MarketingSherpa Blog

The hardest part of getting any endeavor off the ground is to secure funding. Traditionally, in order to gain enough funding for a project, entrepreneurs had to go to banks or find funding through willing investors.

Today, entrepreneurs can achieve funding through a variety of ways including friends and family, angel investors or venture capitalists, but none of them are as interesting as the crowdfunding phenomenon that has surged into legitimacy in the past decade.

Crowdfunding might be an activity for startup companies raising funds, but marketers can learn a lot from the crowdfunding process, from the importance of the pitch to creating effective video marketing content – in this case, the startups are marketing themselves to potential investors.

How does crowdfunding work?

In crowdfunding, the entrepreneur solicits donations from the public either in person at events like Jacksonville’s One Spark Festival, or by using a variety of online websites like Kickstarter or Indiegogo.

Crowdfunding is unique because it allows the entrepreneur to pitch their product while simultaneously perform a focus group dedicated to their product with very little risk. The more people who invest in a campaign, the higher the interest there will be in the final product.

There has been a lot written about crowdfunding campaigns. You can find, in my opinion, one of the best blogs written by Tim Ferriss of The Four-Hour Work Week fame on how to raise $100,000 in 10 days.

My focus in this blog will be to explain how to craft the most important part of a crowdfunding campaign: the pitch.

Pitching a crowdfunding project

The pitch is generally a 3-5 minute video explaining to your potential investors who you are, what you are trying to accomplish, how much money it would take to reach your goal, why you need that specific amount, and what’s in it for them.

Depending on your budget, your video could be professionally made or shot with a simple camera phone. What matters most is your content:

“The strength of your video pitch often determines how likely you are to meet your crowdfunding goal.”

– The Bank to the Future

The pitch can be broken down into three sections: The hook, the core and the bribe.

Step #1. The hook

According to the Bank to the Future’s useful video on crafting a pitch, the first 8-16 seconds of your video should be used to capture your potential investor’s interest.

In those seconds, it’s important to introduce them to the purpose of your video and to tell them visually or verbally what they are going to get out of watching it. If you have a prototype, show it in action. If you don’t, state your value proposition.

To craft your value proposition, ask yourself the following question; “If I am your ideal investor, why should I help you reach your crowdfunding goal?”

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“Every time a person says ‘yes,’ they are saying ‘no’ 10,000 times. One ‘yes’ equals many ‘no’s.’ The power of ‘yes’ is not in its affirmation but in its negation.”

– Flint McGlaughlin

Leading a new business to achieve a sustainable competitive advantage is not easy. It often involves difficult choices and a certain level of courage. But for the startup, it isn’t solely the courage to say “yes” that enables it to thrive; rather it’s the courage to say “no.”

Recently, I had the privilege of spending some time with a young startup company and working with them on their value proposition. Like many startups, this group had done well without any formal process of identifying a value proposition.

They had a group of founders, who, like many, built a unique product to solve a problem for a particular group of people. Intuitively, they had launched with a successful value proposition.

When competitive advantage is challenged

However, times had changed for this group. They used to be the first in their space, but now their market was crowded, and their customers had many similar competing products to choose from.

During the course of our conversation, I could feel the pressure the leaders of this company were up against, which stemmed from the worry about maintaining their strategic competitive advantage.

The temptation was to attempt to be everything their (new) competitors had become — in some sense, to be all things to all people. This is a common pressure, but it is often this precise pressure that causes many organizations to “acquire” their way right out of a good value proposition.

The most forceful value propositions are not those that try to do many things well, but rather those that try to do one thing really well.

Focus is one of the most essential components of a strong value proposition. Unfortunately, focus is often one of the hardest things to find in a business. Focus requires courage, especially the courage to say “no.” Learning to say that two-letter word was precisely the kind of negating focus this startup needed to answer three essential questions:

Question #1. How will you not serve?

A business cannot be all things to all people without diluting the power of its value proposition. By its nature, a specific value proposition must appeal to a particular prospect type. This can be counterintuitive, but knowing who your customers are necessitates knowing who your customers are not. Recognizing this distinction is essential.

The startup I mentioned above had created the most respectable and trusted cloud-based email distribution service. Because of their intense focus on accepting only those clients who send reputable emails, they had the highest deliverability rates, a serious evaluation process and strict guidelines. But ultimately, they had to make the difficult choice to turn away potential customers in order to preserve the value proposition that served their true customers.

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