Considering Crowdfunding? 4 tips for Southeast Asian Start-ups
Because appealing to the crowd is harder than you think.
PHOTO CREDIT: Getty Images
Crowdfunding presents an intriguing alternative over bootstrapping or raising capital from traditional investors. On one hand, you don’t have to give up any equity. On the other hand, you have to deliver a whole slew of rewards to your backers.
High profile crowdfunding flameouts - companies that fail to deliver rewards or even a product altogether - show that raising money through Kickstarter, Indiegogo, or a local platform is no easy feat.
Even so, here are 4 tips from entrepreneurs in Southeast Asia who have chosen the crowdfunding route, along with their candid thoughts on some of the disadvantages of this fast growing form of fundraising.
1. Invest in your multimedia
Singaporean Erwin Lian, the founder of The Perfect Sketchbook, shared that in order to capture a reader’s attention, crowdfunders must deliver their story in the shortest amount of possible time. The best way to do this is usually a video. But make it short.
“Like it or not, few are willing to watch an online video for more than 5 minutes,” says Lian, who successfully raised more than $53,000 on Kickstarter.
Sydney Shi, the co-founder and product manager of Singaporean-based AICO, which raised more than $110,000 for their universal remote, echoed similar sentiments on the importance of multimedia. In fact, Shi suggested that a campaign’s video and images could lead to drop off if they aren’t compelling enough.
“The audience will continue to read more only if they are interested and attracted by the video and images on the top,” he says.
2. Think about your rewards carefully
Filipino entrepreneur Richard “D-cal” Dacalos, the creator and co-founder of Upstart: The Board Game, emphasized that rewards are called rewards for a reason: they must provide some incentive to your backers.
“You need to set a key reward which is the most value-for-money to attract your supporter,” Shi says.
After you’ve designed your rewards to be attractive to potential backers, you must not neglect the details. “The financial back-end of a campaign can make or break it. Research all of the shipping options and costs. Get very clear on your minimum production costs. This is not something that waits to the end,” Dacalos says, adding that he researched and consulted with suppliers 6 to 8 months in advance of his campaign’s launch.
According to Lian, rewards fulfillment is indeed one drawback to crowdfunding. “Most crowdfunding platforms don't offer a good backend support system for customer fulfillment and support,” he says.
3. Tap both your personal and social media networks
For four years, Lian had been documenting his travels and sketches on Tumblr, Facebook, and Instagram, where he gained more than 7000+ followers. Unbeknownst to him, these fans would later form the backbone of his crowdfunding campaign, with most backers coming from this social media circle, including his largest investor.
“Our biggest backer, Dr. Ramona from Austria, has been following me on Tumblr, and kindly answered my call for support,” he says.
Dacalos advised crowdfunders to call on friends and family well before their campaign even starts. “This first push from your community will help bring in the people who are outside of your normal reach,” he says.
Gathering support from your circle of family and friends is arduous in itself. The crowdfunder who embarks on a campaign thinking that they can just press a button and the money comes pouring in is sorely mistaken, Dacalos pointed out.
“Crowdfunding's a handcrank that requires effort and continuous care. It takes time and if you are unwilling to put in the time and effort, then your campaign is already bound for failure,” he said.
4. Not all the money you raise is yours
While the amount of capital a company crowdfunds often makes headlines, not all of this money goes to them. A sizable amount must be turned over to the crowdfunding platform before they ever see a cent, which Lian sees as a drawback. “The disadvantage to crowdfunding is that there is often a 5 to 10% commission charge on your project,” he says.
Still, some crowdfunders, such as Dacalos, find the trade-off worth it, particularly due to the immediacy that crowdfunding creates between entrepreneurs and their end users. “Ultimately, it might be more time consuming than asking for a single sum of money from a single investor, but it's incredibly fulfilling being able to directly connect to the people using your product,” he says.