How can the crowd help with capital and advice?
The Crowdfunding Meetup organized by the Start it @K&H incubator on the 6th of December, 2018 attracted many attendants, where they could get acquainted with the local experts of crowdfunding and hear their experiences and advice.
Crowdfunding as an alternative form of financing has gained popularity during the last decade throughout the whole world. Recently more and more proponents of crowdfunding appear in Hungary – either as investors, intermediaries or campaign owners. Furthermore, both the online and offline media frequently publishes articles about the success stories and failures related to crowdfunding.
During a crowdfunding campaign, a project owner promotes his product or service through an online platform to raise small amounts of money from a group of investors. At the first glance, it could seem that by using a well-designed marketing campaign, crowdfunding provides a way to make easy money. Is it such an easy task indeed? How should a campaign owner prepare a crowdfunding campaign and what kind of pitfalls one might face during the campaign? Which platform one should choose and what kind of marketing tools one should use? What happens once a campaign successfully ended?
On the 6th of December the experts of crowdfunding answered the above questions and a few further similar questions at the Start it @K&H startup incubator. The guests of the panel discussion shared their own experiences related to crowdfunding campaigns.
During the first section of the event, László Szaniszló – the Hungarian leader of Crowd-Fund-Port, which is part of the Interreg program and backed by the European Union – outlined the opportunites that a campaign owner might use in case of launching a crowdfunding campaign until the 1st of June, 2019.
Dániel Fekete, the founder of Poizo – a startup company producing smart heaters – told about his experiences with his current crowdfunding campaign. He highlighted that he chose this form of financing because it provides incredibly important feedbacks from the users. Besides the amount raised, crowdfunding is a useful way to validate and promote a product. Feedback from investors and from consumers in this early stage provides a unique opportunity to redesign and fine-tune the business plan, the business model or the product itself. In order to run a successful campaign, one needs to have a significant amount of capital beforehand; it is required mainly for the creation of the visual elements of the campaign (e.g. graphics, videos and other marketing material). He also emphasized that one needs to create a detailed plan of the use of funds before launching the campaign, in order to avoid problems later on, which could even lead to bankruptcy.
Nóra Szeles, the expert of the pioneering equity-based crowdfunding portal, Tokeportal, outlined the regulatory environment and the challenges of being an intermediary organisation. She noted that crowdfunding bridges the gap between raising funds from the so-called 3F (friends, family and fools) and venture capital or bank financing. She mentioned that the European Committee is going to vote on a pan-european crowdfunding regulation in the coming months, which will facilitate and ease the implementation of equity-based crowdfunding in every Member State. Equity-based crowdfunding means that those investing in crowdfunding campaigns receive shares of the company in exchange for their contribution. Tokeportal provides a platform for this form of financing and supports the preparation of crowdfunding campaigns by exploiting internal resources as well as the partner network of Tokeportal.
Mindclash Games is a startup company creating strategic board games, founded by Viktor Péter. The company has raised almost $2 million so far using crowdfunding and it has become a crucial element of their business model. Crowdfunding is an ideal form of financing for this type of product since its target group can be well-specified and it usually consists of dedicated consumers. The team uses direct marketing tools to raise awareness of their products, e.g. at a board game exhibition in Germany the team promoted their game Trickerion by turning their stalls into a magician’s workshop. They find it essential to raise awareness of their products well before launching the crowdfunding campaign by convincing potential consumers to subscribe and publishing news about their products in the media. Viktor also mentioned that one needs to devote a significant amount of time before the campaign to get acquainted with the related legal and tax issues.
The participants of the discussion all agreed that there are a few general rules, by which the project owners have to abide in order to have the chance of running a successful campaign. These are the following:
- Preparing the campaign thoroughly is crucial. It includes the elaboration of the business idea and the creation of a minimum viable product (nowadays it is very difficult to raise funds in the idea phase).
- The development of the business plan and the pricing is also incredibly important (during which one must not forget about the transaction costs of raising capital).
- The development and consistent implementation of the marketing plan constitutes the soul of the campaign (including social media presence, the design elements and content of the campaign and the introductory video).
- Besides the above mentioned activities, a campaign owner must be persevering and constantly proactive during a campaign. One has to be flexible and react rapidly to any change of conditions or to interactions of consumers and financiers.
The discussion provided lots of useful information for the attendants of the meetup at Start it @K&H incubator.