October 2, 2013 - FILED UNDER Agile Business
Crowdfunding and Innovation Management
We all know the importance of continuous innovation, and around here we’ve been talking a lot about harnessing the power of the crowd to keep the idea machine running. Crowdsourcing is a great way to generate new ideas and solve tough problems, but it’s only a part of your innovation management process. With all of these ideas and solutions pouring in from the crowd, you’re eventually going to need to pony up some cash to execute on them.
Again, involving the crowd to secure funding can not only nab some dough, but it can be in integral piece of the puzzle that helps bolster your innovation process.
Engage Your Investors
The idea of crowdfunding isn’t just innovative, it’s downright punk rock. Raising money from a crowd of investors — that might get nothing more than a shout-out on Facebook for throwing in $10 — flies in the face of stodgy old banks and shakes off the chains of Wall Street investors, all of which expect you to “make a profit” and “pay them back.” Crowdfunding models do vary, of course. They may be donation, reward, or lending-based investments. And as of September 23rd, the US was able to follow in the UK’s footsteps and allow crowdfunding in exchange for equity. No matter what model you follow, crowdfunding has some advantages over traditional money-getting techniques.
Crowdfunding has strong roots in social media, and it includes some of the general structures of crowdsourcing. Cash is invested by a group of consumers for a return of some sort — whether it is actual money, public recognition, or first dibs on a new product or service. Small amounts of funds generally come from a large number of people in crowdfunding efforts, and that not only makes it easy for people to invest, it can generate a huge buzz for your business.
Think about it. You come up with an idea for the next big whiz-bang gadget, and instead of begging at the bank, you hit the crowd at Kickstarter. All the bank would do is check your credit and say yes or no. When you raise funds with the crowd, you’re essentially getting started on and advertising campaign before your first whozit rolls off the assembly line. As you work on getting people talking about your funding campaign, they are getting to know your company and your product. If you are really doing things right, your campaign gets a hold in social media and goes viral. You’re suddenly generating desire, directly engaging your future customer base, and making the money you need to get going at the same time. What more could you want?
Combine Crowdsourcing with Crowdfunding
Going about leveraging your crowdsourcing and innovation management efforts towards actual funding takes some careful consideration — after all, people are often much more likely to give you their brilliant ideas than their hard-earned cash. Here are a few important things to think about:
- Make sure your campaign aligns with your innovation management process. If you’re implementing innovation management into your company practices, you’ll need to consider how generating ideas correlates with generating cash. You don’t want the push for financials to trump the development of great ideas, which believe it or not, are sometimes harder to come by than money.
- Choose the right tools. There are several types of crowdfunding platforms out there, all with their own attitude and characteristics. Examine the types of campaigns that have been successful with each to determine whether or not your company will speak to the platform’s usual audience.
- Make a better first impression than anyone else. You only get one, right? Well, that means a lot — especially when you’re one of a million other companies asking strangers for money. Be succinct, clear, and transparent in your messaging. Using an eye-catching image or video doesn’t hurt, either.
- Tell the crowd how you plan to spend their money. It’s all about building trust when you’re in the ever-vulnerable position of asking for funds. As reluctant as the average investor is to back a project, they’ll be doubly so if they think there’s anything shady going on.
Have some crowdfunding tips for us? Share them in the comments.