Panel: Data is key to crowd funding success
Crowd funding isn’t really about raising money. It’s about gathering data and contact information whose long-term value far outweighs the one-time cash that comes in.
A group of crowd funding experts hammered that point home at an Oct. 20 event hosted by the Central Coast MIT Enterprise Forum at UC Santa Barbara. Crowd funding, in which customers pay money up front to help fund a company and receive products and perks in return, tends to appeal to so-called early adopters. Managed well, those customers can turn into walking billboards for a young company’s product, sharing it both online and offline with their social networks and helping the word spread.
Adam Chapnick, chief “evangelist” at crowd funding heavyweight Indiegogo, told the crowd that the data and analytics about what consumers like or don’t like about a product can have more value than the money itself. Even if a campaign fails, the data remains, helping companies refine for another try. Staking the company or product’s future on the money raised, on the other hand, is not a great idea. “No one here can tell you what you’ll raise,” Chapnick said. “It’d be crazy, in my opinion, to hang everything on a number you can’t control.”
Chapnick also gave some tactical tips: $25 price points are the most popular, but $100 price points are where the most money is raised. The more people involved in the campaign and the more links, the more legitimate it looks. And, somewhat surprisingly, companies that send out 31 to 50 email updates during a campaign do better than those that update rarely. “That seems too much, but in fact it’s not,” Chapnick said.
Christian Smith, co-founder of the Santa Barbara startup Phone Halo, told the story of how his company used crowd funding to raise hundreds of thousands of dollars and jumpstart an already successful business. In 2009, the company had designed a gadget that helped users keep track of their keys and phone via Bluetooth connections. After success at the Consumer Electronics Show in Las Vegas, the company inked a deal with a major distributor. It was a success, but a slow one. “We realized that we weren’t going to be able to scale the company as fast as we wanted to,” Smith said.
So it turned to crowd funding, where it could dream up products every few months and test the waters until it found a hit. The first campaign was glitzy and produced, but the video flopped. “The video we did with zero dollars was a success,” Smith said. “It turned out that it converted [to sales] much better. It’s all about the content.”
Alon Goren, the Thousand Oaks entrepreneur who founded Invested.in, a software platform that lets customers make their own customer crowd funding campaigns within their own websites, gave tips on building momentum. Rule No. 1: “Never, ever share a campaign with a zero on it,” he said. Conscript friends and family to seed the field. He also emphasized constant contact. “The people who raise the most money are the people who keep in touch,” Goren said.
Former Make magazine editor Paul Spinrad, who was critical in persuading the White House to push the JOBS Act, which aims to open up equity crowd funding to the masses, gave an overview of where the law stands. Securities regulators are still mulling the exact requirements for equity crowd funding, though it’s already clear that there will be a lot of paperwork. Spinrad is hopeful that a TurboTax-like program will emerge to guide companies through that process.
In the meantime, he said he believes that most equity crowd funding will eventually be done in person, even if facilitated by online tools. “Ultimately, when you’re raising money, you need to trust someone. Trusting someone online is really difficult,” Spinrad said. “All of these ideas are converging on a local marketplace. Being in person is the highest bandwidth connection we have.”