Crowdfunding Your Startup: Why Most Campaigns Fail

crowdfunding marketing campaign

Now might seem like a great time to start a new venture, especially if you face long-term challenges finding a new position after the pandemic. Also, with the new normal wrought by the pandemic, new opportunities arise for new ways of doing business. Yet, the stubborn challenge of financing your venture hasn’t changed much and you may have exhausted your family’s finances just surviving the last 14 months. Crowdfunding your venture might seem like a great option as you don’t need much of your own money to get started.

crowdfunding your startup

The reality of a new business is you need money. Even if you start your business from home, you still face expenses for legal advice (and I don’t recommend you start a business without at least a discussion of incorporating), office equipment, inventory (perhaps), marketing (and don’t try running a business without marketing), and you need some runway to fund your business until it reaches revenue positive.

Do your research and you can find many ways to fund your new startup but crowdfunding is one of the most popular options out there. Crowdfunding involves marketing to millions of folks who want to invest a tiny amount in an innovative startup, often for a chance to be one of the first to get the new product, rather than as a money-making option.

An example of a successful campaign comes from Coolest cooler which integrated a bunch of useful tools, such as a radio, into its cooler. With 62,642 backers, it surpassed it’s original goal of $50,000 to make around $13,285,226. The incentive was you were one of the first to get the new cooler before they were available in stores.

Sites like Wefunder and Kickstarter offer businesses the opportunity to present their business idea and ask for people to back them financially. Instead of one or two big investors that require a substantial amount of time and energy to find and close, you reach thousands of potential investors who each contribute a small amount of the needed startup capital. Crowdfunding your startup reduces the risk for the investor and people back ideas that they love, mostly fun, interesting products they find useful.

Similar crowdfunding opportunities exist for non-profits (ie. GoFundMe) and for artistic pursuits (Patreon).

However, crowdfunding a startup is easier said than done and most campaigns fall flat before they reach their goal, which means the money never leaves investors’ pockets. There’s a lot of competition out there for crowdfunding hopefuls, so to achieve success, you need to understand the common mistakes and learn how to avoid them. Here’s why most startup crowdfunding campaigns fail.

Why crowdfunding your startup won’t work

Lack of strategy

The idea is important in crowdfunding campaigns and you can only succeed if you come up with something innovative that matches the needs of your target market. Almost all successful crowdfunding campaigns involve a product and funders gain early access to something that catches their fancy. Services don’t often succeed in this space unless they fit the notion of social responsibility held by a group of funders.

However, don’t make the mistake of thinking a good idea can carry you across the finish line. It’s important that you develop a clear, detailed marketing strategy filled with actionable steps you can take to encourage people to invest. You’ll also have to build a prototype to show potential investors or demonstrate you have the ability to build the product if funded.

Without this, you won’t stand out from the thousands of other campaigns on the funding platform at any given time.

If you have no idea of where to start in building your campaign strategy, it’s a good idea to work with a Wefunder marketing agency with experience and a proven track record of successful crowdfunding campaigns that exceed the goals set. That way, you can work on creating the business idea and they can help you manage the marketing side of things.

In addition to the marketing plan for your crowdfunding campaign, you also need to build a marketing plan that includes a budget so you know how to spend the money you raise. The marketing plan must cover your target market in-depth, your advertising campaigns post-funding, manufacturing costs, and overhead. Plan for extra to keep your business afloat until you gain more market traction.

Not building buzz before the launch

During your crowdfunding campaign, you need to create excitement about the business and the product to encourage people to invest. However, you need to ensure you create buzz about the campaign itself. Hence, before you launch your crowdfunding campaign, show your idea around. Not only does this provide valuable feedback to help optimize the design and features of your product, but it also helps attract media attention to create a buzz for your crowdfunding effort.

People like crowdfunding because they can get in on the ground floor and be part of something great in the early stages. But, most people invest in a startup through crowdfunding for the reward structure. Offering specific rewards for the first 50 backers and promoting the campaign on social media before it launches is a great way to build that anticipation. If you get it right, you can hit the ground running and once you have a good number of backers, you can keep that momentum going with your existing marketing efforts.

Over time, transition these marketing efforts away from your crowdfunding campaign and into marketing your new product to retailers and consumers.

Not communicating with backers

People like crowdfunding because it feels like a shared investment. Your investors are on the business journey with you, even if they only want to get first access to your innovative product.  Investors want to feel very close to the project once they put their money in, even if they made a small investment.

So, don’t neglect investors as soon as you get their cash because you can get a bad reputation that damages your ability to attract new investors and can seriously damage your chances of marketing your product post-funding.  Send little updates to investors to celebrate even small accomplishments.

Moreover, early investors share your interest in bringing your product to market, as well as reaching your campaign goals. If you keep investors updated, they may contribute more money to ensure you reach your campaign goal or tell their friends to invest in your crowdfunding campaign. Keep investors happy and they’ll act as influencers to promote your campaign and your brand.


The success of crowdfunding as a funding tool makes it harder for folks to use the tactic due to the high level of competition. But as long as you avoid these common mistakes, you stand a decent chance of finding the money you need.

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