More and more startups are discovering crowdfunding as a financing option. Whether it's about more than just "raising money," what measures can contribute to a successful campaign, and whether crowdfunding has already made its way into politics—we wanted to hear all about it from a real expert. And for that, we spoke with Markus Sauerhammer from Startnext spoken.
Crowdfunding is much more than just a financing option for projects or startups. What else – besides money – can founders and startups gain from a crowdfunding campaign?
The most important added value of reward-based crowdfunding for startups is the combination of market testing, communication campaigns, and (partial) financing through anticipated sales. Interestingly, this combination directly addresses the most common reason for startup failure: Is there actually a market for my product?
“If you want to convince people, you have to be able to tell a good story.”
What makes a successful campaign? Are there any campaigns that particularly stand out in your mind?
Anyone who wants to convince people must be able to tell a good story. The starter must be able to formulate a vision of how they want to change society, articulate the idea, and inspire their target audience. Overall, it's the interplay of various factors that must be considered. The seven most important success factors for a campaign are:
1. Project idea: Get to the point and explain your message.
2. Video: Give your idea a face and introduce yourself and your idea in front of the camera.
3. Images: Choose appealing images that illustrate your project and attract the attention of the crowd.
4. Funding goal: Define a realistic target budget with which you can implement your project.
5. Thank yous: Offer five to ten attractive rewards from which your supporters can choose their return.
6. Target group: Think carefully about who your target audience is and how and with what content you can reach them.
7. Communication: Share your project with the world – on social networks, by email, at events or through the press.
“Crowdfunding is also an image campaign for entrepreneurship”
A multitude of great projects that have been realized through crowdfunding are buzzing around in my head. I find social startups very exciting. Despite their social value, this target group has so far been neglected by politicians and traditional start-up support instruments. Great projects are here. Cucula, unicorn or the Kiron UniversityWhat best demonstrates the real potential of crowdfunding is the campaign by Original UnpackagedFollowing their success, there have since been over 15 more packaging-free supermarkets. Thanks to the transparent and participatory crowdfunding process, each individual campaign is also an image campaign for entrepreneurship as a whole, and we urgently need more of that in Germany.
Would you say that crowdfunding has already become mainstream? Or is there still some educational work to be done in this area?
Crowdfunding is now a familiar term to a large part of the population. Current surveys also show that this is continuing to increase. There are also significant regional differences. This is largely due to how local stakeholders are driving the issue forward and which regional flagships have conducted successful crowdfunding campaigns. Through close integration with communications, each individual project inspires other people to bring their own ideas to the streets. Looking beyond the borders to the USA, we certainly still have a lot of untapped potential.
Why should I, as a private individual, support a campaign?
Through crowdfunding, I, as a private individual, can directly influence which companies, projects, and products are realized. When I support a reward-based crowdfunding campaign, I usually receive the finished product as a thank you, often at a preferential price or in a limited edition. In addition, there are often rewards available exclusively within the campaign. If you like, this is the potential for a demand-driven innovation policy. As a consumer, I don't just determine which ideas are successful through my consumption, but can intervene in this process in advance.
And what about politics: Has the topic of crowdfunding already found its way into party manifestos?
The federal government's 2013 coalition agreement already included a resolution to combine public funding instruments with crowdfunding. Unfortunately, the relevant authorities have so far only discussed crowd investing. In my opinion, this is a major miscalculation, as a look at the US shows the enormous potential that lies dormant in reward-based crowdfunding. Since its founding in 2009, the largest US platform alone has created over 300,000 jobs and almost 9,000 companies.
I see the biggest problem in the fact that analogue financing instruments are supported with public funds, and crowdfunding has to fight for its place in this competitive environment of idea financing. I like to compare this policy to if, in the early days of the automobile industry, people were given a subsidy to buy a carriage and then later wondered why no automobile industry had developed here. However, there are now more and more political actors who are taking up the issue. For example, the L-Bank In April, it became the first German development bank to launch a financing product that combines the strengths of crowdfunding and traditional startup financing. Other players will follow suit throughout the year. Austria has Graz and Linz We've already set up our own funding programs to prepare for a crowdfunding campaign. So things are slowly moving forward.
“Most founders fail not because of financing, but because of the market itself.”
What do you think about crowd investing?
I'm also passionate about crowdfunding. We ran a few campaigns on Startnext and, after these experiences, we stopped the topic for the time being. In my opinion, however, there's still a lot of need, both from the market and from the political side, to create a favorable framework. After my job as a startup consultant, I consciously chose to work in the field of reward-based crowdfunding, as this leverages the efficiencies of digitalization to realize new ideas. In the long term, sales to customers are the only thing that determines a company's success in the market. Through reward-based crowdfunding, I incorporate precisely this process into the creation of new ideas. Most startups fail not because of financing, but because of the market itself. The question is also whether the majority of consumers are better able to assess the benefits of an idea—which they do through their daily consumer behavior—or the financial return on a potential investment?
There are many projects on Startnext in the field of social entrepreneurship – a topic you're passionate about. What particularly fascinates you about it? Are there any projects you find particularly exciting at the moment?
I worked in the field of technology-oriented startups for a long time and am excited about what will develop here in the near future. If we think about current developments logically, with digitalization we have entered an age of permanent change. History shows us that technological change always goes hand in hand with social change. In the past, such transformation processes have not always been peaceful. We should not make the same mistakes again. That is why I am committed to tackling social innovations with the same vigor as technological innovations. Social entrepreneurship has developed globally as an important and, above all, sustainable solution building block. Unfortunately, here too, politicians have so far ignored the issue in our country. A study by the Thomson Reuters Foundation found that among the 45 strongest economies, Germany ranks only 34th in terms of "government support" – between Greece and Mexico. Especially considering our tradition as designers of social innovations, we should not be complacent.
Suitable tools for the challenges of the 21st century
This is where crowdfunding comes into play. We will not solve the challenges of the 21st century with the tools of the last century or even the century before last. I have already presented a number of individual campaigns above. The next stage of development in this context is solving social challenges together with the people. I believe that is the only way social change can work. Two crowdfunding contests are currently running, which, in their holistic design, are incubation programs for social innovations. The non-profit Hertie Foundation supports German Integration Prize Initiatives that create solutions for the integration of refugees and the Ideenkanal Foundation aim to make Liechtenstein a Silicon Valley of meaningful ideas. Both are good examples of how I can use crowdfunding as a tool for designing future-oriented solutions at the local or national level.
