Crowdfunding Your Food Truck Project
Once an unknown financing option for entrepreneurs, crowdfunding has quickly evolved into a fast, effective way to raise cash for just about any mobile food industry project. Crowdfunding’s growing popularity is good news for creative culinary types who typically don’t have access to large bank loans or angel investments. From initial start costs to fleet expansion to new equipment purchases, crowdfunding can cover the whole gamut of various projects food truck vendors need assistance in financing. The great thing is that this funding is likely to keep soaring, as the crowdfunding economy grows from $1.5 billion in 2011 to an estimated $3 billion this year.
Four Things to Do Before Launching Your Campaign
If you want people to give, you’ve got to drum up excitement. Here are four strategies for building momentum even before launching your food truck campaign:
Build your social network. Fundraising season is not the time to be a wallflower. Plan to let anyone who has ever supported your creative endeavors know you’re looking for backers. Don’t have much of a network in the first place? Then build one.
Make a great video. Thanks to the built-in video recording features on smartphones, a good video doesn’t have to cost a dime.
Plan perks people want. If you’re raising money for a food truck or other mobile food business, it makes sense to plan on sending coupons for free food or merchandise as thank yous.
Create multiple entry points. Not everyone has $50 to spare, no matter how great your food truck project sounds. So make sure to have lower pledge levels (starting as low as a dollar) to encourage people to participate in and create momentum for your campaign. Likewise, come up with a few over-the-top perks to reward your biggest backers.
How to Pick the Right Crowdfunding Site
The crowdfunding site Kickstarter has gotten so much publicity lately that you might think it’s your only option. But there are literally hundreds of other sites from which to choose. Here are some of the best, along with their key differentiators:
Kickstarter: With more than $350 million raised for projects since 2009, Kickstarter is the best-known crowdfunding platform, but it also takes the largest cut: a 5% flat fee, plus 3% to 5% for payment processing via Amazon. That means you typically pocket just 90% of pledges. And Kickstarter’s rules dictate that if you don’t reach your goal—even if you raise $9,500 out of the $10,000 you’re seeking—you get nothing. Despite these issues, Kickstarter has a reputation for helping people raise more money than any other site.
Indiegogo: The main reason people choose Indiegogo is that, unlike Kickstarter, it lets you keep all the cash you raise even if you don’t meet your goal. Such largesse doesn’t come free: Indiegogo keeps 9% of funds raised under this “flexible” funding plan, plus a 2% to 3% payment-processing fee. Otherwise you pay a 4% flat fee for Kickstarter-style “fixed funding,” plus the 2% to 3% fee. Indiegogo isn’t just some lame also ran, either. And unlike Kickstarter, Indiegogo allows charity and cause-oriented projects.
Others: Crowdsourcing.org keeps an updated directory of hundreds of crowdfunding sites, if you want to search on your own.
Get Real About Your Overall Costs
The biggest mistake novice crowdfunders make isn’t asking for too much money; it’s not making a realistic estimate of how much money they will need to cover their expenses.
Say, for example, that you know it will cost $15,000 to purchase your truck. Subtract fees (of about 10%, including payment processing), the cost of shipping out gifts to your backers, and taxes, and you might net only half of your total funds raised. In other words, you should ask for at least a third more than the total amount you think your food truck project will cost.
Many crowdfunders don’t realize until after their campaign is over that they underestimated their costs.
If you feel uncomfortable asking for the full amount up front, once you reach a lower goal, you can announce a stretch goal and send updates to your backers explaining how you’d use any extra funding.
How to Drive Thru the Mid-Campaign Deadzone
It happens to even the most successful food truck campaigns: After a swift start and a flurry of pledges from your inner circle of friends and family, donations start tapering off in the second or third week.
Here’s how to turn things around:
Don’t let your food truck campaign drag on too long. A month is the typical sweet spot for most crowdfunding campaigns. Any longer and people will put it on the back burner, then forget to donate. Any shorter and your project can seem rushed and disorganized. It’s also best to end your campaign on a weekday evening so you can give the final push when people are probably bored at home and surfing the web anyway.
Stagger your updates. Assume that donations will taper off in the second week of your campaign—and be ready to re-energize it by sending out an update on funds raised or newly added prizes.
Maintain separate email lists. You may want your first email at the start of the campaign to go only to close friends and family, the second to professional colleagues, and the third to everyone else. Casual acquaintances are more likely to be motivated by seeing that the campaign already looks like a winner. And be careful not to annoy people who already funded you with numerous follow-on solicitations.
Don’t freak out. The mid-campaign slump is normal, not an early indicator that your project is doomed. Avoid the urge to add perks you can’t really afford or to start emailing people on a daily basis.
How to Satisfy Your Funders
Nobody likes dealing with a flake, especially when that flake has your money. So if you ever hope to get your funders behind another project, you need to assure them that you’re on the ball, making progress, and will have something to show for their faith.
Finish early. Looking for a great way to make your backers really happy? Beat expectations.
Communicate. It’s not always possible to finish early, of course. If you’re running late, like three-quarters of all crowdfunding campaigns, let your backers know.