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How not to launch a crowdfunding campaign
It's not often that you'll find us writing about The Apprentice.
It's even more unlikely given how poor the standard of candidates seems to be five weeks in to this year's series. In Week Two, for instance, Lord Sugar brought three contestants from both teams back into the boardroom such was the standard of the two textile advertising campaigns on show.
This week, however, we couldn't resist after the two teams were set the challenge of launching a crowdfunding page to attract investment for their chosen cycling products, and it's fair to say they didn't quite make the impression they had hoped for.
Here we look at five lessons we inadvertently learned about how not to launch a crowdfunding campaign last night.
Warning: This article contains spoilers!
Why crowdfunding?
Lord Sugar made the point that not every business is fortunate enough to be given a £250,000 investment from such a well-known business magnate to get off the ground. Sourcing funding for a new idea can be extremely difficult, but the rise of crowdfunding in recent years has provided a superb opportunity for many.
By pitching a business idea on designated crowdfunding websites, the public and investors can pledge as much as they want in return for equity or an incentive, providing much-needed capital in the early stages.
It's proving to be an excellent tool especially for those who are unable to source funding through traditional routes, without the experience, track record or assets behind them.
Read more about how crowdfunding works here.
What were they promoting?
Both teams were introduced to three entrepreneurs who had developed new cycling products. The first was a trendy gilet with lights as an alternative to cyclists who prefer not to wear reflective clothing; the second a range of handlebar decorations for children to add to their bikes and scooters; the third headphones designed for cyclists so that they can hear traffic as well as their music.
Nebula, led by JD, opted for the headphones, while Titans, with Samuel in charge, chose the gilet.
Lesson #1: Know how to spell your product
Titans didn't get off to a great start when one of the team, Trishna, pointed out the word 'gilet' had been misspelt in the otherwise impressive promotional video produced by Alana, Dillon and Karthik. Trishna said it should be spelt 'gillet' – but don't fear, they would put it right on the crowdfunding page.
Except, of course, she was wrong and no-one else in the team knew otherwise, until Claude later pointed out it was actually slang for a loose woman, much to their embarrassment.
It's not just the spelling that's important to get right when setting up a crowdfunding campaign. Make sure you have all the details accurate before launching it, as any errors can be costly.
Lesson #2: Incentivise well… and be clear
Nebula, meanwhile, weren't doing much better. During their initial conversation with the entrepreneur whose headphones they would be promoting, they failed to confirm the incentive that could be offered to anyone who pledged which, as it turned out, could have been a deal-clincher.
Upon confirming the incentive on the day of the launch – a belt which would be given to anyone who pledged £5 – they were able to finalise the page and launch it. The problem was they didn't sell in the benefit of the belt enough, which actually retails for £14.99. This could have made things even more appealing to people who found the page.
When crowdfunding it is important to make clear the benefits of doing so. While some will pledge money because they like the product, incentives such as this belt, a discount on the final product or the equity their investment will secure can make all the difference.
Lesson #3: Launch your page on time
The result of the delay caused by deciding on the incentive pushed the launch of the crowdfunding page back considerably, so much so that JD was unable to commence the social campaign until long after Titans had begun theirs.
Not much was made of this later on in the boardroom, however that extra time could have helped prevent the failure of the task.
When launching a crowdfunding campaign, ensure that everything is ready to go when planned and try to tie it in with an event, whether it's a PR stunt or a news event that's relevant to your product.
Lesson #4: Capture people's attention
Speaking of PR stunts, the two teams had to do one of their own to grab people's attention and help publicise the crowdfunding page. Yet both teams produced terrible ideas which got worse and worse as the episode progressed.
While Nebula organised for a gospel choir to sing about the headphones outside Kings Cross St Pancras, Titans descended on Waterloo where the actors they hired acted out a cyclist being knocked off their bike. Project manager Samuel was very proud of it, but it generated very little interest and failed to promote the product itself.
There are so many ways to drum up interest in a crowdfunding page, and PR stunts can be effective. But don't do one for the sake of it. Spend time planning it, choose the right location and put the product at the centre of what you do.
Lesson #5: Know your audience
The final part of the task saw the two teams pitch their products to retailers in the cycling market. However, it appeared that little thought had been put into understanding who was present and tailoring the pitch to them.
Nebula's pitch, with project manager JD leading, began with a long introduction about the growing cycling market – to people who are already in the market because of it. Titans, meanwhile, failed to get their pricing structure right, offering a 40% discount to both large and small retailers, meaning there was no cost benefit to purchasing 180 units as opposed to 12.
As is the rule for any business, it's absolutely vital to know your market and who will be buying your product, what their motivations are and what makes this product stand out from the rest.
Marketing is commonly summed up as the four P's – product, price, promotion and place – and this is so important when it comes to crowdfunding.
For more information about how to secure funding for your business idea or start-up, please contact our team on 0800 9774833 or email info@hiltonbaird.co.uk, or visit our page that's dedicated to start-up finance.
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