Crowd Funding, entrepreneurship, Rants, startup

Crowd Funding Troll is Crowd Funding Troll

Ari Zoldan recently wrote an article on Inc. that in my opinion must be one of the most misguided FUD pieces on crowd funding I’ve ever read.

It seems to me that he doesn’t know how crowd funding without selling equity (e.g. Kickstarter and IndieGoGo) works – or deliberately wants to discredit the incredibly powerful new tool available to entrepreneurs for validating ideas and product – or perhaps more likely he just lost track of the evolution of entrepreneurial methodologies since graduating.

(Kudos to him on the polemic page impressions link bait material, though.)

These are my highly opinionated thoughts on his three outrageous claims in the Inc. article.

Any advanced form of trolling is indistinguishable from thought leadership

Claim 1. “It [Crowd Funding] makes it too easy to kid yourself”

– In which he argues for the writing of a business plan (!) instead.

1. Crowd Funding without selling equity is bootstrapping.

There’s nothing more sobering and honest feedback than direct contact with the market. Crowd funding WITHOUT selling equity can be used as a valid MVP (Minimal Viable Product) that will help you validate your thesis that if you build it, they will indeed come – AND buy.

Just don’t build and produce anything until you’ve received pre-orders that will cover the production at cost or better. Obviously. Crowd Funding without equity IS a valid bootstrapping strategy. Make no mistake about it.

Who cares about business plans? No business plan ever survives first contact with a customer anyways. Business plans can only work if you are executing a known and validated business model. That’s the polar opposite of a startup which sole purpose it is to search for a scalable and repeatable business model. No magical business plan is ever going to help you find it. Validating your product in the market will.

I do personally recommend writing a very basic business plan as an educational exercise to arrive at an back of the envelope estimate of how much money is going to come in and go out and where – and then burn it! It’s not an operational guide nor a road map. It’s a work of fiction, a fantasy, a guess.

Isn’t it a no-brainer that as long as you can sell your shizzle, you should try to make as many pre-orders as you can before production and shipping, at least enough to make it cover your cost and perhaps contain some profit to channel into marketing of the second batch? Isn’t crowd funding a perfect viable channel for facilitating such pre-orders?

If you can’t sell enough to just break even, isn’t that a clear sign that maybe you’re not solving a problem that the market cares enough about to pay you? Or that you are doing a crappy job at describing the problem you’re solving and the solution you’re offering? That you should probably be doing something differently?

Isn’t crowd funding an awesome low-risk, low-cost channel to test the viability of your business idea, to help the market find you and fail or succeed faster?

And so frigging what if you don’t make your funding goals? At least you failed before you committed significant amounts of your or other friends, fools or family’s money – let alone an investor’s – bet the barn and lost your life partner.

At least with crowdfunding, you had the sense to save all of that money and maybe even invest some of it into mutual funds or stocks (more here on that if you’re still stock hunting). By now you probably have a pretty diverse portfolio that gives you decent if not great returns and can use that money to fuel the business this time around!

And hopefully you learned more about what you should be selling instead by getting invaluable feedback directly from the market. Consider your time spent raising crowd funding a considerable investment in your personal entrepreneurial education.

And consider this: Every time you fail at crowd funding, you get to play again and again and again ad nauseam, ad infinitum – without going bankrupt or having to beg private equity funds for the privilege to play.

Claim 2: “It [Crowd Funding] isolates you from people who can actually help you”

– In wich he argues you need feedback, permission and validation from investors, not the actual market and your actual potential customers.

2. An investor is a commodity, an outstanding entrepreneur is the prize.

If you as an entrepreneur can show a VC or an angel how you already validated your business and how you’re already making money, you can pretty much shop around for the investor you want to a price advantageous to you.

Basically, you’ll have the best bargaining chip available to any entrepreneur in your pocket. In fact, you might even find out that you don’t need an investor at all to scale your business, that you can build on actual pre-orders and sales yourself.

I call hot steaming bullshit on the ridiculous assumption that savvy VCs and Angels would be less interested in you if you crowd fund (read: bootstrap) your startup at an early stage.

In fact I’ll claim the polar opposite: Crowd funding provides you with a new channel to get found. If you’re able to show traction and sales – they’ll come knocking, or at least it will help get you through most doors.

As an anecdotal proof, I myself have been approached by tier one Silicon Valley investors as a direct consequence of crowd funding projects.

And I guess he’s oblivious to why Customer Development, Business Model Generation and the Lean Startup changes everything.

Claim 3: “I’d never recommend investing in a crowdfunded company. What does that tell you?”

– In which he is trying to distract you from your own logical reasoning by “Argument from Authority” when possessing seemingly none.

3. One swallow doesn’t make a summer.

That Ari Zoldan won’t invest in crowd funded startups means only that Ari Zoldan won’t invest in crowd funded startups.

What you see is all there is – WYSIATI.

I’d never heard about Ari Zoldan before I read this article. He’s not to be found on Angel List, not listed as an investor on CrunchBase, not listed as an investor on LinkedIn nor on his Wikipedia page.

I think that speaks for itself how qualified Ari Zoldan is to give startup entrepreneurs advice on how to get funded – or not.

DISCLAIMER: 1. Here’s my past crowd funding failure. 2. I’m an instructor with NEXT and I preach teach Customer Discovery, Business Model Generation, Lean, MVP-ing, Metrics and Innovation Accounting.

Failure, hustling, Lessons Learned, pitching, startup

On failing: Crowd funding an iPhone app on IndieGoGo

My entrepreneurial buddy Francis and I tried to crowd fund a startup. It was an iPhone app. More specifically, an Instagram for one second videos. We failed. Unspectacularly.

But don’t let that discourage you from trying. Here are some of the lessons we learned.

Update: For validation of our concept, see now twitter owned Vine and Cesar Kuriyama’s 1 Second Every Day that emerged over six months later.

Boot screen

Recap for new readers: In the summer of 2012, me and Francis decided to experiment with crowd funding. We’re both busy running a couple of other startups, but since we were both n00bs to this crowd funding thing we thought we’d better get some experience and without potentially involving our main brands.

In short, we were trying to crowdfund an app to shoot and share videos composed of one second shots – six months before Vine and One Second Everyday. (I still remember people laughing at the idea back then…)

Roughly speaking there are two main types of crowd funding: 1) Funding against selling equity, percentages of shares that is, in your company 2) Funding against selling perks, products, merchandise, hot air and bridges in London – for no equity whatsoever. As we are both stingy bootstrappers, we liked the sound of the last option.

We decided go with IndieGoGo since you needed to be a US citizen to use Kickstarter at the time – or find someone with one willing to be use as a proxy, which would raise all sorts of other issues like liability, legality and added costs in fees – and the potential of a 3rd party effectively being able to hold your money hostage if successful.

Here’s what the last iteration of the video pitch on IndieGoGo looked like:

Starting out, we had some assumptions and there were a few things we wanted to test and (in-)validate:

  1. Is it possible (for us, right now) to crowd fund (without equity) the development of an iPhone app?
  2. Is there any interest in this product in the market?
  3. How efficient is spamming, mailing, tweeting, posting and otherwise contacting friends, fools, families, bloggers and journos?
  4. What is the conversion rate from blogs and news sites when and if we get published?

The tl;dr answers:

  1. No
  2. Yes
  3. Abysmal
  4. Disastrous (extrapolated)

Read on for the more longwinded answers and conclusion.

As luck would have it, during our campaign I also got the chance to ask IndieGoGo co-founder Danae Ringelmann (@GoGoDanae) in person at a panel on Crowd Funding of startups in Europe moderated by Mike Butcher (@mikebutcher) at the Campus Party EU in Berlin.

Mike Butcher moderating panel on Crowd Funding at Campus Party EU in Berlin (OneSec color theme match accidental, not edited in post)

Danae was kind enough to sit down with me after the panel and give me more advice on our crowd funding campaign. Here’s what we learned from her:

  1. For a very successful IndieGoGo campaign example, look at Satarii Star.
  2. Add as much as possible to the story of “what’s in it for me as a backer”, “only you make it happen”, “if you help this happen you will be able to do X and Y”, focus on the emotional appeal. Think Apple.
  3. If you can, show “what’s in it for me” in images to help emotionalize it.
  4. Ramp up the communication about what is going to happen if you fail to raise the target amount and make sure to communicate the consequences.
  5. Reach more than $ 1.000 before pushing to the press.
  6. Reach out to people who have already pledged for stories and testimonials, publish their stories about why they believe in you.
  7. You can extend the running time of a campaign. Get in touch with IndieGoGo support if you need to extend the time.
  8. Keep pushing press although they don’t react at first. Just keep it up and ping them back on any kind of updates.

BONUS (and this is from me, not from Danae): Pay or raise the plus $ 1.000 yourself with family and friends you will pay back if you can and if you’re going for a campaign that gets to keep the money regardless if you reach your goal and consider the PayPal fee marketing expenses. I’ve heard this trick is more the rule than the exception on IndieGoGo.

It’s evident to everybody by now that we were spectacularly unable to fund the development of the OneSec iPhone app. Was it because it’s the wrong product? We don’t think so based on the feedback we are still receiving. We still think there’s a great opportunity to be had here. We have not given up on it.

Could we have kept on going, extending the campaign, applying and executing on the knowledge that we gained on the way? Certainly, but we decided to call it quits and call it a #fail. We had learned a lot about doing a crowd funding campaign and it was time to move on.

In the course of the campaign we were tweeting, retweeting, blogging, mailing and Facebook posting night and day. Manually and automated. We spammed around 680+ journalists in an email blast. We posted tips to about 20 of the top tech trend agencies. We filled special interest forums. We instagrammed. We YouTubed.

Here’s the results:

And how did this convert? The honest answer; We have no direct way of measuring it as IndieGoGo doesn’t offer standard referral analytics. You can track how many tweeted and posted your campaign to Facebook using the share buttons on the campaign page – but that’s it.

Having no referrer data is insane if you’re somewhat successful and want to identify where the traffic is coming from and what to focus on. Luckily for us, we were complete failures and measuring conversion of referrers when you have zero effects is pretty easy. We still would have loved to see which source drove the most traffic – if any, though. (See Francis’ posts on stats on publishing and conversion for more on this subject).

The lesson to us was pretty clear that spamming journalists and getting some publicity didn’t convert into any pledges.

We probably also launched our publicity efforts too soon, before we had reached $ 1.000. Next time we’ll consider paying this amount in ourselves and considering IndieGoGo’s cut as marketing expenses.


So what do we think were our biggest mistakes and lessons learned? What would we do differently next time?

  1. We failed to explain the product well enough
  2. We failed to make an emotional connect with more potential users and backers
  3. We failed to identify the target user segments and multiplier groups
  4. We failed with the tongue-in-cheek, no-budget style whereas more successful campaigns have had more of a serious and solid narrative with polished video content

In hindsight, it’s clear we failed to explain the product to people in the pitch video. Talking to people, the single most frequent first response is “I don’t get it”. Then we take the time to explain it and then they are like “Oh, I see. That’s cool”. We could have made a more detailed demo – especially detailing what we’ve planned for the super-easy editing and the social sharing aspects of it. Making an extensive demo would have taken considerable more time and effort than we already put it, but doing a campaign over again we’d probably start with explaining the product in more detail.

We failed to make an emotional connect with potential users and funders on two levels. On the one hand successfully conveying why we’re doing this, why we believe in this and what will happen if we don’t get funded. On the other we also failed to explain and “sell” the “what’s in it for me” the “how this makes my life better” to the potential backers. Doing it over, we would focus on how the product improves the user’s life like keeping more in touch and more up to date about your life, lives of friends and families, sharing more with others instead of your videos just gathering virtual dust on SD cards and hard disks, Apple-style with people showing real-life use-cases.

Starting out, we spammed targeted our friends, families and fellow entrepreneurs and things looked good for a while. Then as the campaign progressed, growth quickly leveled out as we didn’t manage to identify and branch out to new potential groups of users that would love our product and to other communities who’d be interested in seeing us succeed. Next time, it would probably be smarter to to do some research, tests and cohort analysis to find those groups up front before launching the campaign, having an actual plan on who to market it to, where they are, how to best reach them and how to better enable them to engage with and share the campaign.

In conclusion if we could have invoiced all the work we put in as regular consulting hours with normal customers, we’d probably made more than our original target for the funding campaign. But don’t let that deter you from trying. Just avoid doing the same mistakes we did.

For further reading on lessons learned, make check out Francis’ “Tales of Creation” where other entrepreneurs share their experiences and insights.

Stay tuned for the next installment, in which we perhaps test and learn how to fund an iPhone app – an Instagram for one second videos – with private investors for equity.

Until then, I’d love to know what your experiences with crowd funding are. How did your campaign go? What did you learn? What do you think we did wrong? Share in the comments or join the conversation on Hacker News.

OneSec app screenshot

[I’ve removed an embedded presentation on SlideShare here as SlideShare decided to “forget” its contents – MSFT has really killed that platform with neglect. #sadface]

Update: We were approached by a major investor in [insert name of massively successful camera product brand here] after we had decided that the experiment had run its course and shortly before the Vine app hit the street. Of course there is no telling if that conversation could have gone anywhere interesting – or not – had we decided to revive it and press on. However, perhaps the last lesson learned was that these things take more time than you think. To create and manage – but also for your message to reach out to interesting new places. And just as you are about to lose faith and passion, your luck just might turn if you stick to it. However, we had already decided to kill it as we had run out of personal interest and passion. With the release of Vine immediately after, that decision was reconfirmed for us and I don’t think we regret killing it.

Mobile, News

OneSec – An experiment in crowd funding

As some of you already know, I’m collaborating with a friend of mine on this little fun crowd funding summer project thing called OneSec.

So get out your credit cards and pledge now!

OneSec is an iPhone app that makes shooting & sharing good videos fun and easy by changing the format to one second shots. Less is more!

Check out our campaign on IndieGoGo for the full story.

We thought it would be an interesting experiment to test if crowd funding is a valid option to fund awesome high-quality iPhone apps. We’re iterating our campaign every day and sharing insights what’s working and what’s not. Stay tuned for more insights.

So head over to the campaign and pledge, pledge, pledge as much as you can spare and if you can’t or won’t pay us be sure click all the like and share buttons on the campaign page. That helps too!

Oh, and not to worry about Gauss. That one is still moving ahead at full speed. I’m just doing this as a fun little summer experiment as others have their well-deserved summer break.


OneSec screenshot 2