Crowdfunding is Great at Marketing, But Sucks at Raising Real Cash

According to a Canadian news outlet, more Canucks are raising funds using social media's crowdfunding to start their businesses.

Even your best friend will think twice about
funding your project if it doesn't look successful.

That may be true, but real money comes from actually selling a needed product or service to those that want it, not giving away swag online to convince people they need your product or service.

Most crowdfunding projects succeed based on the "gifts" you provide in exchange for people -- called "funders" -- donating to your project.

It's a loss leader from a marketing point of view, because you have to give away something to get something in return.

Loss leaders don't raise capital -- that's why it's called a "loss" in the first place.

And you have to often spend your own money to get others to fund your project. Most crowdfunding websites recommend having launch parties, or creating media stunts, or other costly events to get your friends funding right away.

After testing out crowdfunding, I learned to raise any money this way, you first had to spend a great deal of your own money, and it forces you to rely far too heavily on your friends and family to spend their money.

It's all part of "greenbar syndrome."

All crowdfunding websites have a progress bar, telling potential funders how much of your crowdfunding goal you have reached, and how long you have to keep trying.

No one wants to fund something that doesn't look like it will be successful. So if your progress bar indicates you are very far from reaching your goal, few will click the button to donate to your cause.

The Kickstarter Greenbar will make or break any project.

Failure to get that progress bar to move in a positive way is called "greenbar syndrome" -- as most of them are green, and it's a very common problem -- if not the MOST common one -- which kills over 60 percent of crowdfunding campaigns.

Yep, on average, only 40% of the people that try to raise funds through crowdfunding are actually successful.

That's not bad, because raising any money for anything is a challenge -- money doesn't grow on trees.

However, if you rely on crowdfunding to actually raise money, you'll either fail or lose more than you were hoping to raise in most cases, all because of greenbar syndrome.

To get that green progress bar up to a level where strangers will feel comfortable donating, you have to spend much of your own money.

It's like going to a bank, asking for a loan, and being told you have to put up 40-60% of the initial funds yourself -- those are the typical numbers the major crowdfunding websites recommend you get your progress bar up to, if you want to avoid greenbar syndrome.

Crowdfunding isn't great for raising funds, but works
to grow a loyal and dedicated following to your brand.

In the real world of business, if you were to put up that much of your own personal cash to start your business, you'd be broke before you even began.

Crowdfunding sucks at raising capital.

But it's awesome at growing friends, fans and followers to your company, it's brand, and and it's channels.

If you see crowdfunding for what it really is -- a marketing tool -- then you can create a budget for how much you are willing to spend on it, and the remaining funders that follow, will become loyal fans of your brand.

Then follow-up with those new fans, as they are key prospects to target, because they've proven they love your brand, so they'll be easily converted into paying customers.

But don't try to raise serious coin using crowdfunding.

It just isn't practical.

On the Entrepreneurial Journey -- Choose Your Advisors Carefully

Billy Mays, one of the most popular
TV Pitchmen ever.

I was at the Business, Franchise and Investment Expo in Toronto this weekend, at the Canadian National Exhibition grounds.

It's a two-day affair, where franchises hunt for franchisees, and business people can network and possibly gain some valuable tips and tricks towards success.

What I was interested in were some of the over 40 workshops on entrepreneurship, running and managing a business, even on investments and investment opportunities.

I wasn't there to become a slave to a franchised company. Not everyone is capable of grabbing the bull by the proverbial horns and being completely 110 percent their own boss, I get that. However, being a franchisee isn't for me.

When we first walked into the expo, a sign right at the entrance boldly warned people that selling anything was prohibited at the show. Violation would get you kicked out.

I didn't think anything of it at the time -- I was there for information, not a sales pitch.

What I got, although inspiring and even entertaining, were pure sales pitches.

The first workshop I sat in on was titled: "Learn What Every Small Business Owner Should Know About Marketing on a Zero Budget."

Marketing on a zero budget? Marketing is one of the key expendables of any business period. If no one knows you exist, you don't. So I was curious and went to the workshop, hosted by one of the keynote speakers of the show, Paul Tobey.

Tobey told a very inspiring story about hitting rock bottom, when he was so broke he couldn't even give a handful of change to a boy scout selling apples.

He then went on to describe how that experience changed his life, and he's since made it his mission to help others achieve the great fiscal success he says he has.

Then he offered to speak with 10 people -- and 10 people only -- for a brief amount of time at the show, for free!

Imagine, being able to talk with someone about their success and how they may be able to help you for free.

Reminds me of when comedian turned actor, Robin Williams was in Toronto a while back, and you could purchase a five minute one-on-one session with him after the stand-up show for $500. That's $100 per minute for you mathematically challenged-types, just to say hello, maybe introduce yourself and hear him do some of his uncanny impersonations, and hilarious jokes.

Although Tobey says he wasn't selling anything, he was the consummate pitchman. Show how green the grass is on the other side, and tell people how it could be theirs -- for a price.

In Tobey's case, he was selling tickets to another event where motivational speakers such as himself, were going to be. Naturally they were offering these "limited quantity" tickets at a special show price -- buy one get one free.

Would you buy a car from this man?

I still don't know how to market my business without any dollars -- that too me just sounds like poor budgeting.

Later, another workshop caught my eye -- "10 Keys to Taking Your Business Over $1 Million," hosted by Doug Vermeeren.

Vermeeren is another amazingly inspirational speaker, talking about his rags to riches story, and he handed out lots of free books and CDs which continued his inspirational message.

But at the end of his talk, he handed out carbon-forms to subscribe to his inspirational service -- but don't worry, your first month was free -- even though you have to give your credit card number on the form to sign-up, and sign a waiver authorising his company to charge your credit card forever thereafter the free month.

I guess that sign prohibiting people from selling anything at the front of the expo was pretty meaningless, because everywhere I went there was pitch after pitch.

One young woman came up to me while I was sitting at  table resting my weary feet after a long day, and tried to convince me that her business of purchasing a condo with the purpose to grow medical Marijuana in was a good idea.

What was she smoking?

Ironically, the best information I took away from this conference was given by yet another one of these supposed self-made millionaires selling advice: "be very careful who you take advice from."

That's actually really good advice -- just because someone appears successful, talks like someone who is successful, even inspires you with their slick spiel -- doesn't mean they know anything about you and your entrepreneurial journey.

Paying someone just because they think they've made it to advise you, is like buying the first car you test drive without looking under the hood. You'll probably end up at the side of the road in a pissing rain storm, waiting for roadside assistance.

Lesson learned, the best advice in the world is usually free, has no strings attached, and comes from people that know you.

Tobey, Vermeeren and the rest were inspiring, energizing and I'm glad I had the opportunity to sit in and hear them.

However, inspiration is only part of the journey towards success. The rest depends largely on acting on that inspiration.

And just as the old song says, the best advice is free.

How NOT to be a Shark During Shark Week

Unless you've been under a rock recently, you've probably seen the hilarious, in-your-face television commercial Discovery Channel is running promoting their Shark Week.

In case you haven't here's the YouTube:

The term "shark" sends chills down our spines in a business sense too -- thanks to another American television show called "Shark Tank," where self-made entrepreneurs turned investors, listen and more often than not, chew out new entrepreneurs who have come on the show hand out, looking for some much needed cash.

We have a similar venture-based reality show here in Canada called "Dragon's Den" -- which actually features two of the same investors on the American show.

Before I go, let me be clear, I am a huge fan of CBC's Dragon's Den, which airs Sunday and Monday nights on the Canadian Broadcasting Corporation's main channels. See, I'm even giving you guys a free plug -- how about tossing some cash my way. . . 

Ever have one of those days?

You don't have to be a mean fire breathing dragon, or a cold hearted shark to do business, even if you don't like the pitch, the product or the person.

Shattering someone's dreams isn't just cold hearted, it's downright mean.

Now, there are some really, REALLY bad ideas out there. 

The second someone even mentions "MLM" -- I'm out -- BIG TIME.

Multi-Level Marketing (MLM) -- AKA -- a pyramid scheme -- despite what those running MLM businesses claim -- is nothing more than a scam which preys on the hopes of the desperate and the poor. NO ONE gets rich off of MLM except the person at the VERY top -- which usually is the person that started the scam in the first place.

RANT OFF -- sorry -- MLM bilks thousands of innocent people every year, it really gets my blood boiling.

Back to the topic at hand -- how not to be a shark or a dragon in forming business relationships.

This goes not just for venture capitalists, angel investors, and others looking to invest in and partner with entrepreneurs, but also with entrepreneurs too -- just be nice.

Remember when you were a kid, and your parents told you to "play nice?"

That's sound advice, because although you may be currently listening to a pitch that seemingly never ends, down the road, it may be you seeking out a business relationship from it's presenter.

If you cause someone to cry, or more likely, just never forget how horrible you made them feel, then when you approach them because they now have something you want a piece of -- oh boy -- I wish I had a camera with a live feed to the world when that's happened to me.

It certainly would make for entertaining -- perhaps dare I say more entertaining -- television than "Shark' Tank" and "Dragon's Den."

Sometimes it's better to grin and bare it, listening to awful elevator pitches, handling grungy products you wouldn't pay someone to use, or even sitting across from some slimy character you swear you'd never do business with, ever.

Because you never know if that person is going to be the next Elon Musk (founder of Tesla Automobiles), Mark Zuckerberg (founder of Facebook), or Richard Branson (come on -- who doesn't know this dude?)

Don't be a shark, even though it's shark week.