You’re not going to kickstart your startup
Joshua Davidson wrote this article
We’re huge fans of metrics. We try to collect as much data as we possibly can, on whatever we can. We pretend that we are the Billy Beane of startups (we’re not… but there’s no harm in pretending).
I know that some individuals are not huge advocates of this mindset. They only want you to collect data on what you can make sense of. What I’ve learned though, is that over time, data that has no value for you today, becomes useful not only overnight, but easily shows correlations to things that you couldn’t have even imagined. I would rather have more than enough data, than not enough.
So why am I bringing up data when talking about crowdfunding? As of the date that I am writing this blog post, a little over 782 different entrepreneurs/startups this year have reached out to us at Chop Dawg looking for us to provide them with assistance (we’re truly blessed to have received so many applications). Out of this number, 319 have informed us, right off the bat, that they would be looking to secure funding to work with us through crowdfunding on a website such as Kickstarter and Indiegogo. Do you know how many of these companies ended up working with us — even the ones who told us that they are dead-set in using us? The answer is so simple; I wouldn’t even need any of our collected metrics to tell you.
The answer is 0.
Little over 40% of those who reach out to us at Chop Dawg have expressed interest in using this method to raise funding, but have had no success rate. Meanwhile, those we do have the privilege to work with, are self-funded (bootstrapped), have raised angel rounds, secured funding through friends/family, found a partner (or partners) to split the financial burden, went out there and figured out a way to pay the bills. So why is it that crowdfunding, a method that the majority of individuals that reach out to us want to use, has little to no success rate?
I want to start this off by saying that I actually love the concept behind crowdfunding from an entrepreneurial point of view (seriously, who does not love raising money without giving up equity or adding additional individuals with voting power to your team without you carefully hand-picking them) — but it is a flawed concept that you should not bank on as an entrepreneur (or inspiring entrepreneur).
Crowdfunding became popular roughly two/three years ago. I know that Kickstarter was founded back in 2009, but just like any startup, it took time to grow. In fact, Fast Company did an article about Kickstarter and how it has remained true to its roots. They created an entire new business model, an entire new platform for entrepreneurs (and those with great ideas) to have a medium to raise funding. Less risk than ever before. You don’t have to give up an ounce of your equity. You do not have a board to tell how your progress (or lack of progress) is coming.
The media quickly fell in love with it. Who doesn’t love a great underdog story? When these small, scrappy ideas start raising thousands of dollars, reaching 800% or more of their goals, you’re going to get attention. Quality is there, sure…. but with the attention, the hype, the newness, the quantity quickly follows. The noise rapidly adds up.
For every success story, thousands fail. This is even truer for crowdfunding. Success creates imitations, trying to replicate the same success. Ideas flood the market. Crowdfunding is hard. Getting attention, trying to win people over. It also does not help when something like a potato salad is now second on Google’s search results for a Kickstarter page because it raised over $55,492.00. It is a flooded, over-hyped, saturated market. You’re trying to stand out in the crowd by using Kickstarter? Good luck.
Crowdfunding offers a false sense of security. You aren’t risking rejection by getting your idea out there, pitching to investors, to your friends and family, finding a colleague, a partner to share the risk with you and make something become a reality with your own hard-earned money. Ever heard of the term put your money where your mouth is? If your crowdfunding campaign fails, everyone is quick to blame that it was a crowded category on Kickstarter, that they didn’t get it taking off on social media, that people just ‘did not get it’. We hear all of the (many) excuses. This is false. Sometimes you have a great idea. You just didn’t believe in it enough to go with something that had more of a risk, more of a reward.
The biggest issue though, in full honesty, is that most of these individuals are heading onto these crowdfunding websites without anything concrete to show. Who wants to invest in someone who doesn’t have any wireframes, high fidelity designs, branding, prototypes or minimal viable product to display? Someone who hasn’t put a single dollar down on his or her idea that they are suppose to truly believe in — but asking you to put down your hard-earned dollar. You’re being asked to trust an entrepreneur, who is asking for your money to make their idea happen, without giving you any equity, nor any of the reward if it takes off — and with no proof of concept. That is rough. If you were an investor, would you jump on this? Not going to happen.
Metrics tell us the story when our eyes and our ears cannot connect the dots. In this situation, metrics, our eyes, and our ears are all on the same page. Crowdfunding a new startup is possible, but it is a fool’s game. Take the true path. Create a pitch deck. Get your hands dirty. Fund yourself a prototype, create an early concept of your app. Get in front of your friends, your family, your colleagues. Face rejections. Be a real entrepreneur. The numbers are more on your side and above all — you have full control of your destiny.