How To Raise Money Online Using Smart Crowdfunding

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Crowdfunding is using small amounts of capital from a large number of individuals, from family to friends to friends of friends, to finance a new business venture. Online crowdfunding is the same concept, but even greater accessibility of vast networks of friends, family, colleagues, and virtual strangers through social media websites like Facebook, Twitter and LinkedIn to get the word out about a new business and attract investors. If you’re asking how to raise money online, Crowdfunding has the potential to increase entrepreneurship by expanding the pool of investors from just your local network to a global network.

You can’t just expect raise money online overnight with crowdfunding, however. Successful crowdfunding entails a systematic approach to approaching these different projects and making sure that you have the right influencers, timing, and other blueprint online fundraising essentials. Join Eli Regalado, Chief of Madness at Mad Hatter Agency and self-proclaimed serial entrepreneur, as he teaches students how to build a successful pre-launch to raise money online. His lecture series, How I Hacked The System To Raise $400k With Crowdfunding, will teach you how to successfully create a pre-launch campaign, build each phase of content and digital assets, and launch the fundraiser.

Preview the lecture with a transcript snippet below. Eli will give personal examples of his successes, his peer’s victories, as well as some pitfalls to expect if you don’t go according to your plan. Good luck on your fundraising endeavors!

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Lecture Transcript:

Okay everybody, when we talk about crowdfunding, one of the biggest questions and concerns I get is, “How do I take the risk out of this? How do I guarantee that my weeks, if not months, of work are going to be successful?” And that’s really what this presentation is all based on: how to maximize your time and maximize your chances for success, and have fun with this whole process.

For those of you who don’t know, crowdfunding is not a new concept. In 1884, Pulitzer ended up crowdfunding $100,000 to erect the Statue of Liberty. It took him a little over five months. The average backer was less than $1, and people got little mini statues of this little thing for their contribution. The world newspaper was “the social media” of the day and that’s how they got the word out about this. It is not a get rich quick scheme, though some people see these campaigns that raise massive amounts of money on the first day or two and they think, “Hey, all I need to do is shoot this video and do the same thing.” No. It’s not how it works, and you’re going to see that in some later slides. It’s not for the lazy, and this takes work, guys. And it takes work and it takes thought, but if you do it and you do it correctly, not only are you going to have one successful campaign, but you’re going to have a community of fans that are willing to give you money on an ongoing basis.

And it’s not just for unfunded companies. There is an organization up the road in Boulder, Colorado. There’s a gentleman by the name of Brad Felt, who we know, who has a VC firm called The Foundry Group. They drop $7 million into this app company. Besides all that money that they got, they said, “Hey, how do we take this and do something cool with it?” And they said, “Well hey, let’s crowdfund this next new product we’re going to bring to market.” This is three days in, as of September 19th, $500,000. Two weeks left in the campaign, they’re at $993,000. Now, people ask, “How did they do that? How did this work?” Keep in mind that they did have an existing user base, they had a community of people that were already using the app for the iPhone and the Android, and now they’re coming out with this 3D sensing device that they can put on an iPad. So they were able to take one community, roll it into another product, and now they’ve got over a million dollars worth of money, free and clear.

This is my buddy, Larry Roberts. Larry was one of the four men credited with starting the internet. He was the chief scientist of the Arpanet project, and he’s a true internet pioneer. He said, “You know Eli, crowdfunding’s like the early days of the internet because back in those days, there was this lie that you could create this really crappy website and put it on the internet and all this money was going to come pouring in.” Well, we all know what happened. People were making these really bad investments in these internet companies, and slapping them up on the web, and of course, they built it and no one came.

Mad Hatter Agency is an organization that I founded. We are a launch agency focused on launching really cool, innovative ideas. Now whether that’s a product, a service, whatever it is, it has to be cool and it has to be sexy in order for us to even take it on. So we are very unconventional in our approaches, especially marketing. We focus a lot on public relations; we get a lot of attention for our clients. Advertising is always a little bit abnormal. Social media strategy, I know that’s kind of Greek for a lot of people, but we really take a systematic approach to approaching these different projects and making sure that we can pull this whole thing off. I’m going to show you some of these things that you can implement right away in your own business to do, literally, today. Growth hacking, if you’re not familiar with that term, it’s basically taking limited amounts of resources and hacking the system, or systems, to get you the maximum amount of growth with the least amount of money spent, and then influencer building and video production. Influencer building: you’ve already seen one example of Larry Roberts and you’ll see some more.

About me. I’m a serial entrepreneur. I started my first company at the age of 19. I did not go to college. I ride a Harley motorcycle and I have six sisters. As a result, 90% of our clients are women. I was an early employee at Service Magic, that sold for several hundred million dollars to a company called IAS. Of course you have Steve Wozniak and myself, and we actually met on Facebook using some of these growth hacking techniques I’m going to show you.

How we got starting in crowdfunding – I had a consulting company basically building relational capital for organizations, so I was a hired gun, if you want to call it that. People would hire me to reach out to influential people, set up meetings, close deals, whatever it is. The situation always varied. People that you see on the covers are people who we actually met with and worked with. Steve Wozniak, of course, and we have Rupert Murdock and Mayor Bloomberg. All the guys in the cowboy hats, that’s eight presidents from Central and South America.

During this consulting gig, I started working with an organization called Startup America Partnership. We started a web series called Startup TV, and one of our first guests on it was Slava Reuben who is the CEO of Indiegogo. I reached out to Slava and I said, “Hey, I really see this thing called crowdfunding taking off and I’ve been an entrepreneur all my life. I’d love if you could just teach me how to do this and I’ll run projects through your platform.” Indiegogo’s really big on education. Slava and Adam Chapnick sat down with me, and really went through different data sets – here’s why you do this, here’s why you don’t do that. Here’s why you do some of this, here’s why you don’t do that. And everything that I’m going to show you is based off the research that I’ve done personally or the research that Indiegogo has taught me as well.

There are two success stories that I’m going to point out to you. The first one is a product called Hot Straw. We ended up raising $18,000 for a plastic straw. I don’t know if you know about the straw market, but $18,000, you’ve got to move a lot of straws in order to get that thing off the ground. That led to a pretty significant angel round, and this company’s still in business today because of it. The other example down below, is a company called Adam’s Express. The founder created these little lego type bricks that you could connect, make interactive toys that you can control with your iPhone. They had accelerometers built into them, they had little light sensors, crazy little things like that. We had a $100,000 target for that one. We ended up raising $183,000, and that lead to over a million dollar angel round as well.

What you notice is some vast differences between these. A, it’s the product, but B, it’s also because on the project below, we spent a lot more time in the pre-launch building the community before we ever turned on the juice. There’s nothing worse than working your butt off just to see something fail, and that’s really the point of this presentation – there are certain things that if you do and do correctly, that you can really hedge success with these different campaigns. If you don’t take this advice when you fail, you just don’t have an excuse.

Quick stats: 60% of all projects fail, globally. That’s not bad considering that nine out of every ten start-ups fail, but it is bad considering that the average raise is less than $10,000. This is what I call an F and F raise, so it’s a friends and family. I’m going to put a project on Kickstarter, on Indiegogo, I’m going to get all my friends and family to give me money, and I’m working within a limited sphere of influence. What I’m going to teach you how to do is do a proper pre-launch and leverage the press to take that $10,000 and turn it into $100,000.

Crowdfunding is like fishing. Everyone can fish, and some more so than others. Over here to the left, you got the little tyke. He’s got his little fish and he’s super excited. And then you’ve got these guys over to the right, and they’ve got some big huge whale looking thing. It comes down the bait. It comes down to where you’re fishing, and how you’re fishing. Are you getting pulled behind a boat, or are you just casting from the shore? All these factors go into how much you fish, and also of course, how big a fish you can catch.

Crowdfunding is the same way. Everyone can crowdfund, some more so than others. You’ve got the guy over to the left and he’s 180% funded. He raised 180 bucks. He just wanted a few bucks just to do his little button and magnet sets. And then you’ve got the guys over to the right with the ten-year hoodie, who are marketing a hooded sweatshirt, and they raised over $1 million, and it’s due to a pre-launch. The money will always come after you connect and build your community, every single time. Without building and connecting with your community, you’re basically just trying to sell Amway to strangers on the street. I don’t have anything against network marketing, but I’m just using that for an example.

Let me prove this to you. I started a political movement with some friends a few years ago when the Tea Party first started. While I agreed with a lot of what the Tea Party was saying, I didn’t necessarily agree with some of their antics they were using to get their way. So we started a political movement, within a few months built this thing over 400,000 Facebook fans. The media took note, so we’ve been featured on Fox News and CNN. We were on the front page of the Washington Post, and a myriad of other blogs and A list press organizations. We had zero budget and were 100% volunteer driven. But we had something to say and we involved people. We allowed people to voice their political opinion. We encouraged discourse, we encouraged people to start discussing these different issues, and we had a plan on moving forward.

The most common mistake I see is when people say, ‘Hey, I’m going to set this campaign to 60 days, and that way that’ll give me maybe a month to figure it out.’ That is the absolute worst thing you can do – the absolute worst. Do not ever do that. The best thing that you can do is plan all the stuff out accordingly, ahead of time. Do a proper pre-launch, reach out to the right influencers, and then you’re executing the plan as you launch as opposed to trying to make it up on the fly. You don’t build a house without first getting a blueprint and getting a plan in place. You don’t start a company or do a crowdfunding campaign without doing the exact same steps.

Here’s what crowdfunding looks like. The first stage is the research and planning stage. This can be a week or two, just depending on how fast your team can move. Then you want to start building and refining. This isn’t a perfect process, you’re really just seeking feedback from the community. You’re involving your friends and family, you’re involving different influencers, and you’re having these people help you craft the message. Then when it comes time to launch, you turn on the PR engine, you fire up your social channels, and you  really start driving traffic back to either your Kickstarter campaign, your Indiegogo campaign, or whatever platform that you’re on. Keep in mind that a good campaign is only going to convert 4-5% of the traffic that comes through to the site. If you’re trying to get $100,000, do the math and figure out how many people you’re going to need to drive to that campaign in order to reach that mark.

Here’s one thing I always tell people. Don’t get overwhelmed with data. I’ve had clients come to me with notebooks and hard drives stuffed full of information that you’re going to have to try to sift through. Just take what’s useful in how it relates directly to your campaign. Just discard the rest. This is a condition that I call DRIP, and that’s data rich, information poor. It’s not about how much data you have, it’s how much information, actionable information, that you can glean from that as it directly relates to your business goals, and specifically your crowdfunding campaign.

Now on to building the team. Teams with four or more people raise 85% more money, and this is directly from Indiegogo themselves. Regarding the roles, you typically want someone to have the vision. This is usually the founder or the CEO or whoever’s driving the ship. You have an FTA (that’s your foot to ass – that’s a technical term). This is the person that really keeps the campaign on track. They make sure that everyone’s doing what they’re supposed to be doing. They’re assigning tasks, they’re following up with people, and making sure that everything is getting done. You need to have someone that can do research. You need to have someone to leverage social media correctly, and then you need to have a utility person. When I talk about social media, I’m not talking about your 16 year-old niece that’s on Facebook all the time. I’m talking about people that are actually going to look for influencers, connect with influencers, write compelling copy, those types of things. And the utility person, this is kind of a floater. This could be an intern, a volunteer, a part-time person, that’s just going to chip in where and if needed. And then the only other skills that you need is someone to shoot a video, and of course someone to write copy, like I said before.

That’s it. I hope that gives you a high level picture on how to take the risk out of crowdfunding. Definitely email me with any questions. We’re going to be doing a series of these, and we’re going to start creating some more of these based on your feedback. Definitely let us know how we can improve this. Leave your comments. We’d love to hear from you. I hope to hear from you soon.