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The Dark Side of Crowdfunding: Why Campaigns Fail

  • October 29, 2021
  • 7 min read

There’s a harsh reality that the crowdfunding world has come to accept: as many as 85% of campaigns fail. Long gone are the days when a campaign launched only to immediately go viral with little promotional effort. 

But it’s not all doom and gloom! With strategic planning, execution, and hands-on management, successful campaigns are absolutely attainable for even the smallest startup. We’re here to teach you which pitfalls to avoid on your way to crowdfunding success.

💀 Why campaigns fail

👻 What kind of campaigns are least likely to reach their funding goals

🎃 What you can do to ensure your campaign’s best chance for survival

Crowdfunding campaigns are intense for everyone involved. They start with a heartfelt mission and steadfast belief that with enough capital, your idea can change the world. In the weeks leading up to your campaign going live, you put your blood, sweat, and tears into creating the perfect page, flexing your social capital, and doing everything you can to ensure your campaign’s success.

Then comes the launch. You probably obsessively check your page to track the investors that you hope will come pouring in. Sometimes, they do and it’s exciting! But more often, they don’t. The clock ticks down and, in the final moments, you fail to reach your goal.

A failed campaign you hung your hopes on is devastating and disheartening. But the honest truth is, failed campaigns are the reality for most people who launch.

At Arora Project, we’ve experienced these highs and lows alongside our campaign partners, and we’ve become experts in detecting the signs of what makes a successful campaign—and the key indicators of campaigns that have a higher chance of failure.

Here are 5 of the most common red flags we’ve seen over the years. 

Warning Sign #1: You’re Not Being Realistic

There’s a pervasive misconception that crowdfunding campaigns are as easy as launching a page, tweeting about it, and raking in cash. Let us be clear: they are not at all easy. Campaigns require unwavering focus, continual untapped creativity, and a one-track mind for hitting your goal—for weeks or even months at a time. 

Before you even consider a launch, you’ll need to research how campaigns similar to yours have succeeded or failed. Consider how much money you want to raise in total, and how much you need to raise for your campaign to be a success. 

Then ask yourself the following questions, and be honest with the answers:

  • What will happen if your campaign isn’t successful? 
  • Will you relaunch at a later time? 
  • How will your strategy be different, and should those strategies be implemented for this raise?
  • Is your goal realistic? 
  • Does your product or service solve a problem or provide value to potential investors that you can leverage? 
  • Do you actually have the traction to justify your raise goal? 

Warning Sign #2: You’re Not Using Your Social Capital

While it’s not necessary to have a robust social media following and devoted fanbase before launching your campaign, it definitely helps. 

But if you haven’t yet built your social media presence, that doesn’t mean your campaign is dead in the water! It just means you’ll need to work harder on promotions. 

Start with your family and immediate social circle. Ask for opinions. Find out if your campaign is compelling enough for them to consider investing. If they say yes, awesome! You’re headed in the right direction. If not, don’t panic! Assuming you’ve given yourself a realistic timeline pre-launch, there is plenty of time to re-tool your campaign.

From there, branch out into your extended professional  network to do the same research. Leverage your connections. Don’t be afraid to ask for investments—many campaigns get a huge pre-launch boost from friends and family that aids their success.

In the meantime, start posting consistent content on social media to build your fanbase. You’d be surprised how quickly an Instagram or Facebook following can grow with dedicated effort!

Warning Sign #3: Your Campaign Page Isn’t Clear Enough

For every crowdfunding campaign that gets launched, there are thousands of other campaigns gunning for the same investors and capital. 

The best campaigns are those that can sum up their offering in a concise, eye-catching way. In fact, the most successful campaigns are less than 500 words on average, and rely on a combination of video, graphic, and written content.

Here are some questions you’ll want potential investors to be able to answer clearly as they’re reading your campaign page: 

  • What problem does your product or service solve? 
  • What is your unique selling proposition? 
  • Why should an investor choose you over your competition? 

Warning Sign #4: You’re Not Communicating With Your Audience

We can’t stress this enough: communicating with investors and potential investors throughout your campaign is absolutely critical for a successful raise. 

Campaigns with regular investor updates actually raise 105% more than campaigns without, which could be the difference between reaching your goal and not. On average, successful campaigns post updates between 4-12 times over the course of the raise.

These updates can be literally anything you want.  Examples from past successful campaigns include:

  • Exciting new developments in your company 
  • Introducing new staff or products
  • Campaign investment recaps
  • FAQs
  • Opportunities for people in your community to meet you 
  • Live Q&As that you plan for your investors
  • Interesting industry articles or statistics that you come across
  • Profiles of your lead investor or executive team
  • Interviews with satisfied customers or investors

Warning Sign #5: You Haven’t Set a Realistic Budget

You have to spend money to make money. It’s a cliche—and it’s true! 

Unfortunately, many startups new to crowdfunding forget this reality. We get it.  After all, you wouldn’t be asking investors for capital if you were already swimming in cash, would you? 

Launching a campaign shouldn’t cost more than you’ll raise from it, and there are places where you can reasonably cut corners. 

For instance, professional promotional items, such as videos, photos, headshots, and a pitch deck are all things that can be done in-house with little to no initial investment other than necessary equipment. 

But choosing savings over hiring a professional is a slippery slope. Trying to save money can result in promotional content that looks amateur…which will reduce your legitimacy, and that’s the last thing you want while crowdfunding. 

Non-negotiable things  to account for in your crowdfunding campaign budget include: 

  • An advertising budget to drive people to your campaign page
  • Platform listing and processing fees—generally it is free to list your campaign on most platforms, but all platforms take a portion of your raise + processing fees for all funded investments
  • For Reg A, A+, and D campaigns, you’ll need to pay for a variety of financial reporting documents, as well as fees to the SEC 

Don’t Let Fear of Failure Keep You From Starting

If your company’s ready to scale but needs capital to take the next step, now’s the time to consider crowdfunding. Take the leap. Set your goals, make a plan, surround yourself with a team who is ready to accomplish the dream and get to work. 

Crowdfunding is here to stay. There’s enough capital out there for everyone, and markets are primed and ready for innovation. Thousands of companies have benefited from successful crowdfunding campaigns—why can’t you be one of them?
And if you need some help? Arora Project has a 100% success rate on our partner campaigns. We’d love to help you crowdfund your next venture.

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