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Sep 9, 2015 2:49 PM ET

Crowdfunding is about you

iCrowdNewswire - Sep 9, 2015

Imagine yourself as a venture capitalist. Someone asks you to put money in his project. What would you analyze? Of course, the project is important. But wouldn’t you be more worried about who runs the project? Wouldn’t you want to make sure the person proposing to run it can actually make it real?

What’s true for VC is true for most crowdfunding backers as well. A study from Agrawal, Catalini and Goldfarb in 2013 stated that creator incompetence, fraud and project risk are the main disincentives that every crowdfunder faces. As Conversion XL noticed, only one of those factors is related to the project itself. There rest is related to who runs the campaign.

Incompetence can come in two forms:  inability or inexperience of the team, who fail to make the product at all; failure to deliver the product on time, a common issue specially with projects that manage to beat their goal by far.

Fraud is also common to crowdfunding, an issue exacerbated by one particular feature of platforms: the lack of continuous interaction. As the study states, contrary to platforms like eBay or AirBnB, where there is an incentive for the seller to get good ratings in order to continue selling their products, in crowdfunding people tend to run only one campaign, without any previous background.

Project risk is inherent to the project itself, of course. When the challenge is too big, people can become suspicious on the feasibility of it. That happens even to big names, like Mozilla’s Matchstick project. As the time goes by and more ambitious projects fail to meet the market, we can expect the public to become more suspicious of bold projects.

So what’s a crowdfunder supposed to do? First and foremost, put your name and your face in the project. If you have an established company, make sure you put it as an example of your past work and your ability to turn what you are proposing into reality. That will reduce two perceived risks: fraud and incompetence.

As for the project, if you have a good prototype, put that on video. Show you have it well planned and developed. If you can say how you are going to handle, where you will manufacture it (make sure you have signed contracts), so much better. Make sure you show you have a clear plan.

Via iCrowdNewswire
Keywords: Crowdfunding, strategy
Tags: Blog
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