Competing in a Crowded Market
Words by Julia Eskins
As crowdfunding in Canada transitions from novelty to mainstream, businesses beyond startups are reaching for a piece of the community pie. With marketing being a key differentiator, entrepreneurs must now raise the bar in order to raise capital. But is there really a special recipe for campaign success?
The honeymoon phase is over. The days of simply launching a project on Kickstarter and watching the money roll in are long gone. But were they ever here to begin with? This misconception has seemingly led to everyone and their grandmother launching a campaign in hopes of their project becoming the next Pebble Watch.
As the reward-based model continues to soar in popularity and the equity-based model quickly picks up steam in Canada, it’s clear that crowdfunding is now being accepted as an alternative form of financing. But that doesn’t make it any easier for campaigns to succeed.
The reality is that garnering capital, let alone attention, for a product or service that doesn’t exist yet is incredibly challenging. Along with a brilliant and feasible idea, you’ll need a comprehensive marketing strategy that goes beyond a simple Facebook share and a few tweets.
This was a lesson that Mike Lovas, chief design officer and co-founder of Push Strength, quickly learned while launching his app-enabled wearable fitness device designed to track your strength and progress while weight training. “Marketing is a massively underappreciated aspect of launching a crowdfunding campaign,” says Lovas. “Having a site alone does very little to drive traffic, so a big part of it is growing a community beforehand. We did a lot of social media, built up a fan base and became thought leaders in the field by writing blog posts, reaching out to big names in the science world and engaging potential customers.”
The idea for Push was born after Lovas’ business partner, co-founder Rami
Alhamad, blew out his knee while squatting at the gym. Being an engineer, Alhamad was interested in understanding the metrics behind his workout but soon realized that existing strength tracking devices were expensive, stationary and often only accessible to professional athletes at designated testing facilities. So, he built his own.
With usability being a key factor, the Push band streams data onto the athlete’s smartphone or into the coach’s computer so that he or she can see the trends and make live updates to their training program, says Lovas.
Following early interest from angel investors, the company launched an Indiegogo campaign in 2013 to gain traction, create a focal point for their marketing campaign and raise capital – $133,951 to be exact. Fast-forward to 2014 and the company has attracted interest from athletes at the NFL and NHL level. Most recently, Lovas’ team created their largest install yet at the University of Toronto’s stadium for the Pan Am Games, where varsity athletes can use the device and tablets to optimize their training.
To avoid ending up in the graveyard of failed campaigns, entrepreneurs have to embed themselves, and more importantly their brand, into the field they’re trying to sell in and become a respected member of that community, says Lovas.
The clincher for Push was having Joel Jamieson, a influential figure in the strength training world, share their website with his followers. This sparked the launch of a beta program, which immediately drew interest from professional sports teams and gyms. “Within hours, we had thousands of people flocking to our site and asking to buy our product, and that was well before we even had a product.”
While proper planning can ensure delivery, it’s often the lack of a tangible product or service that has crowd financing critics questioning the legitimacy of the reward-based model.
The story of companies failing to deliver after running into a technology snag or underestimating extra costs is a common tale, says Daryl Hatton, CEO of FundRazr, a Canadian crowdfunding site and Facebook app. “One of the major reasons this happens is that the group running the campaign didn’t ask for enough money up front. The projects are often done by first-time
entrepreneurs and they don’t really understand what it will take to get their product or service to market,” says Hatton.
This can be a huge momentum killer as the company’s best advocates, who were once promoting the product on social media channels, begin criticizing the business and asking for refunds. To combat this, it’s crucial that campaigners help their customers understand that they are investing in an idea and sharing in the risk in order to get something exciting built.
“If people just shop using Kickstarter or Indiegogo for new tech products, they’re likely to be pretty disappointed,” says Hatton. “What happens if it doesn’t ship? You have to be willing to take the risk in exchange for getting early access to some of the hottest things out there.” The evolution of crowdfunding is two fold, says Hatton. It’s increasingly becoming a
test-marketing tool for existing companies, and campaigns are becoming less about the portal they’re hosted on and more about the brands themselves. “A lot of people are very proud that they run their project on Kickstarter, which is great for Kickstarter in that everyone is always talking about ‘Kickstarter,
Kickstarter, Kickstarter’ but you should be getting everyone talking about ‘Pebble Watch, Pebble Watch, Pebble Watch,’” says Hatton. “Once your project is over, you can’t acquire new customers without having to shift all of that traffic over to your own website.
It’s these very trends and concerns that have led to the launch of the first Canadian Crowdfunding Summit, which will be hitting Toronto’s MaRS centre on March 3, 2015. With Canada’s new proposed crowdfunding regulations expected to be released in the first quarter of next year, the event is coming at the right time. “Crowdfunding is a lot better than it was two years ago in terms of awareness,” says Craig Asano, founder and executive director of the National Crowdfunding Association of Canada. “Instead of ‘What is crowdfunding?’ the questions have turned into, ‘Is crowdfunding right for me now and how do I leverage this new financial tool?’”
While Asano notes that it may be possible to go from zero to 100 and launch a successful campaign is less than one month, it is highly unlikely and many should expect anywhere from one to three months of pre-planning. “You’re average campaigns are running two months, but the data is showing that the
longer you run these campaigns, the lower your success rate. Interestingly, a lot of that is attributed to the fact that the process is so intensive that people get exhausted after 30 to 45 days,” he says.
For the best outcome, pre-plan your outreach content and determine your value proposition is before going live, says Asano. Of course, researching some of the tricks of the trade, such as driving 20 to 30 per cent of your own internal net worth into your campaign, doesn’t hurt either. As the Ontario Securities Commission’s new capital raising exemptions hang in the
balance, the summit aims to take interested companies through the whole process, including what you can legally raise through equity crowdfunding in Canada. “Once the regulations are announced, I think the industry will boom. It becomes very real – it’s no longer just a discussion,” says Asano.
“There will be opportunities for accountants and lawyers to work with companies who are interested in raising equity financing or perhaps going through one of the peer-to-peer channels.”
Until then, Asano’s inbox is being inundated with recent university graduates asking how they can become crowdfunding consultants. To this, we say: take a number.
