There are more ways to raise money for your business, project or organization than ever before. There are more angel investors, more online sites, more VCs… it's true that the local bank has largely abandoned this responsibility, but the web keeps reminding us of the opportunities.
Here's the key thing you have to understand before you ask your mom or your friends or the local VC for an investment:
There's a huge difference between spending money on expenses and spending money to build an asset.
Ice at a picnic is an expense. Once it melts, it's gone. Your electric bill, rent–these are costs of doing business, and you should rarely if ever borrow money to pay them.
Assets, on the other hand, are things that sustain or grow in value, that you can use again and again, and that are ultimately worth more than they cost.
A college degree from the right institution is an asset. So is an earned list of 10,000 people who want to hear from you by email once a week. So is a reputation (which some people call a brand).
For entrepreneurs, then, the math is simple: any asset-building opportunity that will generate a long-term profit is worth considering and even worth borrowing money to acquire.
But if your business needs to borrow money to simply pay your expenses, to keep you at a steady state, you're doomed. Unless those expenses are demonstrably building a bigger asset for tomorrow, you're going to regret the investment, because it's not an investment, it's just a waste.
The second thing to keep in mind is this: you probably have to pay the money back. Don't borrow money to pay for an asset unless you can see a clear path to paying it back. That might mean selling the asset later (which is what VCs almost always do) or it might mean building a project where the asset is so profitable you can pay people back directly (which is why it's worth borrowing money to go to Harvard Medical School).
If you sell a percentage of your company (which is what most investors ask for) then you've basically started down the path to sell the whole thing in order for the investors to get repaid. Nothing wrong with that, just be sure you're going in with your eyes open.
When in doubt, raise money from your customers by selling them something they truly need–your product.
It may be easier to raise money effectively than it is to spend it well.
Raising money for your marketing budget, your ad budget, your staff–this is a linear process. You can look at others who have raised money before you and emulate and increment and escalate those tactics and raise even more than the other guy.
What's interesting is how bad these very same people are at spending that money.
Marketers at companies big and small spend their money in childish, frightened, copycat ways. They believe that escalating the budget on what has worked before is a professional act, and one likely to work. So they give up insight and initiative and, yes, intuition in favor of scale, and try to scale their budget the way they scaled their fundraising.
Good luck with that. The competition is just as good (or better) than you at raising money, so the only competitive instrument available to you is to be better, not merely louder.
Architecture is a combination of sculpture and art and engineering and user interface. It is high tech and low tech at the same time, utilitarian and beautiful and virtually always budget constrained.
But do you know what great architects understand?
If you don't get it built, the work doesn't matter.
Great architects are able to be great because they know how to sell their ideas to their clients. (Or, they know how to find clients who will build their ideas. Same thing.)
If you're brilliant and undiscovered and underappreciated (in whatever field you choose), then you're being too generous about your definition of brilliant.
First, thank you to my amazing readers. To say that I had an overwhelming day is a bit of an understatement. The Kickstarter reached its goal in record time, less than three hours after I first posted it. We met and then blew away the stated goal. It means a lot to me that you're so connected and generous.
As promised, I'm going to do a few updates to share data and insights that might help the next person.
- Half the people who visited the page watched the video all the way through to the end. I'm guessing that's 5x what happens on YouTube. There's something about the medium of a Kickstarter page that makes the video even more important than you'd think. I'm glad I reshot mine (and made it shorter).
- A fancy video isn't important unless the product you're selling involves video. Direct and clear beat clever editing and dissolves every time.
- Scarcity cuts both ways. I stated from the beginning that my goal wasn't to maximize the revenue generated from the page, and it was clear within minutes that many readers were excited to be part of something that was limited. Of course, some people got upset by the very same thing–it's hard to balance scarcity (a signed edition, say) with abundance (spreading ideas far and wide).
- People are smart. This Kickstarter had ten levels, which felt like a lot when I built it, but I bet the audience could have figured out their favorite choice if there had been twenty.
- I'm not sure your goal should be to make the topline number as big as possible. The whole idea of measuring the revenue of Kickstarter makes no sense (how much does it cost to make a Pebble watch or record a CD?) No one really knows what your costs are, but it's the costs that matter, not the revenue. That's obvious, yet we're busy talking about what people 'make' on Kickstarter, and many Kickstart builders are trying to structure the offer to push that number up. No need. It doesn't matter. Maximize what's important to you, not the pundits.
- Folks who put up links to your Kickstarter are generous beyond measure. Even more important is permission to talk to a tribe that cares about you and what you make. Build that first.
- If you're thinking about skipping the permission step when you build your campaign, please reconsider. This is the one and best secret of Kickstarter.
Thanks again to everyone who took the time to talk about it, watch the video and participate. If you're interested, there are some rewards that aren't sold out. For me, it's back to writing, working on making you the best book I can.
I’ll need your help with this one. [And you came through, big time! The goal is already reached, in less than three hours. Thank you. The Kickstarter is open for another four weeks, and there are plenty of rewards still–check it out.]
My new book launches today–but you won’t be able to read it until January.
Let me explain:
Books take a long time to invent, produce, ship and go on sale. Almost all of that work happens on faith, and it’s then followed by a frenzy of promotion and anxiety, as the publisher and author try to find out if there’s actually desire for the book. Activating the tribe at the end of the process is nerve-wracking and inefficient. For the reader, it’s annoying to hear about a book 32 times from a panicked author who has her back against the wall, and then in every media outlet you turn to.
As part of my 25-year quest to find a better way to make and promote books, I’m launching a hybrid experiment today. The idea is to do it in public, and to use widely available tools that can be emulated by other authors and other publishers if it works.
The problem with traditional publishing is that you do all the work and take all the risk before you find out if the audience is ready and willing to buy the book. And you have only a few days to go from “it’s new” to “it’s over.”
I think there’s a new way to think about this, a hybrid of old and new, one that activates true fans and makes it easy to spread the idea through the tribe and beyond.
It starts with a Kickstarter* page. A lot of the details of what I’m describing are on that page, so feel free to check it out when we’re done here.
A successful Kickstart is great (Amanda Palmer is our hero), but what happens after that? How do you take the buzz and connection and scale it?
My idea: Kickstart + bookstore + ebooks.
The publisher (my key to the bookstore) is only willing to go ahead with the rest of the plan if my Kickstarter works. No Kickstarter, no distribution, the stakes are high. (As you saw at the Domino Project, the ebook part is easy now, but the bookstore is still critical to reach the many readers who find and buy books in stores).
If the Kickstarter works, then all the funders will get to read the book before anyone else, plus there are bonuses and previews and special editions. A few weeks after the early funders (that would be you) get to read it, the book will be available to book buyers for purchase the traditional way (wherever fine books are sold in the US, including digital readers). Of course, the Kickstarter funders get a better price, get it first and get unique bonuses, plus the pleasure of being in early–and knowing that they made it happen. The only way this book becomes real is if my readers get behind it now.
By using Kickstarter early in the process, we eliminate book publisher/bookseller skepticism and create the excitement they need to actually stock and promote the book. Those books you see stacked up by the front window at the bookstore? That’s not an accident. That’s a promotion planned months in advance, based almost entirely on how optimistic the publisher is about a book’s prospects.
So that’s the idea–a way that any author with a following can divide the publishing process into three pieces–get the true fans on board early, give them something to talk about just before the book is in stores, and then use online and offline bookstores to do what they do best and distribute far and wide. It moves the power in the process to where it belongs–to motivated readers and their authors.
It's not easy to build a following, and it takes time, but I hope you'll help me show authors and publishers that it's worth it. Here's a short link you can share: http://kck.st/KvkY4h
I’ll update you four times in the next four weeks about how we’re doing. Thank you for helping me make this work, and for publishing your own great idea as soon as you are ready.
* [Three Kickstarter details:
- Kickstarter is a free website that allows artists to give their fans a chance to show their interest in a new project.
- Kickstarter doesn’t charge you (or me) a thing unless the project meets its minimum. After that, you're charged for what you pledged and you are guaranteed to get the reward you signed up for.
- This is the rare Kickstarter where there’s not an unlimited inventory of rewards–every item is limited. When a reward is gone, it's gone.]
Thank you for your help.
The single most appropriate question to someone who attacks, dismisses or trolls: "What are you afraid of?"
It's incredibly easy to tear someone down, easier still to criticize an idea. The more vehement the opposition, though, the deeper the fear.
[Note: tomorrow's blog post will probably be about an hour later than usual, as I'm announcing a new project.]
I'm listening to an obscure CD of the Silver Beats, a group of four Japanese lads who play note for note renditions of Beatles songs. They don't speak a word of English. And yet they sing beautifully.
I saw them as an opening act a few years ago, and the novelty was extraordinary.
The thing is, I don't want to see them again. Why would I? It's note for note. No chance for random rhapsodic moments. No chance for total disaster.
Part of the magic of our work is that it's not guaranteed. As soon as it is, we can digitize it or mechanize it or outsource it.
The most efficient way to get the behavior you're looking for is to find positive deviants and give them a platform, a microphone and public praise.
The tribe is hyper-aware of what's being celebrated, and when you celebrate those that are moving in the right direction, you create a powerful push in that direction. It's tempting to spend your time extinguishing bad behaviors, but in fact, spreading the word about the superstars is far more likely to change the culture of your market.
This is the fear that kills brands and b2b sales and individual creativity. It's the fear without a name, without a face, without false facts that can be shot down or arguments that can be reasoned with.
This is the amygdala firing, the lizard brain being triggered without rational explanation.
When we are wrestling against the elusive and resilient fear with no name, often the only choice is to live with it, to care enough about forward motion and practical progress that we can come embrace the inner trembling that won't give up.
In market after market paralyzed with fear, this trembling might be the very best sign that you're on to something.