The idea of the crowd as a source of knowledge, skills and finance has immensely gained in popularity over the last few years. The crowdfunding market alone is projected to grow five fold by 2022 compared with 2016 levels. Entrepreneurs are using these people not only for the purposes of cash flow, but also as proof of concept, early idea validation and even customer pre-orders.
And the good news is, there’s still a lot more where that came from. Forbes magazine points out that if just 2 percent of the $30 trillion in the U.S. long-term investment capital were directed towards startups, it would be 10 times greater than the amount angels and VCs invest every year. And that that same 2 percent would equal all of the current small business bank loans in the US today. In other words: The crowd has a lot of money to invest.
So if the crowd represents so much potential it makes sense for business owners to think about how to best pitch in order to get the desired response. This post will address both crowdfunding (i.e. getting money from the public) as well as requesting other kinds of engagements from the world (such as to mine data or assist in AI development).
Simple, clear and realistic
The first principles of pitching to the crowd (whether you are looking for money or data) overlap with general pitching. You need to assume that the person listening to your pitch is super busy, impatient and skeptical. That means that you need to convince her within the first minute of your presentation’s merit— which is where the famous “elevator pitch” phraseology comes from.
That means you need to keep the information punchy and bite-sized. So if you are pitching live with the aid of slides, there shouldn’t be too much text. Similarly, if the presentation is being read on a website, the text used should be sleek and undergirded by strong visuals.
Getting started, the first question you need to answer for your listener is: “Why should I care?” It helps to provide facts and figures (statistics) that support the broader societal need for your solution. Having said that, be sure to be realistic with your projections. Yes, investors want to see growth but they also know that hockey stick growth is rare. After all, you are going to be held to account to what you say at your pitch, so you had better make sure you can do what you say you will do.
Know what you want
There a is a fine balance to be found in asking for money. Ask for too little and you risk investors not taking you seriously. Asking for too much can leave you disappointed and may limit your future funding options. The way to remedy this is to segment your requests. That is to say, don’t ask for everything at once. Instead try to focus your crowdfunding request on specific parts of your business. By doing so you are indicating to the crowd that you didn’t just get the numbers from thin air but that they are based on real research. Of course, once you get the funding, you need to make sure you deliver on your promises so that you retain credibility for your second round.
A pitch is an opportunity to show that you have done the work required to complete the project you have set your mind to. You do this by, for example, demonstrating knowledge about your competitors. By the way, don’t fall into the trap of believing that you your project is so unique that no one else has ever thought of it. That is both highly unlikely and comes across as laziness. Even if your project is wildly unique there will be people who have at least tried similar projects. You need to know what they are doing right and wrong before you speak to investors.
Finally, commit to practicing and honing the pitch. Almost nothing in the history of art or business has arrived into world fully formed. Everything takes practice and several iterations to be truly great. So make your pitch many times to different audiences, each time taking notes and learning from the experience.
Keys to getting data from the crowd
If it is not money but data that you are after, there are a few things to consider when approaching the crowd. First you need to go into the industry with humility. Many crowdsourced business models that were initially successful had to file for bankruptcy in just a few years. Dell, an early pioneer of crowdsourcing, has only been able to implement 2 percent of the ideas they developed.
So surviving in this game requires you to engage the right crowd. Many companies fail because they treat “the public” as one amorphous blob. The truth is that you need to segment the crowd into those who have knowledge and skills that you require and those who don’t. If the group you are addressing lacks know-how about your topic, they will not be able to give you good data, which eventually amounts to a faulty foundation on which to build your business.
Secondly, once you have the crowd, you need to treat them well. In this context that means giving them the freedom to not only present ideas but also to refine and develop them. An example from Dell is particularly telling in this regard. When the company came up with IdeaStorm, it announced it was using multi-staged challenges (or storm sessions) to ease the sourcing and development of products that made use of the crowd. This eventually led to the world’s first Linux-powered laptop called Sputnik.
And lastly, it is essential that crowdsourcing initiatives develop both short and long term feedback mechanisms. This will require rigorous, labor intensive processes and manual data management, all of which require a lot of time and resources, but which are essential to making sure that you are getting what you need and not “garbage”.
Though engaging with the crowd for finance or data is relatively new, there are general principles that humanity has known for generations which also apply to this situation. Make sure you know what you are talking about and know who you are talking to when you ask them to engage with you. And in the case of data, make sure that you have systems in place to manage the knowledge that they will be creating, in order to keep the endeavour meaningful and orderly.