Although it may seem like most crowd-funding ventures are fantastically successful, the numbers show that most campaigns fail miserably and don’t come close to their target, consultants say.
By ARIEL SHAPIRAUS dollars and euros banknotes are seen in this illustration photo(photo credit: REUTERS)
In a report published on March 3, 2014, Kickstarter made three exciting announcements: • Up until March 2014, $2,171,304 from 12,799 different Israeli accounts was invested in Kickstarter crowd-funding campaigns. By comparison, Russia, which has a population 18 times that of Israel, funded only $3 million in 15,000 Kickstarter accounts.• Indiegogo, Kickstarter’s largest competitor, set up operations this year in Israel under the management of Oren Simanian. This is additional proof that the world believes Israel is not just the start-up nation, but also the crowd-funding nation.• Projects led by Israeli entrepreneurs are among the most successful Kickstarter ventures. For example, PowerUp, which built the world’s first smartphone-controlled paper airplane, was the first Israeli campaign to raise more than $1.2m., and Scio, which created a pocket molecular scanner, raised more than $2m.Despite these accomplishments, the road to success is full of obstacles and difficulties, especially for Israeli entrepreneurs, which must be overcome.I recently sat down with Liran Erez and Liron Goldstein of Sparqly, which helps companies navigate the world of crowd-funding platforms and e-commerce channels. They offered the following tips for success:• Although it may seem like most crowd-funding ventures are fantastically successful, the numbers show that most campaigns fail miserably and don’t come close to their target.Competition on the international level is growing every day as large companies use crowd-funding as a way to market their products and not necessarily to raise funds.This is what Pebble did when it launched its second smartwatch. Pebble is an established company with investors, stable cash flow and plenty of equity, so it was not searching for additional funding. Instead, it used Kickstarter as a marketing tool to promote its new product, but at the same time it succeeded in raising $20m. in just over a month – all this before it even began manufacturing its new watch. But don’t be fooled, Pebble invested a huge amount of money in the Kickstarter marketing campaign, funds that most Israeli companies do not have at their disposal.• Israeli companies often get bogged down with administrative difficulties since crowd-funding companies require that participants have an international bank account in a qualified country; as of today, Israel is not on that list. As a result, before they can even begin the crowd-funding process, Israeli ventures are forced to open private or company accounts overseas, a complex procedure that has serious ramifications with respect to taxation and financial transactions in Israel. To avoid these complications, it is always recommended to consult with a tax adviser prior to beginning a crowd-funding campaign.• Israeli investors tend to invest large amounts of funding in developing products, but they often fail to invest enough money in marketing and brand recognition. As a result, Israel is considered a giant in R&D but not in advertising like the US is. But in crowd-funding, having a quality product alone won’t bring in the cash.
Israeli entrepreneurs should approach marketing professionals who specialize in crowd-funding if they really want their product to succeed.This is an important step to take early on in the process – not just prior to launching your crowd-funding website.Having a successful crowd-funding campaign requires more than just a good idea and a nice design.It requires community management, direct approach of target populations, ongoing dialogue with supporters and, of course, quality infrastructure and well-functioning operations and marketing divisions. As a result, a number of crowd-funding specialists, such as Sparqly, began offering their services to Israeli ventures. These specialists help reduce companies’ risk, improve their learning curve and advise them before, during and after their campaigns.• It’s important to remember that just because a crowd-funding campaign has successfully been completed doesn’t mean that your work is done. In fact, the opposite is true.Israeli entrepreneurs tend to focus on the exit, but with crowd-funding it’s different. Even after you’ve brought in a significant amount of cash, you can’t just take off on vacation to Hawaii.Many entrepreneurs who felt cashheavy have gone on a spending spree, only to find that when they sat down with manufacturers in China they didn’t have the funds to produce their product, the deadlines were too tight or that the specs weren’t what they were originally promised. These issues can lead to bankruptcy, the need to raise additional funds, taking loans or even lawsuits.Although not many Israeli companies carry out production locally, it is still advisable to consult with manufacturing experts before launching a crowd-funding campaign so that you can estimate costs and risks as closely as possible.App helps you sell store creditZeek, an Israeli app company for unwanted store credit, lets you sell store credit (those receipts you get when you return an item that usually ends up getting washed in the laundry), gift cards and e-vouchers below face value. Zeek recently announced that it has raised $3 million in Series A funding from Blumberg Capital and Qualcomm Inc.through its venture investment group, Qualcomm Ventures and Waze founder Uri Levin.Zeek said it will use this new funding to facilitate its expansion into Europe this year.“Zeek deals with a big problem of $100 billion wasted globally every year by consumers on store credit,” Zeek chairman Uri Levin said. “It is changing the way consumers buy through its innovative sharing economy that I love, and it is simply making the world a better place.”Zeek CEO Daniel Zelkind said: “Zeek has proven to be a great success in Israel, and so we’re really excited to be in the UK. Close to 20 percent of issued store credits in the UK go unredeemed year over year, resulting in a $1.5 billion loss to consumers as well as retailers that are not able to secure the 40% up-sell on average they usually receive on redemptions, so of course we see a huge potential for our service to UK consumers.”Alon Lifshitz, a partner at Blumberg Capital, said: “We at Blumberg Capital love Zeek’s focus on helping consumers save money on unused store vouchers, preventing users from throwing money down the drain. Their strategy combines technological and macroeconomic advancements to create a unique solution that will change how consumers shop in years to come.”RideAir RideAir is a portable, refillable air capsule that lets you inflate your bicycle tires at the push of a button.The capsule can be refilled at any gas station or bicycle store and is the simplest and most convenient solution to cyclists’ most common problem: reduced tire pressure.RideAir recently launched a crowd-funding campaign on Kickstarter in an effort to raise $37,000 to finance the completion of its R&D process.Reduced air pressure is a problem bicycle riders constantly face, either from ongoing usage or due to a small puncture. And this usually happens when we’re out on a ride and not near an air pump, so we are forced to drag or carry our bicycle to the closest gas station, which in the case of electric bikes can even destroy their tires.RideAir, which was designed and developed in Israel, is a safe and inexpensive solution. The environmentally safe RideAir capsule can be refilled and does not require the purchase of new, expensive capsules, and it is designed to fit any bicycle bottle holder.If you run a young start-up, have developed an interesting app or have a question, please feel free to contact info@ social-wisdom.com.Translated by Hannah Hochner.