understand if you are not serious. In that case, most platforms would want to invest their efforts in people who take their crowdfunding project seriously.

How to Build a succussful Crowdfunding Campaign

A crowdfunding page includes three main elements. The text and graphics that tell the story of the campaign, a video that serves as sort of a ‘trailer’ to the campaign and the rewards or level of support.

Preliminary decisions:

All or nothing or flexible campaign - If there is a certain amount of money you have to raise in order to fulfill the purpose of the campaign then you should go for an all or nothing campaign. If, however, it’s a crowdfunding campaign for a nonprofit which can use any amount it raises for the purpose, then the flexible campaign can work as well.

The pros of choosing the all or nothing are (a) usually, and believe me when I say so, you’ll raise more money. When you know you’ll lose all the money you raised so far if you won’t meet your goal amount, you’ll work harder to meet your goal amount. (b) Potential backers (and the crowdfunding platforms) give more credibility to all or nothing campaigns because the crowdfunder basically says ‘I have a specific purpose and I don’t want to take your money if I can’t fulfill it’. It makes everyone feel more confident that the money will be used to the purpose for which it was raised. (c) usually, the crowdfunding platform fees are lower in the all or nothing campaigns.
The cons: the main risk here is that you’ll work hard and get nothing. That might lead people to add their own money into the campaign or to lose everything they were able to raise.

Your goal amount (how much money are you looking to raise) - most people set a higher goal amount then they should. You should aim to set the minimum goal amount that will enable you to fulfill your core purpose (including all expenses). Think about it like a restaurant you are trying to fill. If you have a huge restaurant, it will look empty for a longer period of time and getting new customers will be harder initially (people see a full restaurant as an indication of the quality of the food). If you start with a smaller restaurant, it’s easier to make it look like a successful place and therefore to get new customers. A crowdfunding campaign psychology is similar. People feel much more comfortable to back a campaign that already has backers. They don’t like to be the first. Many crowdfunders are concerned that if they’ll set a lower goal amount, people will stop backing them once they meet it. Everyone wants to raise as much as possible. That’s wrong. A lot of crowdfunders use ‘stretch goals’. They set an initial goal, the one that they have to meet in order to fulfill the core purpose of their campaign, but as they meet it, they set additional goals which are like bonus goals (think of them as extras to the car you buy). On most platforms you can’t change the initial goal, but you can communicate the new goal on the main text (in the top) and through updates and social media. These goals give people a reason to continue backing your campaign, and they do.

Duration of the campaign - When it comes to the time available for support, more is not better. Campaigns should have a sense of urgency, a threat of a lost opportunity if the Support button isn’t pressed now. Indiegogo published some data that showed the ideal campaign duration is 30 days. Some crowdfunders say it’s even less than that. Running a crowdfunding campaign requires a lot of time and effort. You can’t do it properly for 60 days, and you probably can’t meet your potential within 10 days.

Your crowdfunding video

Should I prepare a crowdfunding video?

Yes! It significantly increases your chances to raise money by 40% because a good video delivers the message of your campaign in a faster way that fits people’s short attention span. It also makes you look more serious both to potential backers and crowdfunding platforms who vet your project. Do NOT use a video you prepared before for a different purpose as your crowdfunding video.

For most crowdfunders, this is the biggest hassle in the campaign building phase. So, if you have the budget you should consider hiring a professional to help you with it (especially if you are a business). However, I have seen so many campaigns raising so much money with their unprofessional video. It happens because what really matters is the message.

Crowdfunding video script

That’s the first thing you should do. Nancy Duarte analyzed thousands of speeches and found a winning template. Once you figure it out, you can write a great script for your crowdfunding video. I recommend watching all of it, but if you are looking for the core watch 06:09 - 08:50.

Let’s have a look at two examples that used a similar structure. These are not crowdfunding campaigns videos.

Example 1 - this is an intro video I prepared when I launched my own crowdfunding platform in 2012. People in my country didn’t know what crowdfunding is.

Example 2 - Chrysler’s super-bowl commercial

How long should a crowdfunding video be and what should it include

Your video should be up to 3 minutes in length, but you have 5-10 seconds to catch people’s attention. Show yourself and your team in the video, people want to see who the money goes to. Also, show your product.

Your crowdfunding text

The text of your crowdfunding campaign is what people see below the video. Since the video is only 3 minutes long and serves as the ׳trailer׳ of your campaign, the text and graphics you include in your campaign tell the whole story.

Screen Shot 2020-04-14 at 12.41.29 PM.png

The text should tell your full story, and should be fun and interesting to read. It doesn’t matter if it’s a donation, reward or equity based crowdfunding campaign. Get people into your story. And your story isn’t the money you raise now, that’s just the reason people are listening to you now. It’s about your vision, what made you start your initiative, who are the people behind it, what success have you experienced with your initiative so far, what difficulties, and how you overcame them.

If for example you raise money for your first album, people would want to read about your journey as a musician, what pushed you towards music, what kind of music are you affected by. Of course they would want to know what rewards are you offering, what do you need the money for etc., but these are just to show you are serious about delivering what you say you will, to show you are serious.

When you write about the money you raise, tell people what it will be used for, show them you have done your homework and that you are very careful about asking for money you don’t really need. Tell them about the risks, and answer frequently asked questions. Add images of your team and graphics to support your story and to make people feel like choosing a reward just because it looks great (if applicable).

Your crowdfunding rewards (perks)

There are two main reasons for people to support your crowdfunding campaign. They either get something out of it (more relevant to reward and equity based campaigns) or they're doing something to do good and feel good (think nonprofits who raise donations). While on reward and equity crowdfunding campaigns people want to see what they get in return for their money, in donation based campaigns, backers want to see what their money buys for those in need. If you are raising money to help homeless people, show people that for $10 they can keep one person warm at night, and that for $20 they can keep them warm and fed.

If it’s a classic rewards campaign (raising money for a movie, an album, a product etc.) you can offer products, services, experiences and also offer deals with third parties (like a famous restaurant).

You can limit the availability of a reward to incentivize people to back your campaign early. You can also limit the availability of a special price (i.e. people will still be able to get that reward later, but the price increases). The early adopters are more important than the money you ‘lose’ when you offer a special price.

You can also offer packages as you increase the price (e.g. you can get the album, lyrics, chords and tickets). This is common. If a specific price isn’t included in any package, mention it so people will feel it’s special.

Crowdfunding rewards ideas - the ‘perk-bank’

I have created a list of around 300 rewards ideas for music, film and publishing related campaigns. However, it will inspire you even if your campaign doesn’t fall into one of these categories.

A case study

A while ago I gave a lecture at a university about crowdfunding. Thirty minutes before I was due to take the podium I received a newsletter with a link to a very cool, 3D-printed, guitar gadget. Tom Barnes, a journalist for Mic had this to say about the gadget:

“Trying to assemble the perfect guitar for every situation is a pipe dream for most musicians. Most would likely bankrupt themselves paying thousands of dollars to collect the perfect armada of guitars to own every genre they want to play. Yet, there’s one company working to bring this dream of high-end guitar customization to the people.

Strassell Guitars — a small, New York City-based company founded by Andrew Strassell — has come up with a way for guitarists to essentially turn a single guitar into dozens.”

Sage Lazzaro of The Observer wrote about Strassell Guitars as well. He was so confident that Strassell’s idea would take off that he titled his piece: “How 3D Printing Is Changing the Guitar Forever.”

But the device wasn’t in production yet. The company was looking for funding and offered a link to its crowdfunding campaign on Indiegogo.

I’ve seen thousands of campaigns and I expected that this one, for a great idea with a big potential market, would have done very well. What I found made me change my lecture notes and talk about why this crowdfunding campaign failed.

This is what I saw:

Screen Shot 2020-04-16 at 8.17.01 PM.png

There are a lot of reasons for a crowdfunding campaign to end up like that. In many cases, it’s down to marketing. However, this campaign had five significant mistakes related to how the campaign was designed.

The Video- While Strassell Guitars’ product was exciting, its video was dull, short and delivered the wrong message with the wrong content. You can see it for yourself. When people look at a crowdfunding video, they want to understand the product, but they also want to see the creators and be inspired by their vision. Also, the video had none of the elements Nancy Durate mentioned in her lecture about how to build a great pitch. Strassell Guitars’ creator should have shown himself with a guitar and opened with something like: “History will split the guitar industry into two parts, before the Strassell and after. Now I’m going to show you why.” That would have been enough to get people’s attention.

The Rewards- Although supporters could donate any amount they wanted, the campaign had only two perks: one at $100 and another at $2,500.The average pledge in a crowdfunding campaign is around $25. For that price, Strassell Guitars could have offered a discount or a sack of guitar-related accessories. It wouldn’t have taken too much imagination to find a few dollars’ worth of goodies to give away in return for $25. By starting four times higher, the company missed out on its biggest potential audience. The huge gap to the next reward guaranteed that they missed out on even more. Effective campaigns must use perks and rewards to incentivize donations and pitch at price levels to suit a range of different budgets.

Graphics: The body of the campaign had too little imagery (they upload the images to the gallery, which in my opinion is less effective). When it comes to product-related campaigns people want to “feel” the product as much as they can. The campaign should function like an online store allowing supporters to almost pick up the product and try it out. They also want to be convinced that this idea will happen, and that the project owner knows how to turn a concept into a product. Here is a good example of how to do it right.

Friends And Family: No one wants to be the first to reach into their pocket. A crowdfunding campaign should start with more than two backers from its closest circle to provide funds. Whoever those first backers may be, they should be lined up so that strangers can see that the project is already trusted and that they won’t be the only supporters.

Duration Of The Campaign: Strassell went for 60 instead of 30. They didn’t create any feeling of urgency, and enabled potential backers to procrastinate.

Marketing Your Crowdfunding Campaign

Common assumptions crowdfunders have (and usually collapse)

Before I get into the most important part of the campaign, which is marketing it, I’d like to share several common assumptions crowdfunders have before their campaign starts (as someone who owned a platform, I worked closely with thousands of crowdfunders). These assumptions usually collapse shortly after the campaign starts. I’m sharing those because I think it will get you into the right state-of-mind before reading the section about marketing.

“My friends and family will back my campaign when I’ll ask them”. In most cases, you need to nag even your closest friends and family to back your campaign when you most need it, immediately after it’s live (you need validation and they know you so it’s less of a risk for them). People live their lives, they have a job, family and are generally busy. The solution is to prepare them a while before the campaign goes live and stress how important it is that they’ll back you as fast as possible. Make a list of the relevant people and start contacting them before the campaign is live. Ask if you can count on their early support.
“I’ll meet my goal amount easily, my page has lots of likes”. Likes ≠ money. It’s easier to like something than to actually support it financially. Of course, if you have a page with many likes that’s a good start because a like is an indication that a person feels more connected to the cause than others. However, it’s only an indication. Remember that.
“How hard can it be?”. People are optimistic, me too. But when you are crowdfunding, you need to know that in most cases (99.9%) there are no miracles. Uploading the campaign to a crowdfunding platform and expecting the money will just flow because people browsed Kickstarter or Indiegogo and found your project is the biggest mistake you can make, the biggest!
“The more time I have, the more money I’ll raise”. You set a deadline for your campaign. The ideal time is 30 days. You need to distribute the campaign on a daily basis, it’s time consuming and mentally challenging. Most people can’t do it for two or three months. Also, when potential backers visit your campaign and see there are 50 or 60 days left, they are less likely to support your campaign now, many of us tend to procrastinate.
“People will share my campaign, I’m not worried about marketing”.You and your team are alone when it comes to sharing your campaign. Sure, some people will share your project, but don’t count on them as marketers. You can give them incentive to do so with a referral contest though, I’ll get to it later.

The most important thing to know about crowdfunding distribution:

If you can remember just one thing from this guide, this is it!

Crowdfunding platforms are not like eBay or Amazon. Most people don’t go into a crowdfunding platform and look for campaigns to support. That means you need to market your campaign. And if you do it well, and people can connect to your cause it will be funded.

84% of the campaigns who failed on Kickstarter, raised less than 20% of the goal amount. Probably many of them realized that they needed to market their campaign after it went live or found that difficult and gave up in the beginning because they didn’t know how to do that.

Marketing channels:

In this section I’ll do a general overview of the different distribution channels you can use to promote your campaign. Today, having a crowdfunding campaign isn’t news, many did it before. People don’t really care that you launched a crowdfunding campaign or how much you raised so far. However, they are interested in your story, in your business, in your music, in the stories of the people your non-profit helps to. If you are raising money for an album they’ll be interested to hear what music do you listen to or influenced you, they’ll be happy to see the notes of your first songs or hear you on a short video playing a song from your new album. If it’s a business, it’s interesting to know what made you start it, what motivates you, what your parents said when you told them you are starting a business or how you felt the first time someone paid for your product. I’ll mention it later as well, but you get the point, you need to create content throughout the campaign and distribute it as if it’s a short blog, vlog or story, and each time add a link to your campaign (if the medium enables that).

Okay, now let’s look on the different channels you can promote your campaign on:

Friends and Family

The first channel you should use is your friends and family. Most successful crowdfunding campaigns I saw started with them. Keep your campaign under the radar and approach them in any way you can in the first few days. When people you don’t know will see your campaign, you want it to look like a success story, you want them to see a green progress bar. Nobody likes to take the risk and be first, but your family and friends know you so it’s less risky for them (or they don’t mind). I know it’s not easy to ask them to buy something or support you, but for the time of the campaign leave shame at home. Use email, Messenger, iMessage, Whatsapp and even phone calls to make sure they support you early.

Campaign Updates

You can send updates through the crowdfunding platform:

In most platforms you can publish a public update for anyone who enters the campaign to see, or a private update just for your backers. Use the updates to reach out to your backers so they’ll either upgrade their perk when you release new perks or ask them to help you distribute your campaign (they get updates to their emails). And remember, in most cases they don’t really care how much you raised so far, tell them interesting stories about the venture you are raising money for. SonyaBot will help with that as well.

Facebook groups and pages

In many cases, Facebook (FB) is the biggest source of traffic for your crowdfunding project. Now, I’m not talking on marketing your campaign to your facebook friends or to their friends. That’s pretty straightforward, you do that on a daily basis by posting interesting content, add a link to your campaign and a call to action. SonyaBot will also help you with that.

I’d like to discuss how to market to relevant people out of your network. The best way to do that is through Facebook groups and pages. Groups are generally more interesting for us since the discussions are more open to everyone. Pages are entities managed by a company, celebrity or organizations and the flow of information is more of a one way street. Let’s see how to find the relevant groups and pages. Let’s assume I’m raising money for a guitar related campaign. To find relevant groups and pages we’ll type guitar in the search bar. In the top menu we can find guitar-related people, videos and more. We are interested in the groups.

What you see below is a list of guitar related groups. We can see how many posts are posted each day as well as the name and description of the group just to make sure it’s relevant for us.

You’ll need to join the groups you’re interested in, in most cases you’ll get approved fast. You should join all the groups you think might be relevant just to evaluate their relevance.

Now, all that process of finding the relevant groups is something you do before the campaign goes live. You list the most relevant groups in your google spreadsheet and rate them so you’ll know where to focus your efforts. Be active in these groups before you start posting your campaign, answer people’s questions and be a positive member so when the time comes, you won’t be perceived as someone who is just here to get something, instead of benefiting the members. Initially you’ll also have a badge of a ‘new member’, which would be great to lose.

The process of finding relevant pages is similar. I’m looking at the size of the page and how engaged people are. If I see a page with many likes and no engagement at all it might be a page with fake likes and it isn’t interesting.

In many cases pages will be owned by businesses. It could be great to have them feature your campaign, but it’s less likely they’ll do so. There are two main things you can do though:

Offer a special perk for their readers or early access to a special perk. That enables them to show their followers they bring them value.

The second way to get featured on their page is by getting them to cover you in an article (if they have a blog or they are a professional news outlet). I’ll teach you later how to reach out to reporters.

Both of these things are hard to accomplish and require lots of time. If you are alone in this campaign you should focus on the groups and maybe approach them when your campaign is trending. If you have team members or a PR company, you should consider having them do it.

Start posting on the groups or approach page admins after your campaign is trending and you can see some color in the progress bar (definitely after your friends, family and close network already backed your campaign).

Email marketing

Email marketing is a great way to bring people to your campaign. You will use it every few days to share interesting content with a link to your campaign at the end and a call to action.

If you have a mailing list, it’s time to use it. If you don’t,, start creating one by creating appealing content, quizzes and tools that might appeal to your audience and get them to enter their email. I created the 32 work from home jobs quiz to get autistic freelancers interested in Spectroomz (Spectroomz lets you hire exceptional autistic freelancers, which can also help you with your crowdfunding campaign btw). The ideal way is to create such content months before your campaign goes live, and get organic traffic to it (non-paid traffic you get from Google). The professional name is SEO. It’s not easy, but will benefit you a lot. I wrote a guide about how to get backlinks to your content (backlinks are other sites linking to your content, and it’s an indication for Google that your content is worth pushing up the search engine results).

Email marketing tools

ConvertKit - This is a very popular email marketing tool that’s currently trending. Here’s a ConvertKit review.

Substack - This is a free option, mainly for writers.

Mixmax- This is an email superpower tool that integrates with your Gmail and enables you to send emails, track them for opens and clicks and a lot more than that. See my Mixmax review.

Mailchimp - Mailchimp is probably the most famous email marketing tool. They have a free plan with a limit of 2,000 contacts and up to 10,000 emails/month. For some reason we’re experiencing difficulties with them, but they work for many others :)

Newsletters

You can approach people who already have relevant newsletters with many subscribers. You are probably a part of a community around the subject of your crowdfunding campaign, so it shouldn’t be hard to find relevant newsletters. It’s a good idea to approach the person behind the newsletter and offer a special perk to his or her community. You can also find relevant newsletters on Substack, GetRevue or just Google it.

Twitter

Use Twitter to promote your campaign whenever you promote it on Facebook. You can also automate it using tools like Zapier (which have a free plan) or Hootsuite.

If you are not active on Twitter or if your audience is less active there (though it’s unlikely), it’s still a good place to engage with influencers and try to have them share your campaign. Finding relevant people on Twitter is similar to finding Facebook groups (as explained above). Type relevant keywords, you’ll see people, organizations and businesses. You are looking for private people. The most relevant are probably at the top. Get into their profile and explore their tweets, see how engaged people are with their tweets. See how many followers they have and how many they follow. If the number of people they follow is similar to the number of their followers they are less relevant.

Another thing that’s common today is Twitter threads, which is a series of connected tweets that enables you to write something in the nature of a digestible blog post.

Tip: you can get help from exceptional autistic freelancers on Spectroomz who will research Twitter and Facebook to find relevant groups, pages and Twitter influencers.

Podcasts

This is a relatively new medium, and my experience with it is little. You can reach relevant podcasts and interview with them about your venture, your story. Then, you can mention your campaign and offer a special perk for the podcast’s listeners. There are podcast networks (Earwolf is one example) you can start your search in. Of course you should prefer to get featured for free, if you are interesting and relevant enough it’s possible. You can also do paid advertising on podcasts (It was less effective for me though, here’s another blog post about podcast advertisement it by ahrefs).

Linkedin

If you have many connections it’s a good place to post interesting content on a daily basis. If not, it’s still a good place to promote your campaign in the relevant groups.

Simply type the relevant keyword and start browsing groups and join them. You can also connect to influencers, but from my experience it’s less effective to reach out to people on Linkedin. You can incentivise them to promote your project though.

You can also publish blog posts on Linkedin, this is quite effective from my experience, especially if you have many followers. You can use content you publish there on Facebook or in the updates of the crowdfunding campaign as well (and vice versa).

Reddit

Reddit is a huge website with lots of traffic. It has many forums (each one is named subreddit), in almost any subject you can think of, all in one place. Each subreddit is a different forum with it’s own rules. Use Redditlist (or Redditlist alternatives) to find subreddits and see how active they are.

Check how many members the subreddit has, the overall engagement. See when were the last few posts posted and how many upvotes and comments each one has (upvote is Reddit’s version of the Like) .

Check the rules of each group. Redditors really hate advertisements and marketers. The subreddit’s admins will ban you or delete your post if you are selling something. They might look at your post history so be active on the relevant subreddits before your campaign goes live. On some subreddits you’ll need minimum Reddit Karma (some kind of a scoring mechanism Reddit has) to post, so this is another reason to be active long before your campaign goes live.

AMA

AMA (Ask Me Anything) is a way for you to engage people by stating who you are, and let them ask you anything. In the example of the case study I shared above (the 3D guitar gear campaign) I would write something like that:

“Mic and the Observer just wrote I’m revolutanize to guitar industry, AMA”

This is a powerful tool you should use during the campaign, SonyaBot will mention that as well. You can do it on Facebook as well, not just Reddit, although there is a specific successful subreddit for it.

ProductHunt

ProductHunt is mostly relevant to gadget and product related campaigns, but anyone should know it because it’s like a search engine for tools you can use in your crowdfunding campaign. On ProductHunt people submit (they call it hunt) cool products, and others vote and discuss the products. Many products are submitted to ProductHunt each day, and only a few are featured on the home page (I was able to get several projects featured). Being featured can get you lots of traffic and you can also schedule your submission to a specific day. There are lots of guides about launching on ProductHunt, here’s the official one.

Remember: Don’t post on ProductHunt (or other platforms before your friends and family back you).

Public relations (PR):

Getting your campaign on relevant media outlets can be extremely valuable, though it requires research and time and it’s not always effective. You should do it only after you reach at-least 30-40% of your goal. I was able to feature my ventures on sites like TechCrunch, FastCompany, EliteDaily, VentureBeat and more. I previously wrote a guide on how to get media coverage , it includes screenshots of the emails that got me featured.

Paid advertising

If you have a marketing budget here are some ways you can use it. You shouldn’t advertise before you have reached at least 30-40% of your goal though.

Facebook and Instagram:

FB and Instagram are probably the most effective advertising platforms for your crowdfunding campaign. The process of advertising on Facebook and Instagram is the same. I think you should check out this guide to Facebook ads platforms (It needs updating a bit, but still, it’s a great guide). Lightricks enables anyone to create professional video ads easily. I’m using their VideoBoost tool.

Jellop

If you are a business with a big budget who is aiming to raise more than US$ 200,000 you should know Jellop. I haven’t worked with them personally but heard great feedback about them. They have an algorithm that brings amazing returns so on every $ you spend on FB, they bring 5-15 of pledges. You only pay them a share of what they bring.

Taboola

Taboola is the company that shows you ‘further recommended reading’ below the articles you read on media outlets. Some of these articles are from the same site, and some are links to paid content. If you got featured on a media outlet, you can promote that article on other big outlets using Taboola.

Affiliate marketing:

You can incentivize people to market your campaign and in return get something special or a payment when they refer backers. Indiegogo has a built-in feature for that. Kickbooster enables you to do it with Kickstarter (Kickstarter doesn't have that feature).

Influencer marketing

Here’s a guide I wrote about how to do influencer marketing.

BackerClub

BackerClucb a club of people who on average, supported more than a 100 campaigns on Kickstarter or Indiegogo. You can submit your campaign, and get exposure to that community, but it looks like their focus is product-related.

If you liked what you read and want to learn even more, here’s my crowdfunding course.

Frequently Asked Questions

How does crowdfunding work for entrepreneurs and businesses?

Usually a local business, or a business who has something to give in return will use the reward-based crowdfunding method. They could offer their products or services in return.

If it’s a tech startup building an app or some other software and is looking to crowdfund capital, they probably don’t have anything valuable to offer in return except for equity in company. This startup will choose the equity-based model. In reality, most startups who raise money using this method already have a product, or at least something close to a useable product, as well as a team. Raising money based on a mere idea wouldn’t work.

Do you pay back crowdfunding?

No, you do not need to pay back crowdfunding. You do, however, need to provide your backers the rewards you offered in exchange for their money, or the equity in your business in case you crowdfunded on an equity-based platform.

How do you make money from crowdfunding?

Crowdfunding platforms usually make money only if the crowdfunding campaign raised money successfully. The fees are a percentage of the total funds raised and are usually between 5%-12%. In most cases, a flexible campaign will have higher fees than an-all-or-nothing campaign (see types of campaigns above).

How does crowdfunding investment work?

Crowdfunding is the process of raising small amounts of money from a lot of people in order to fund a project, a company, or a cause. In some cases, the funders do so as an altruistic donation, while in other cases, they get rewards, equity in the company who raised the money, and more.

What do Crowdfunders get in return?

It depends on the type of crowdfunding campaign. If it is a reward-based campaign (e.g. develop a product), then the crowdfunders get the reward attached to their level of their support. If it is an equity crowdfunding campaign, then crowdfunders will get equity (shares) in the company who raises the money. In a lending campaign, it will be interest (in addition to their money), and in a donation campaign it might be a symbolic reward.

Does crowdfunding really work?

Definitely. So far crowdfunding platforms like Kickstarter, Indiegogo, Gofundme, Seedinvest and thousands more have enabled individuals, charities, and companies to raise Billions. It does. however, requires time and efforts from the crowdfunder.

Can I use crowdfunding to start a business?

Yes. Entrepreneurs use crowdfunding to raise money for their new ventures. You do offer backers your product in return or shares in your company if you are using an equity based crowdfunding platform.

Pro tip for creators

When you start building your community, you should try to connect with them on a weekly basis (even before the crowdfunding campaign). ConvertKit is a trending email marketing tool for creators (I use it) because it enables you to segment your audience based many different factors and contact each segment with tailored messaging:

Those who purchased from you (you can even segment by the amount of purchase in many cases).
Those who engage with your content (open and/or click)
Those who don’t engage with your content
Many more

Learn more in my ConvertKit review

Fair disclosure - if you sign up with Convertkit through my review, you support Spectroomz, which is great. However, the review is not affected at all by that (there are improvements offers + alternatives too).

Access my crowdfunding course

If you liked what you read, you can access my crowdfunding course. I teach there what I learned from helping thousands of crowdfunders while running my own platform. There’s a 30-day money-back policy. Learn more below and access it here.