During the second half of March after the pandemic was declared, the crowdfunding platform Indiegogo reported traffic increased nearly 14% compared to last year and daily funds raised were up 24% year over year. Kickstarter also reported in last month that the funding success rate for projects is up five percentage points over last year, and Wefunder saw investor volume increase 35% from February through April.
Just because interest is up, doesn’t mean pulling off a crowdfunding campaign is easy – indeed, The Crowdfunding Center reports that between Jan. 1, 2014 and Oct. 20, 2020 only 23% of projects across platforms were fully funded with the average raise leveling out just under $35,000.
Still, crowdfunding can offer more than access to capital – it can also help drive brand awareness online, which the CEO The Luving Company Ashi Jelinek notes is more important than ever in today’s virtual-heavy world. With this in mind, earlier this month she launched a campaign on the SEC-regulated crowdfunding site StartEngine.com for her zero sugar, vitamin-infused children’s water brand KidsLuv.
“There are limited ways as an emerging brand that you can grow, get visibility to new consumers, have brand presence on the market. We are very limited right now with what we can do, and I think this is an amazing way online, digitally to be able to reach out to whole new groups of people – from a business perspective and a consumer perspective,” Jelinek told FoodNavigator-USA.
She added from a marketing perspective, crowdfunding allows companies to talk about their growth, retail partnerships, sales and innovation that is different from traditional consumer outreach.
“Then there is the other piece where you are potentially reaching someone who … would be interested in the product who has maybe never heard of the product because we are so new,” and they both want to invest in the company and buy the product, she said.
Bridging a funding gap
Even as The Luving Company leverages the campaign for marketing, the money generated also will be pivotal in tiding over the business, after the pandemic dampened earlier fundraising efforts.
“I was actually in the process of raising when the pandemic happened, and it has been a difficult time. We have been bootstrapping and doing what we can,” but the funds raised from this campaign will act like a bridge to help us meet certain metrics that are required by venture capitalists and other investors, Jelinek said.
A benefit of crowdfunding over venture capital or even angel investors is that companies can set their own terms and don’t need to agree or even compromise to garner investments, she added.
Picking a platform
Once entrepreneurs decide on crowdfunding, Jelinek says they need to decide on the platform that is right for them – a daunting task given the wide selection.
“There are so many different platforms that are out there, and what is right for one person is probably not right for another person depending on what your product is and what you are planning to do,” she said.
No matter the goals, she recommends that entrepreneurs vet each platform to ensure they have campaigns for similar categories of items, have a strong track record of successful raises, and thoroughly vet potential investors so as not to compromise a company’s ability to raise in the future.
Ultimately, Jelinek said that crowdfunding is the right choice for her right now, and that KidsLuv is the right choice for interested investors because it is helping to lead the development of a children’s wellness set – an underdeveloped but in demand area as parents look for healthier beverages to support their children during and after the pandemic.