12 Things You Need To Know About Crowdfunding
I recently had the pleasure of speaking to Salaams M. Salami formerly of PieShell. PieShell was a crowdfunding site dedicated to food and beverage startups. The platform, founded by Cheryl Clements “empowers food and beverage entrepreneurs to bring new ideas to life.” A variety of questions have poured in asking about crowdfunding and what it’s all about. So I decided to address these questions all at once in this blog.
Below are 10 things you need to know about Crowdfunding. If you have questions you would like answered post it in the comments. The responses to the questions were provided by the Community Growth and Support Manager, of PieShell, Salaams M.
Is crowdfunding really legal?
Do I have to be a legal entity to post and raise funds?
You can be an individual, business, nonprofit, etc. Again, each site is different. This is what’s true for PieShell.
Do platforms charge upfront fees in addition to the success fee on funds raised? How do crowdfunding platforms get paid?
No upfront fees on PieShell. We take a percent of the amount raised. Our platform fee is 5%.
Can I run a campaign simultaneously on more than one crowdfunding platform?
Every platform is different but we do not allow this, mainly because it will seriously impact your success. Driving traffic to one campaign is hard enough. Having two up at the same time will split your audience, impact your fundraising and momentum.
As a food entrepreneur, what do I need to know about crowdfunding? How can it help my little business?
Lots of things! Fundraising, of course, but more importantly, it’s a great tool to build brand awareness, reach new customers, get market feedback, proof of concept (this helps with getting larger investment dollars down the line), and build a strong community. People who contribute to crowdfunding projects become huge supporters of the brand, i.e., brand ambassadors – which means they go out and talk about you to everyone they know. It’s incredibly valuable.
What is the difference between product crowdfunding and equity crowdfunding?
PieShell is a rewards-based crowdfunding site which means you offer gifts in return for contributions. You don’t pay the money back – it’s yours. Equity is a way to raise funds by giving away shares of your company – people become investors rather than contributors.
There are a lot of crowdfunding organizations out there. What makes PieShell different?
We’ve baked the crowdfunding best practices into our platform. We’re not an open site – this means we don’t let just anybody launch with us. If someone is approved for launch that means they’ve followed our guidelines and are ready to crowdfund, which means their odds of success are much higher than on any other platform. To go live with us you must raise 25% of your goal amount from your own audience. So far, everyone who has accomplished this has hit their goal. We have a 100% success rate! In addition, we have been developing our audience for 2+ years. The folks in our network are people who are interested in learning about the latest food innovations – new products, businesses, and ideas. They are consumers and they are also VCs and Angel Investors. We regularly get investors asking about the projects launching with us and are happy to make those introductions.
Are there different types of crowdfunding? If so, what are they? How do I know what’s best for me?
We only have 1 type of crowdfunding on PieShell – the “all or nothing” model, which means you have to hit your goal to get your funds. Indiegogo offers “flexible funding” which means you do not have to hit your goal to get funded.
What is equity crowdfunding? Is this something my business might need? How would I know?
If you are trying to grow into a large brand and need large investment money equity could be the right direction for you. Investors will expect your business to scale rapidly so they make a profit. If you are a hobbyist or don’t plan to scale nationally or beyond this may not be the best option for you.
Who would help me run a successful crowdfunding campaign? How does that work?
We offer a host of resources to help people learn how to crowdfund correctly. They are right on our website. We also offer biweekly webinars to help people learn the details as well. I do not recommend working with agencies or consultants. There are a lot of crooks out there. Do your research if you choose to work with someone. Ask them for SEVERAL referrals, and CHECK THEIR REFERRALS. A lot of people claim to be crowdfunding experts but they are only out for your money and don’t know what the hell they’re talking about. My suggestion is to spend a little extra time and attend one of my webinars where you can get tried and true strategy advice for free.
What are some things I need to know before starting a crowdfunding campaign?
I suggest attending one of our webinars or checking into our resources. The main thing I’d say is you need to spend time cultivating a community in order for crowdfunding to work. And you need to have gifts that people want. It’s not something you can do part-time. Crowdfunding is a lot of work and you need to take it seriously to succeed. It’s easy to think that crowdfunding is a super simple way to make money. When you see 6 and 7 figure campaigns popping up, it seems simple. It isn’t simple. All of those campaigns are doing a ton of work and investing a lot of dollars to make that happen. Also, food is a special category. Margins are thin – it’s not easy to raise huge dollars like hardware campaigns can. So keep your expectations in check. Average raises are between 3k-25k for food campaigns. They can be higher of course but those are usually companies that have a big social impact component or are investing large marketing dollars.
What happens if my crowdfunding campaign doesn’t earn what I need?
On PieShell, if you do not hit your goal, we refund everyone and you are not charged.
I want to give a gracious Thank You to Salaams M. for sharing their Crowdfunding knowledge and wisdom!
If you have questions about crowdfunding or launching a crowdfunding campaign contact PIeShell today!