When Ian Gaffney and Samantha Abrams were looking to expand their upstate New York organic, raw, and vegan snack food company, they turned to an unlikely source for business advice: Gaffney's brother's rock band.
The band, the Makepeace Brothers, had just successfully paid for the recording of their latest album using IndieGoGo, the crowdfunding site that lets users raise money for projects—and that means anything from a rock album to an art projects to cancer research. Gaffney said the site, which now manages 22,000 campaigns across 159 countries, was a good fit for their small company, Emmy's Organics.
"We were kind of like, 'Wow, we have this big project we want to take on, we don't have the cash flow to do it.' We thought we would give this IndieGoGo a shot," he says.
Within a month, the campaign raised more than its $15,000 goal, giving Emmy's the capital to redesign its logo, create new packaging, and launch new branding.
IndieGoGo is attracting more and more entrepreneurs for its rate structure, which charges only 4 percent for successful campaign, while rival Kickstarter charges 5 percent. And unlike Kickstarter, users get to keep most of the money raised even if they don't reach the goal (with a 9 percent charge for unsuccessful campaigns).
Here's how to best use the service to fund your big innovation—and how to create a built-in fan base you can't get with traditional venture capital funding.
Using IndieGoGo to Fund Your Innovation: Be Strategic
Picking the appropriate length of time and monetary goal for your campaign is trickier and more scientific than most people think, founder and CEO Slava Rubin says. The key is to be pragmatic.
"No goal is too small, no goal is too big. It's whatever is realistic," he says.
The deadline for the fundraising has to be set for between one and 120 days, but, for whatever reason, the site sees the best results at campaigns that are about 60 or 70 days long, he says.
"You should be doing a campaign that you can be active for during the entire duration of the campaign," he says. "If you have lag time or down time in campaign, you will actually have negative results."
Emmy's was able to reach its goal quickly by focusing its campaign to just 30 days, and by being clear about exactly what the money would be used for, Gaffney says.
Barry Beagen, project director and leader of the Cornell team using IndieGoGo to fund construction of a school in South Africa, found worldwide supporters through the site. But Beagen recommends breaking your project up into smaller goals if you're unsure you will be able to fund the entire thing.
Dig Deeper: 6 Cool Crowdsourcing Business Tools
Using IndieGoGo to Fund Your Innovation: Make a Good Video Pitch
When you're trying to sell people on your project, IndieGoGo can be a little like Internet dating, says Sally Hodgson, a producer who used the site for several projects including getting the film Sound It Out to SXSW this year.
"Once you put a face to a project, it gives people reassurance that there's somebody behind this that has the passion and the energy to make it," she says. "If you were going to go on an online dating site and didn't put a photo up, no one's going to contact you."
There's evidence to back that up: Rubin says campaigns with a video component raise 122 percent more money. The best videos are personal, tell a story, and explain why the money is needed and what you plan to do with the funds, he says. It should be more than just an ad or a trailer.
"People want to see you having fun with whatever you're manifesting," Gaffney says. "People want to be inspired by it."
You should also the site's Vimeo tools to tweak and update the video throughout the campaign. Brian Lamb, co-founder of Satarii, makers of the Star Accessory, a product that makes mobile cameras follow your every move, found this helpful when the project started to get press and other technical details changed.
"We were able to evolve our marketing materials essentially live as we progressed," he says.
Dig Deeper: How to Pitch Your Business to Friends and Family
How to Use IndieGoGo to fund your Innovation: Choose Good Perks
Your fans are giving to you—and it's expected for you to give something back. Rewards for donating are extremely common among successful Kickstarter and IndieGoGo projects.
But you might not want to offer anything of great monetary value that will eat into your fundraising success. The best perks are something intimate to the project, and often something that doesn't have a dollar value at all. Hodgson's film offered people who donated at the $150 level the chance to meet the record store owner who was the subject of the film.
"It's really personal and it gives another level of involvement for people," she says.
Rubin says popular perks include backstage passes, personalized notes, or unreleased products.
"Not your run-of-the-mill thing you can buy on the shelf anyway," he says.
Satarii even used the perks to further its research: Some contributors got to test prototypes of the Star Accessory.
"The most valuable thing for us is to build a community of followers to start to extract market data," co-founder Vlad Tetelbaum says.
Dig Deeper: How to Start a Customer Rewards Program
Using IndieGoGo to Fund Your Innovation: Spread the Word
Once you've got your campaign page set up, now you need to make sure the world knows about it. IndieGoGo makes it easy to share the campaigns via Twitter and Facebook, in addition to providing a widget so followers can post it on their own blogs.
The site uses a custom algorithm to determine the "GoGo Factor," which helps decide which campaigns get promoted on the homepage, on the site's blog, or in media mentions. The factor takes into account funding, comments, shares and other campaign activity.
"Everybody has equal opportunity," Rubin says. "Not everybody has equal results. The more they earn it the more they earn from IndieGoGo."
The site's metrics and analytic tools let you keep track of where your traffic is coming from and how much traction the campaign is getting.
"It's so easily viral," Beagen says.
Veterans of the site say the key to building momentum is to start by raising money from your inner circle: friends, family, coworkers, and other early supporters. Rubin says about 30 to 40 percent of funding comes from a project's inner circle before "stranger" money comes in.
Tetelbaum says that, after being turned down by venture capital firm after venture capital firm, the first thing they did with their IndieGoGo campaign was appeal to their families for support over the holidays. The families responded with several thousand dollars in pledges.
"It's hard to get someone who doesn't know you to use campaign," he says. "We spent a bunch of time with friends and family to basically build that support."
Dig Deeper: 5 Secrets of Highly Effective Twitter Users
Using IndieGoGo to Fund Your Innovation: Stay in Touch
The other benefit of crowd funding your project through the site is that it creates an automatic built-in fan base. But you have to keep the audience engaged first.
Hodgson did this by sending supporters thank you notes, asking them about their record store experiences, and encouraging them to share information with other supporters.
"They're a little community in themselves. If they want to connect with each other they can," she says. "I think it's really vital that you don't just accept their donation and leave them floating in the ether."
You should be providing regular updates about the project, and filling the supporters in on any major developments or changes, Rubin says. That makes your backers feel like they're more intimately involved, and makes them more likely to spread the word. Campaigns that send out 13 or more updates are able to raise 60 percent more than those that just update five times, Rubin says.
"You can't just create a campaign and walk away," he says. "Whatever it is, it's a way to communicate with your campaign funders. It's a way to keep it fresh."
Dig Deeper: How to Make the Most of Customer Feedback