Crowdfunding 101

by Ryan Halvorson on Sep 24, 2015

Profit Center

Can this increasingly popular platform help you launch your next business or product?

In August 2014, personal trainer Lyam White learned that one of the owners of the studio where he was renting space was looking to sell. The Seattle-based location had worked well for him, and he was concerned that he might have to search for a new place to train.

“I talked to the other owner about buying in, to ensure that I would still be able to train at this location,” says White. “Additionally, my wife is a massage therapist, and it occurred to us that the space could be used to consolidate our services and offer a ‘whole body shop’ storefront.”

Everyone was in agreement. But then came the next big question. Where would White and his wife find the money to buy out the owner who was ready to sell?

They elected to launch a crowdfunding campaign—an increasingly popular method for securing financial support through a multitude of investors. Here, White and several other fitness professionals describe their experiences, and offer insider tips on crowdfunding and how to successfully take advantage of it.

Crowdfunding Basics

In 2009, a small, unknown company called Kickstarter was formed with the mission of helping to fund creative projects. Instead of a project creator asking a small pool of investors for a significant amount of money, Kickstarter gives this individual the opportunity to secure financial support via a large pool of people who put up small amounts of money. The creator sets a goal and is given a finite amount of time to promote and fund the campaign. The company claims that since Kickstarter was launched, it has helped raise $1.8 billion for 89,000 projects.

Why Crowdfund?

Fitness pros launch a crowdfunding campaign for myriad reasons—the most obvious being to get money.

Raise funds. London-based Adele Kirby, a self-professed “geek who is also totally addicted to exercise,” yearned to create a program that would make fitness more fun. She’d come up with the idea of developing an “audio fitness adventure” app that would combine an ongoing radio play with a variety of workout programs.

“We needed to build a (relatively simple) app for iOS and Android, develop and produce 37 half-hour episodes and hopefully have enough money left to market the thing,” says Kirby, founder of Imagineactive Fitness.

She had some funding to get started, but not enough to develop and promote the app, so she decided to try pulling in the rest with crowdfunding.

Create buzz and raise funds. Oscar Kemjika, personal trainer at Credit Suisse Fitness Center in New York City, used the platform for two purposes—to raise funds and create buzz around his new fitness apparel line.

“What inspired me to use a crowdfunding program [was knowing that it can be] a lucrative way to market,” says Kemjika, who is also founder and CEO of iBE-FiT, the company that produces the apparel. “[I was] able to get my brand some exposure while recruiting funds in the process. It’s also a good way to build a solid customer base as I jump-start my business.”

Promote a product or service. Others—such as Otis Jones, founder and owner of GYMatch, a “gym locator and networking app”—use the platform primarily for promotional purposes.

“I’ve self-funded GYMatch for the last 2 years and had come across Kickstarter through a buddy who thought this would be a great way to get noticed,” says the Los Angeles–based entrepreneur. “When we originally discussed taking on Kickstarter, it was for the sole purpose of getting the brand out there and gaining a following through social media, not for financial funding.”

Assess interest in an idea. Another reason to crowdfund is that it offers an opportunity to test an idea before spending significant money on development. While Kirby believed in her Apocalypse Survival Training app, she knew others would not necessarily share her sentiment. So, in addition to raising money for her project, she used the campaign to gauge consumer interest.

“I wanted to see if other people thought it was a good idea, and a crowdfund campaign is a very good platform for testing an idea,” she says.

First Steps

Funding Models

The crowdfunding landscape is filled with a staggering array of options, but there are two basic funding models to choose from: All or Nothing, and Keep It All.

An all-or-nothing approach means that if you fall short of your monetary goal, you receive no funds. After careful thought, White decided against choosing this model. He settled on GoFundMe because it would allow him to keep the investments no matter what.

However, Kirby reasons that the all-or-nothing approach makes it easier for potential investors to offer support, and that’s one reason she chose Kickstarter.

“I knew I was going to need support well outside my personal network; therefore, I needed a lot of people who [didn’t] know me to put money down confidently,” she says. “As soon as you move off ‘all or nothing,’ people have to really weigh up whether they’ll back [you] , as their money will be taken even if you can’t deliver what you have promised.”

Campaign Launch

“Getting started wasn’t so difficult,” notes Kemjika. “The first step was to register with Kickstarter. I had to upload the project on their website with videos and photos of my product. I filled out sections explaining the iBE-FiT movement and what it’s all about, a background story of who I am as the founder, and so forth. Once all of that was done, I waited for approval from Kickstarter.”

Los Angeles–based personal trainer Craig Ramsay (follow him on Instagram at @craigramsay) learned that the video is perhaps the most important aspect of any campaign and that plenty of effort should be put into developing one that will explain—and entertain—viewers.

“Keep [the video] to 2 minutes, and spend some time and money if necessary to make it a glossy,” he advises. “I found that most people only read my bio and incentives and counted on the video for the explanation of what the project is.”

Incentives

It’s important to remember that a crowdfunding campaign isn’t the same as a charity fundraiser, explains Kirby. While some people will give financial support without a reward, most require an incentive to part with their hard-earned cash. And typically, the more a backer contributes, the bigger the incentive he or she receives.

To gain support for his Workout’s a Drag DVD program, Ramsay—who partnered with popular drag queen Pandora Boxx for the project—offered copies of his Anatomy of Stretching book, a one-on-one training session, a Skype consultation and more.

Jones offered his backers access to his app for 90 days. “Also, the larger donators could potentially receive stainless steel water bottles, towels and a really cool leather gym bag,” he says.

In crowdfunding, “I think perks and rewards take the place of dividends and ROIs,” notes White. “Supporters are not ‘shareholders’ (thankfully), but they are investors, in the least formal and most edifying sense of the word.”

Spreading the Word

For the most part, our sources favored social media for project promotion.

“Social media is indispensable,” says White. “Know your audience, and focus on them. We went straight for the arts community, the martial arts community, the massage community, the alternative health community, and many we knew who are interested in health and fitness but are skeptical of the health and fitness industry and community.”

Kemjika also took advantage of social media to promote his campaign, but he found that a more personalized approach proved more successful. “I also announced it in church and told family and friends about it,” he recalls. “Efforts such as calling, texting or emailing potential backers directly were more effective than just posting on social media. This may be because many people have busy lives and tend to forget to check their social media news feed, but will get a text message or email alert instantly.”

Frustrations

“I have to admit that there were many times when I felt out of control with this process,” says Ramsay. “My experience with crowdfunding felt like playing a slot machine while on a roller coaster ride. You can strategize as much as you want, but there are always surprise wins and setbacks.”

Despite surpassing her £10,000 [$154,000] goal, Kirby echoes these statements, recalling that she often felt chained to her computer, watching the investment process in frustration.

“I didn’t enjoy the campaign month,” Kirby says. “You’re sitting behind the dashboard every day looking at who backed, how much, and how many people that day, and that all comes with a lot of mental baggage. People I didn’t expect to back at all pledged surprisingly large amounts. And people I hoped might pledge more pledged £5 [$7.70].”

Tips for Success

White believes that the best campaigns are built on a solid foundation and facilitated by those who aren’t afraid to take chances.

“If you’re timid, you will fail,” he warns. “Be realistic, of course, but once you’ve set your amount and started your campaign, keep that campaign loud and public.”

Ramsay advises potential crowdfunders to do plenty of legwork and development before announcing a project to the world. He says it’s also important to prepare for what will happen once the campaign ends. “It is advisable to have everything ready to go, so that once you get the funding, you can keep the momentum going,” he says.

Finally, Jones notes, “If you believe in your dreams and have a burning passion about fitness (or whatever it is), then others will sense that and want to hop on your bandwagon and help!” n

© 2015 by IDEA Health & Fitness Inc. All rights reserved. Reproduction without permission is strictly prohibited.

It’s important to remember that a crowdfunding campaign
isn’t the same as a charity fundraiser.

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© 2015 by IDEA Health & Fitness Inc. All rights reserved. Reproduction without permission is strictly prohibited.

About the Author

Ryan Halvorson

Ryan Halvorson IDEA Author/Presenter

Ryan Halvorson is an award-winning writer and editor. He is a long-time author and presenter for IDEA Health & Fitness Association, fitness industry consultant and former director of group training for Bird Rock Fit. He is also a Master Trainer for TriggerPoint.