What is crowdfunding?
Crowdfunding is a way of receiving capital or investment for a business or idea, from many people, in exchange for some type of discounted or valuable perk. Crowdfunding can benefit both those starting a business or expanding an established one. It can also be used for a tangible product or a for a service.
For example, someone with an idea for a new watch may use crowdfunding to raise the capital required to put that idea into production. Some of the pain rewards for donating to the campaign would be receiving that watch at a discounted price.
On the other hand, an established business such as a hostel may want to expand. They can use crowdfunding to raise the capital necessary to grow their business. In this case, the rewards may not be a new product but rather discounted services such as bed nights, walking tours, or pub crawls.
In any case, crowdfunding is used for far more than receiving money. The exposure, marketing, and PR that a campaign can create is often just as valuable as the monetary gain and may pay off far longer.
Crowdfunding can be an exceptional tool but, like anything, it takes serious work to get serious results. A few weeks ago Hostel Management had an online panel discussion about crowdfunding which was packed with advice and tips.
The following post is a summation of the most important takeaways, including what *not* to do based on experience. If you are considering crowdfunding, think carefully about the work it takes, make a solid plan, and then go for it!
Note: The following post is long, as it contains detailed info for anyone wanting to undergo a successful crowdfunding campaign. If nothing else, read these 5 important tips:
Plan ahead- every day before & during should have an action plan
Know where 30% of your goal is coming from before you launch
Have a massive and segmented email list
Spend money to make money- use targeted ad campaigns
Stay committed to your campaign from beginning to end
Why Use Crowdfunding
Crowdfunding is one of the best ways to get the word out about your product or service because of its viral potential. Even if it doesn’t go viral, it can still have a much further reach than traditional marketing.
In tourism specifically, crowdfunding can help you stand out because using it is still very innovative and different. According to Blaz Jemc of the tourism-based crowdfunding platform TravelStarter, crowdfunding has largely stayed in the technology and product areas, so when it’s used in tourism, it often garners the attention of everyone from bloggers to news outlets.
Testing your idea
Crowdfunding can also be a great way to find out if your idea is actually viable. While it’s not a perfect indicator, as there are so many variables to the success of crowdfunding that have nothing to do with the idea itself, it can give you an idea if you are on the right track. A campaign that is receiving little feedback before you even launch is probably not going to do well once you take it outside your inner circle. It can also show you if the way you present your idea is unclear. Perhaps the product or service is simply not ready to launch in the original.
Easier ability to get investment
Crowdfunding has opened up a whole new level of finance for entrepreneurs. Previously many people got rejected by banks or investors, who wouldn’t even return calls and emails. It’s difficult to convince a bank loan officer with a personal story, but it’s much easier to use that passion and story in a platform like crowdfunding. It not only allows for the initial influx, but personal stories are often what drives viral sharing.
What to Do
In a nutshell: Prepare, otherwise, you will fail. Crowdfunding can be incredibly successful, and can also fail very easily if you don’t plan it properly or maintain the campaign well.
Creating your campaign
Planning & executing your campaign
Talk to others who have done crowdfunding, both successful and not
Look at similar projects and take note of what they are doing
Read resources and info from groups like Samit’s on Facebook: Crowdfunding Backers: Tips, Tricks, & Traffic
What Not To Do
Tips & Tricks
Use targeted Facebook ads
- Can target geographically plus other factors
- For ex. people who are more than x # of miles from home (i.e. traveling), and are friends of people who already liked your hostel Facebook (i.e. they may be traveling to your area, or your style of guest)
- Can also target based on your competition
- Build lists off of people who have liked certain pages, like HostelWorld or your neighboring hostels
- The more you narrow down your ideal target market, the more precise you can be with your advertising dollars
Building an email list- a great suggestion from Blaz at Travelstarter
- Create a quiz with fun questions that are easy to answer
- Ex. “What is your favorite site in xyz destination?” Or “What do you think is the most popular food in xyz region?”
- Make some questions multiple choice (for ease) and some blank (for info/data)
- Target people who are interested in your destination or project
- Emails, Facebook ads, etc.
- A quiz is an easy way to gain insight to who your target audience is, what they like, when they plan to travel, demographics (age, gender, etc)
- You also gain their email + data
- Allows you to segment your email list easier
- You don’t even have to have a crowdfunding campaign to do this
- Can be useful data for your hostel in general
So as you can tell, there is a LOT that goes into crowdfunding. However, do not let it stop you from taking advantage of such an incredible tool! If you are willing to put as much time and energy into a campaign as you are your hostel, it can pay off immensely. Best of luck, and thanks again to our panelists Blaz, Samit, and Ori for all the useful info.
If you'd like to see the full hour panel discussion on Crowdfunding for Hostels, you can watch it here.
Do you have experience with crowdfunding? Have you ever thought about using it for a hostel? Sign in and comment below!
**I know many of you comment on these blogs on the site's FB page, which is great, but it would be even better to have the comments directly on here for everyone to read. Thanks for your input and helping to further our knowledge.**
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