Crowdfunding Growing at a Startling Rate, New Report Says

Originally Published at Entrepreneur.com on June 14, 2014

Just a couple of years ago, providing answers to some of the most common questions on crowdfunding was based evenly between limited anecdotal evidence and my gut feelings as an attorney with keen business instincts.

But as with any fledgling industry moving towards maturity, more and more data has started to appear that makes answering these questions a bit easier. One recent mountain of data on the crowdfunding world that just arrived contains a plethora of information -- read on as I distill some of it for you.

Barry James and his team at The Crowd Data Center recently released eFunding & The State of The Crowdfunding Nation, a report (which can be purchased for $49) that studied more than 75,000 crowdfunding campaigns for the first quarter of 2014. The report provides a wealth of information about both rewards-based and equity-crowdfunding campaigns. It puts crowdfunding into a whole new perspective.

Those of us in the industry already knew how profoundly the crowdfunding explosion had affected society. But the report puts it into perspective, and one particular fact truly illustrates the explosive nature of the burgeoning industry. Gordon Moore, one of Intel's founders, coined Moore's Law that predicted computing power would grow exponentially for the foreseeable future, doubling every 18 to 24 months.

According to the eFunding report, crowdfunding on a global basis is doubling at nearly 10 times the rate of Moore’s Law.

The report and the infographics accompanying it offer insights into what is happening in crowdfunding worldwide by drawing on a continuous influx of data from live crowdfunding campaigns as well as studying the major funding platforms, pledges and patterns of donors and investors during the first quarter of 2014. Here are some interesting facts and numbers about the global effect of crowdfunding from the eFunding report:

• More than $57,000 is pledged to a crowdfunding campaign somewhere in the world every hour of every day.
• The five most popular categories of successful crowdfunding campaigns are gaming, technology, design, film and music.
• Rewards-based campaigns on Kickstarter successfully fund 42.8 percent of the time. On Indiegogo, the success rate is 14.4 percent.
• The average number of backers of a successful Kickstarter campaign is 255.
• An average of 325 new crowdfunding campaigns launch every day.

These tidbits of information are a great resource for anyone who is looking to crowdfund. For example, being able to look at the statistics that are now available allows interested crowdfunders to know which platforms work and how well. James and his crew are constantly updating the site with more and more research. The site has search tools that let anyone answer almost any data-driven question about crowdfunding, questions that are crucial when someone is considering, planning and launching a campaign.

Until now, getting answers to these could take hours or days of research on many different platforms, trying to compare apples to oranges.

As someone experienced with the field, not only can I now find promising crowdfunding rising stars or rocketing campaigns far before they've become obvious to the world, but I can do so by mining the live-data (registration is required) on active campaigns on a daily or even hourly basis. The site’s analytics can also be used to dig deeper into the data for emerging trends.

While traditionally, investing has been a very closed world with information closely guarded and available at a premium, if at all, one of the things I love about crowdfunding that's transformative is its openness and transparency. Having data such as this available will assist investors and entrepreneurs as the crowdfunding world booms when equity crowdfunding under Title III of the JOBS Act soon becomes a reality.

Enlist Twitter for Crowdfunding Success

Originally Published at Entrepreneur.com on June 4, 2014

Here is the worst-kept secret in crowdfunding: Social media is vital to its success. Twitter is perfect for crowdfunding if used correctly because of its reach and the speed with which news can be spread. But like everything else in the world, it is only effective if it's used correctly.

Here are five basic rules to harness Twitter for your crowdfunding campaign:

1. Build relationships on Twitter before you launch the campaign. Start cultivating followers well before you start crowdsourcing funds. Follow people who could be potential donors and many will follow your account back.

Post interesting content so that potential donors will pay attention to you before the launch. Be sure to interact with their posts. Send them @messages and retweet their posts to build a relationship whereby these individuals will be more likely to retweet your tweets promoting your crowdfunding project down the road.

Do the same with media people if you would like them to spread the word about your project. There is no better way to gain access to a journalist than through Twitter. But you have to establish a relationship first. Do your research, find those writers and bloggers who are appropriate (such as people writing content related to your company's focus), and follow them, retweet their posts and interact with them before the campaign's launch.

Then when your campaign launches, you can pitch these writers or editors the idea of doing a story about your campaign. Or ask influential bloggers to retweet your post.

2. Tweet often. Twitter is a moving target. If your post does not hit a follower's feed when that person is looking, the post is likely lost and gone forever as far as that person is concerned. Sending one tweet a day is not enough. Even tweeting about the campaign in the morning and again at the day's end means 95 percent of your Twitter followers won't see the tweets.

During the campaign tweet similar messages (but not the same one) at least four times a day -- at a variety of hours -- to catch everyone. No matter what you tweet, be sure to provide a link to your crowdfunding project in every post.

In addition, use craft additional tweets each day to thank donors for contributions, give progress reports and updates, provide links to media or blog coverage and announce the launch of new videos or rewards. Use Twitter as the news feed it's intended to be.

3. Ask people to retweet. Tweets go viral based on retweets. When your followers tell their followers about your campaign, you get into a secondary market of donors. If those people then retweet posts, you have hit the home run of crowdfunding: entering the tertiary market of donors in huge numbers.

But most people rarely retweet anything unless it's compelling news or they are asked to do so. You would be surprised, however, how easy it is to have something retweeted if you simply ask. Add “please retweet” or “please RT” to the end of every tweet about your campaign.

4. Tweet everything you post on Facebook. Don’t assume that the people reading your Facebook posts are the same individuals scanning your tweets. Post the same information on both social networks because your audience may be different on each channel.

Most people link their Facebook account to their Twitter account so that the posts on one will show up on the other. Don't just rely on this, though. If Facebook posts your message on Twitter, the link on the tweet will go to your Facebook page not to the crowdfunding campaign page. Forcing people to jump through this small hoop to contribute to a crowdfunding project is a bad idea. You have to make it easy for them.

5. Use hashtags to help spread the word. In the twittersphere, hashtags will let anyone easily find the crowdfunding project, making it easier for tweets to be retweeted and for spreading the word. Yes, #crowdfunding is a good generic hashtag. But having a special hashtag just for your campaign is a sound idea. Then be sure to use it in every tweet.

Why Oculus Didn't Betray Backers With $2B Facebook Buyout

Originally published at Entrepreneur.com on April 8, 2014

When I penned my tongue-in-cheek-titled article “Will Equity Crowdfunding Laws Be the Death of Kickstarter?” I addressed a misconception that equity crowdfunding under the JOBS Act would have a negative effect on rewards-based crowdfunding sites such as Kickstarter, because the JOBS Act has nothing to do with rewards-based crowdfunding.

Despite this, a recent New York Times editorial and a Bloomberg column, “Attention Suckers: Please Send Us Your Money,” show that even the media fail to grasp the huge difference between rewards-based and equity crowdfunding. Both articles offered harsh criticism for crowdfunding as a whole and for Oculus, a company that utilized rewards-based crowdfunding to raise capital for a virtual-reality system it was building. When Oculus was recently acquired by Facebook for $2 billion, the Bloomberg article accused Oculus of pulling off a “scam” because the supporters of its Kickstarter campaign did not get a share of the profits from the Facebook buyout.

The crowdfunding industry is relatively new, so it’s understandable that members of the general public don’t recognize the distinction between rewards-based and equity crowdfunding. But the public relies on the media for awareness and education, so it is less understandable when large publications can’t be bothered with researching the facts in a rush to throw fuel on the fire of misguided outrage.

A bit of relevant background: Oculus used Kickstarter, the largest rewards-based crowdfunding site, to fund the Oculus Rift virtual-reality headset for video games. Oculus raised $2,437,429 from 9,522 backers. Each of these backers knew that they were not buying stock in Oculus when they donated, and each received something of value in return for their donation. For example, more than 5,000 people donated $300 each to get a developer kit that could be used to create software for the headset. Some of these backers saw future profit potential from having early access to the developer kit, and others likely just wanted to be the first to enjoy the new technology. Even if Oculus had wanted to sell stock at the time rather than giving away tangible rewards, they were not legally allowed to do so, because equity crowdfunding under the JOBS Act is not yet legal.

Eighteen months later, Facebook bought Oculus for $2 billion and the Twittersphere exploded with people upset that they donated $35 to Oculus for a t-shirt that did not magically turn into a financial windfall they never expected in the first place. When I go to McDonald's, I don’t look at the bottom of the bag beneath the spilled french fries hoping to find a stock certificate for MCD preferred shares I can trade on the New York Stock Exchange. Yet, some people were outraged that Oculus did not convert their $15 Kickstarter pledge for a cool poster into Facebook shares or cash.

The New York Times editorial board chimed in with their take on the Oculus deal with “How to Harm Investors,” referring to the SEC’s proposed equity crowdfunding rules as “a joke.” The Grey Lady said that under the JOBS Act, “investors could end up with next to nothing even if they invested in the next big thing.” The Times failed to emphasize that the donors to the Oculus crowdfunding campaign were not “investors” and that the SEC rules only apply to equity crowdfunding, not the rewards-based crowdfunding Oculus undertook on Kickstarter.

The Bloomberg article by Barry Ritholtz was worse. Apparently Ritholtz, whose bio includes being a lawyer, has never read the JOBS Act and has no idea that Kickstarter could not have legally offered equity crowdfunding. But this did not stop Ritholz from writing for the otherwise respectable publication that the Oculus deal showed the JOBS Act “has been revealed as the massive bait-and-switch it is.” Ritholtz further misstated that “regardless of strenuous objections, the JOBS Act became law, making it all-too-easy for companies to raise money.” He topped off his trio of inaccuracies by adding “perhaps there will be some embarrassing litigation from those people who feel duped.”

When The New York Times and Bloomberg do not understand the difference between rewards-based and equity crowdfunding, the crowdfunding industry has a problem. Equity crowdfunding under the JOBS Act, when it becomes legal, could be a game-changer for startup businesses who have no other way of raising capital in today’s economic environment. But when huge media conglomerates scare the public into thinking equity crowdfunding is a scam, even though it does not even exist yet, the chances diminish of entrepreneurs being able to utilize this valuable tool to grow businesses and create jobs. It’s a shame the media did not do their homework before putting out misleading headlines and factual inaccuracies about the good fortune enjoyed by Oculus after using rewards-based crowdfunding exactly as it was intended to be used.

Your Crowdfunding Campaign Is Doomed Without This

Originally Published at Entrepreneur.com on March 3, 2014

To be successful in rewards-based crowdfunding, effective use of social media is critical. Gaining financial support through social media is not as simple as posting a picture of your lunch on Facebook or retweeting the latest joke from Jimmy Kimmel. Successful crowdfunding through social media requires planning, dedication and determination. A few tips from your favorite crowdfunding expert also can’t hurt.

The process of using social media for crowdfunding starts weeks before a crowdfunding campaign launches. Having up-to-date profiles on the three major social media sites (Facebook, LinkedIn and Twitter) is imperative. Building followers before you launch is even more important. A typical rewards-based crowdfunding campaign lasts only 30 to 60 days, so it is too late to try to build a following on social media during the campaign. Adding quality contacts on social media must start weeks, if not months, before the campaign launches.

In the days before a campaign launch, successful crowdfunders do two things. First, they create a list of “core” supporters who will contribute funds and spread the word about the project. Second, they write the majority of the social media posts they will use throughout the campaign and create a posting schedule for themselves and for their core supporters. Having these two things out of the way before launch is essential because once the campaign is underway, a crowdfunder needs to spend time on the tasks that could not be done in advance, such as reaching out to media, interacting with donors and fulfilling rewards.

Facebook. For the duration of a crowdfunding campaign, posts containing links, videos, photos and useful information must be posted several times per week. Remember, only a small fraction of your Facebook friends see what you post on Facebook. In order to get the largest exposure, Facebook posts need to be frequent, and at various times of the day. Every post needs a link to the campaign page, a plea for a donation and a call to action to share the post.

Facebook posts should include photos from the campaign, links to the crowdfunding video, “thank you” posts for donors and posts detailing each reward. One important series of posts should highlight benchmarks attained and goals being approached. For example, proudly announcing that a campaign has reached 25 or 50 percent of its goal tells potential donors the campaign is gaining momentum and that successful funding is within reach. Similarly, telling a Facebook audience that only $1,000 remains to reach the final goal with two days left puts pressure on potential donors to act quickly.

Twitter. The Facebook page should also be linked to the campaign’s Twitter account so that posts are tweeted automatically. Twitter also offers great way to generate awareness and excitement about a campaign, and to spread the word even faster than Facebook. Tweets should be written and scheduled so that they are run at least 10 to 15 times per day for the duration of the campaign, at all hours of the day. Remember: Twitter is a news feed, so most people will only see what comes across their feed at the moment they are on Twitter. With the scheduled Tweets, Facebook posts being Tweeted and additional Tweets being added as the campaign goes on, it would not be overkill to have at least one Tweet per hour by the middle of the campaign.

LinkedIn. The network allows a crowdfunder to approach others in similar industries and professionals who can help with donations and marketing. Post updates on LinkedIn about the campaign, and also join crowdfunding groups to engage their membership. Many business people engage on LinkedIn far more often than other social media, so take advantage of this tool by tailoring the approach to that audience.

One last important bit of advice: Be sure to respond to and interact with each and every person who tries to engage you on social media. Social media works when people feel a connection. Simply posting something, then ignoring comments or interactions is a big mistake. When someone “likes” your Facebook post, thank them, and post a comment asking them to donate and share your post. When someone retweets you, thank them using their Twitter handle and give them a link to a reward they might like.

Interaction is the key to successful social media engagement. For the month or two of a crowdfunding campaign, success requires that daily time be set aside to utilize this incredible tool, not only to tell people what is going on, but to talk to your audience directly, and to respond to them as quickly and as thoroughly as possible.

The JOBS Act Provision That Could Change IPOs Forever

Originally published at Entrepreneur.com on February 21, 2014

There is excitement on "Main Street" about equity crowdfunding democratizing the investment process. Most people are unaware of another provision of the JOBS Act that could have a much larger impact on entrepreneurs and small businesses: Regulation A+. This provision will allow entrepreneurs to raise up to $50 million in a simplified form of an initial public offering.

Depending on how the SEC rules look when finalized, raising $50 million under Regulation A+ could have a similar cost and require nearly the same regulatory compliance required to raise only $1 million under the JOBS Act “equity crowdfunding” proposed rules. If the SEC keeps its proposed Regulation A+ rules intact, I will give this JOBS Act provision an A+ grade.

When congress passed the JOBS Act in 2012, they tried to fix Regulation A, a little-used provision of federal law that permits new and emerging companies to raise up to $5 million in a public offering. Regulation A is rarely used because it requires a company to register their public offering in every state where it is offered. The cost of complying with every state’s “Blue Sky Laws” makes Regulation A unattractive, given that more commonly used laws such as Regulation D allow a business to raise the same amount of money and not have to deal with 50 different state regulators and expensive state-by-state compliance. This is one time where a D is better than an A.

In the JOBS Act, Congress attempted to fix Regulation A by amending it. The new version had been dubbed Regulation A+. Congress increased the amount that can be raised from $5 million to $50 million a year, and removed all state registration and compliance requirements. Under Regulation A+, a small business must only sell their stock to “qualified purchasers.” The good news is the SEC proposes making everyone who wants to buy the stock, including anyone in the general public, a “qualified purchaser.”

Regulation A+ seems like a great fit for most small and emerging businesses. In fact, it could be a game-changer for the way small businesses are funded.

Unfortunately, Regulation A+ has some opponents. Not surprisingly, state securities regulators are unhappy that they are being cut out of the picture. These bureaucrats want the SEC to require a small business to register and follow the law of every state where they wish to sell their stock. Some even want the SEC to define the term “qualified purchaser” to mean an “accredited investor,” thus limiting the sale of stock to investors with annual incomes greater than $200,000 or a net worth of more than $1 million.

If the SEC succumbs to these critics, Regulation A+ will end up sitting on a shelf collecting dust like its elderly father, Regulation A. For less money and regulatory effort, a small business can use Regulation D to raise the same amount of money with a private offering limited to accredited investors. If a company can’t sell its Regulation A+ stock to the general public, there will be no reason whatsoever to use this exemption.

Regulation A+ offerings will only be an attractive means of raising capital if the proposed SEC rules remain intact, making these offerings exempt from state Blue Sky laws and keeping “qualified purchaser” defined to include any member of the general public who wants to purchase the stock.

We are in the middle of a 60-day comment period where the SEC allows the public to submit its opinions online. You can read my comment to the SEC on Regulation A+ here, in which I ask the commission to pass the rules without requiring state compliance and allowing the general public to purchase stock in these offerings. You can submit your own comment here until March 24.

I encourage everyone to submit a comment and to implore the SEC to define “qualified investor” as broadly as possible and to keep a company using Regulation A+ exempt from state Blue Sky laws. This law could help spur the economy with new businesses and new jobs.

6 Tips to Create a Top-Notch Crowdfunding Video

Originally Published at Entrepreneur.com on February 17, 2014

One major key to crowdfunding success is by creating a good video that sells your campaign to potential donors. In fact including a video will up your chances of success to 50 percent, according to Kickstarter. You don’t need to be the next Steven Spielberg or have a huge budget to create an amazing video. All you need is that electronic marvel in your hand that creates bathroom-mirror selfies and endless Facebook posts of the food you are eating. With a good smartphone and a few tips, you can create a video that will help you raise money and get your startup dream off the ground.

o turn stop asking Siri questions, ignore your incoming texts, pause your Candy Crush game and turn your smartphone camera to video. Follow these six rules and you will be on your way to crowdfunding success.

1. Video and audio quality are important. Shooting high-quality video on an iPhone or Android device is possible, but make sure the phone is on a tripod (or other stabilized device) and the audio is clear.

For lighting, record your video in a well-lit room or outside to get the optimal results. Before you hit action, shoot a sample scene. Look at it on your computer to make sure the lighting is correct and clear.

Consider buying a clip-on microphone that plugs into your phone rather than using the built-in audio that will sound hollow the further you get from your phone. Speak loudly, clearly and have the phone at an appropriate distance to get good quality. Listen to a sample, and if it sounds too hollow or if every time you say a word that starts with a “p” the sound pops, do it over. Trial and error is the key here.

2. Don’t try to wing it. Unless you are a trained public speaker, don’t ad lib your video. Write a script and make sure it hits all the key points of your crowdfunding campaign. Like a journalist writing a news story, include the who, what, when, where and why of your campaign. Read it out loud and revise it until it is perfect. Then, practice. You should sound natural when you shoot the final product.

3. Mention only two or three rewards. Going through an entire list of rewards is one of the most common mistakes I see in crowdfunding videos. People don't want to hear you drone on about every reward being offered. Instead, highlight only two or three of your best rewards. You want to get the viewer excited about what you are giving away through some of your best rewards, because enthusiasm is contagious and drives donations. For the remaining rewards, just include a simple reminder telling the viewer that the entire list is on your project page.

4. Keep it short and end with a bang!  When making any video, follow the KISS rule: Keep It Simple Stupid. Unless you are Martin Scorsese, nobody wants to sit through three hours of your video, especially when you are asking people to fork over cash for your project.  

The video should be short, exciting and get the viewer fired up and wanting to read more about what you are offering. Ideally, the video should be three minutes long or less (although really great videos will hold the audience’s attention even if longer).  For those who have a tendency to ramble on, keep in mind, with a crowdfunding campaign, you have an entire page online to write out more details and to show photos to supplement the video. People have busy lives and short attention spans. Don't lose your viewers before getting to the most important part -- asking for donations and help spreading the word about your campaign.

5. Don’t forget ‘the ask.’ Every successful salesperson in the world will tell you that if you do not ask for a sale, you will not get it. In your video be sure to ask for a donation and for help spreading the crowdfunding project to the viewer’s friends and social-media network. "The ask" should be clear, carefully worded and create a sense of urgency and action. Tell people specifically what to do and don't leave it up to them to figure it out on their own. But make sure it is sincere, as this authentic message can turn a viewer into a donor and marketing machine.

6. Turn to others. Look at other successful crowdfunding campaigns and watch their videos for inspiration. People who have successfully raised a lot of money through crowdfunding typically have very good videos. Learn from their experience. 

Will Equity Crowdfunding Laws Be the Death of Kickstarter?

Originally Published at Entrepreneur.com on January 29, 2014

There have recently been some angry grumblings from the blogosphere about the government wanting to stick its fingers in the crowdfunding pie. The concern across the internet seems to be that new regulations will destroy the rapidly-growing crowdfunding industry that brought us the Pebble Watch and the Veronica Marsmovie.

I am here to paraphrase Mark Twain and assure you that the rumors of Kickstarter’s death have been greatly exaggerated.

The JOBS Act and the proposed SEC rules have nothing to do with Kickstarter or any rewards-based crowdfunding site. The SEC rules only apply to equity crowdfunding, where a company is selling stock or equity from an online crowdfunding site. In fact, Kickstarter has already said it will not participate in equity crowdfunding, and most rewards-based crowdfunding sites will not do so either, primarily because of the extremely high cost of compliance.

Under the Jumpstart Our Business Startups Act (The JOBS Act), anyone who wants to start or grow a business will be allowed to use an online equity crowdfunding portal to raise up to $1,000,000 by selling stock in their company.

Those who do not have a million-dollar brokerage account at Merrill Lynch and could not get in on the Twitter IPO will be allowed to buy stock in the “next big thing” and be on the ground floor just like rich, accredited investors can do today. And those who need $500,000 to start a business but can’t get a bank to return your phone call will be able to use the JOBS Act to raise money online by selling part of your company to everyday folks who want to help you build your business.

The JOBS Act is nine pages long and pretty simple to understand. The concept was to help the economy recover by getting funding to small businesses and creating jobs in the process. It was passed by congress with overwhelming bipartisan support and was signed into law in April 2012.'

In late 2013, the SEC released 585 pages of rules, regulations and compliance requirements that, by their own calculations, could cost a new business as much as $30,000 to raise $100,000. Those of us who deal with securities laws were not surprised that the SEC was making crowdfunding under the JOBS Act difficult, expensive and filled with regulatory pitfalls.

For those who are excited about JOBS Act equity crowdfunding though, don’t be scared off by the apparent high cost and the seemingly insurmountable compliance issues. As it rolls out, individuals and businesses will employ creative means of making the JOBS Act work and filling the $1,000,000-and-under funding void that was formerly occupied by banks and angel investors. Broker-dealers scared off by the liability and costs of funding smaller raises will have new resources from innovative entrepreneurs that want to see equity crowdfunding work and become the trillion-dollar industry many predict it will become.

Kickstarter fans can rest assured that these new rules will not affect the rewards-based crowdfunding phenomenon -- at least for the moment. We all know that governments will eventually see the billions of dollars passing tax free through the rewards-based crowdfunding system and will want a piece of the action. Let’s all hope that congress manages to stay gridlocked enough that they never get around to doing so.

Take a Step Back. Set a Realistic Goal for Your Crowdfunding Campaign.

Originally Published at Entrepreneur.com on January 23, 2014

If I had a dime for every person who didn't understand the concept of setting a realistic crowdfunding goal, I could crowdfund the next Pebble Watch and a second Veronica Mars movie.

As a crowdfunding expert, many people call or write to me about great ideas that are perfect for rewards-based crowdfunding. Inevitably, after hearing their ideas, I close my eyes tight, scrunch up my face, hold my breath and ask the magic question:

How much do you want to raise?

The guy with a really cool idea for a fuel-efficient car needs $5 million. A lady with a great concept for a new kitchen gadget said $4 million would do. One filmmaker working on his first movie told me he could get by on $15 million.

We could all "get by" on $15 million, but less than a 10th of 1 percent of crowdfunding projects in the history of Kickstarter have raised over $1 million. The reality is 74 percent of successful Kickstarter projects raise less than $10,000.

If you need more than $100,000, you better have a great idea, a huge social network and a team to support your effort. If not, you need to wait for the JOBS Act to kick in and then use equity crowdfunding, where you will be able to sell stock in your business, because less than 2 percent of Kickstarter crowdfunding campaigns successfully raise $100,000 or more.

You need to set a more realistic goal.  

In order to do so, it is important to create a budget for the project and make sure to account for all expenses. Make sure to not miss expenses involved with the rewards promised to donors. You need to be sure to factor in the cost of the rewards, the expense of packaging and shipping the rewards, any marketing expenses and, most importantly, the crowdfunding platform fees and credit card processing fees, which will generally cost about 10 percent of the total amount raised. Add this all together, and you know how much you need to raise.

If the budget you create requires you to raise more than $25,000, consider breaking the campaign down into manageable sections. Raise $10,000 first to build a prototype, get the initial marketing materials finished, handle the legal and accounting and be ready to manufacture. Then, raise the rest in a second campaign for the first production run of your manufactured products.

By showing your donors that you can follow through on your first campaign, effectively raise money, build a prototype, fulfill rewards and communicate your success, you have built in a second round of donors who have a vested interest in your success, and who will not only support you in round two, but will also help you spread the word for the bigger second campaign.

Remember that there is a psychology to crowdfunding from the donor's perspective. Most donors will not give money to a campaign they believe will be unsuccessful. If your goal is high, and a donor sees you have raised very little when they review your campaign, chances are they will not donate, no matter how much they like your idea.

This is why smart crowdfunders line up 25 percent or more of their financial support before they launch their campaign, then have that money donated on the first day before promoting to the general public. Doing so makes the goal seem more attainable to potential donors and helps build momentum from the very beginning for a successful campaign.

One final thought on setting a crowdfunding goal: Taking donations and failing to fulfill rewards, or live up to your promises, could lead to legal trouble and will certainly result in negative publicity for you and your idea. Rewards-based crowdfunding has had surprisingly few instances of fraud or massive failures to fulfill rewards or promises, but when they happen, they are big news. As we all know, what happens on the internet, stays on the internet forever.  

Having a large number of angry donors writing, blogging, tweeting and otherwise spreading the electronic word about your poor business sense, or worse, your dishonesty, can have a lifelong effect on your personal reputation and even your business or employment.

So set a realistic goal, hit it, then follow through on what you promised. Keep the crowd happy, and the crowd will keep coming back for more.