Crowdfunding is not a business model

Hallelujah! Finally, someone else said it.

One of my favourite people to follow is Chris Guillebeau, of SideHustleSchool.com.

This week, his recap podcast episode pretty much re-validates what I keep droning on about to clients and my readers: Crowdfunding is not a business model!

Here’s an excerpt from his post/recap:

Today’s update includes an anonymous comment from someone who had a very successful crowdfunding campaign. The campaign raised more than $100,000… but his business is struggling to maintain momentum just a few months later.

Crowdfunding can be a wonderful tool for launching a product, but it’s not a business model on its own. You need to ask yourself: what will you do after the hype dies down?

Now, don’t get me wrong, crowdfunding has it’s uses – it’s a great way to help entrepreneurs with great ideas to validate and do an initial product launch.

But…

…during your crowdfunding campaign, you MUST figure out a way to get those customers onto your own list (I know crowdfunding sites have a lot of restrictions when it comes to getting people off their platform) but for you as as business, the only ones that succeed or at least have a higher chance of succeeding are the ones that get people onto an email list and/or have some way to communicate with them via your Facebook page.

This reminds me of one guy I spoke to who is a product designer by training. He ran a successful Kickstarter campaign ($300K in funding if I remember correctly) and wanted to hire a marketing person to help launch his next product.

I did a free consutation call with him and he immediately admitted he knows nothing about marketing, but he can call “bullshit” on so-called marketing experts. (Ok, my initial thought when I hear this is this doesn’t make sense at all and is usually a warning sign of someone you don’t want to work with…).

His plan was to launch ANOTHER Kickstarter/crowdfunding campaign for his next product which was a complementary product to his original one.

I asked about whether he built up any lists from his previous campaign but he didn’t do that. He’s completely reliant on crowdfunding.

When I suggested he consider building up his list for this next campaign otherwise, he won’t have much sustainability, he scoffed at that idea.

Often, when I mention email, the founders and so-called entrepreneurs I speak to that roll their eyes at that are the ones that will eventually struggle.

Think about it, if you’re completely reliant on the crowdfunding platform, you’re starting from zero all over again. You own nothing. No customer list, you can’t upsell/cross-sell to the ones that bought from your first campaign.

This guy asked me, “well, what kind of results can you get me with email? What kind of open rate, click-through-rate, etc”

I said, that’s impossible without knowing what your list is like or even sending test campaigns to your list. No list is the same.

That’s where he called my “bullshit”…

…a guy that admits he knows nothing about marketing expects someone to tell him with certainty the results they can give him.

My response was, “No honest and self-respecting marketer will be able to answer you this or give you a figure without actual testing. Anyone that does, is lying to you.”

He didn’t buy that.

So, we agreed to end the call.

Unfortunately, this isn’t the first case I’ve encountered this exact same scenario.

The lesson is, you must test with your own assets, lists, product, etc to know for certainty what your results MAY be. It’s not even 100% certain without enough data.

Please don’t fall into the trap that these people make of expecting some magical crystal ball to tell you what “results you can expect” and don’t rely on any ONE platform. It’s not a business model.

I know I lose a lot of business when I tell the truth of the industry and not tell prospective clients what they want to hear. But that’s why I’m in this business because too many businesses and so-called experts out there are willing to pander to these people and tell them lies and scam them out of money.

I just won’t do that for a fast buck.