Welcome to the latest edition of Connecting the Dots - our ongoing series that searches for the best thinkers who can extend, elevate and deepen your understanding of local issues and events that affect you.
'Social media': These two words may be the least understood and yet most used words in the lexicon of our mobile society. Mention them at a cocktail party and no doubt, like charade game responses, someone will chime "Facebook' and 'Twitter.' Social media has almost become synonymous with these tools. Yet it may be argued that the most powerful crowdsourcing tools on the collaborative horizon relate to such crowdfunding sites as Kickstarter, IndieGoGo and Ulule.
In fact Kevin Lawton and Dan Marom, co-authors of The Crowdfunding Revolution, say that crowdfunding is the behometh that is turning the way we have traditionally done business on its head, disrupting the status quo so long dominated by Wall Street and conventional funding methods.
This is great news not only for entrepreneurs who could never reconcile their roundness with square methods. It's also a boon for business startups with specialized niches that have a hard time finding mainstream funding. For them and the multitude who are now considering this really breakthrough way of raising capital, this book will be the place to visit and revisit for inspiration as well as practical strategies.
We liked the book so much we asked Kevin Lawton if he would be willing to share more perspectives about crowdfunding. Thinking back to the Vallejo area chefs whose Kickstarter campaign we reported on last year, we asked Lawton to comment about leveraging local investors.
VCE: Should local businesses concentrate on attracting local investors. Or is it better strategically for them to cast a wider net in their crowd-funding marketing efforts?
Lawton: It's best to think in terms of waves. The first wave builds a base of investors who generally have reason to know or have interacted with the entrepreneur, or who 'get' the product idea right away, often because it serves their needs. So this is a combination of trust, vetting and initial market signaling. And it's used to attract the second wave of investors who serve more as market signaling, who serve as virality for the third wave and so on.
For local businesses, you can imagine it's very helpful for the first wave to be local, as trust/vetting tend to be more strongly tied to locality. But for products which serve non-local markets, don't count out early adopters who 'get' the big idea. Or the leverage of attracting "super-node" types, people who have a lot of sway, be it in the online or offline world.
In terms of "casting a net", the best energy spent is reaching out to those people who have a natural interest in what you do, and carry a lot of sway power. One person like that who takes a shine to your idea, and 10,000 other people will know about you as well. Seek these people out, but don't ask them to spam their lists. Ask questions and their opinions. If they get excited and believe in your idea, they'll give you a big push.
There are also often many serendipitous benefits of a wider exposure. Money is only part of your business. You never know what else you'll discover, or loyal customers you may make. So in any case, it's worth casting the net wider than you initially anticipated.
The Crowdfunding Revolution
Authors: Kevin Lawton and Dan Marom
Publisher: McGrawHill, ISBN: 978-0-07-179045-1
Stay tuned! In the next posting Lawton discusses the factors that can jeopardize the success of crowdfunded projects. He also mentions the type of projects that are well-suited for crowdfunding.