Bonus episode: How to get Funded Through Crowdfunding

[00:00:00] Tess: The biggest myth I think, about crowdfunding campaigns is that they think it's easy. They think it's a fast way to become a millionaire. They think it's just as easy as putting together a couple of drawings and renders and, you know, have images and slap it up on a page and the money will come. That is not the reality. It's hard work. You have to put in the time.

[00:00:28] Host: Hi, This is Small Business, a podcast brought to you by Amazon. I’m your host, Andrea Marquez. On This is Small Business we cover all things small business that will help you start, build, and scale your business. We will hear from guests with diverse backgrounds, point of views, and stories, with the hope of hearing from many types of small business entrepreneurs. By the end of each episode, I'll point out key takeaways that you can use on your business journey.

Funding is a topic that's constantly on the minds of entrepreneurs. No matter where you are on your small business journey, you'll always need money to keep your business running. [00:01:00] We've talked about some forms of funding like getting grants and asking for loans but we haven't tapped into crowdfunding as much; that's when you fund a business by raising many small amounts of money from a large number of people. I’m excited for this episode.

Coming up -- I'll talk to Tess Estandarte, Director of Product Marketing at Rainfactory, a digital marketing agency that helps brands with crowdfunding. But first -- I want you to meet Josh Lipinski, the founder of Breakwater Supply. You can find them in the Amazon store along with most of the small businesses we feature on This is Small Business. Josh has launched lots of successful campaigns using crowdfunding. He managed to get people to buy his product and trust that he would be able to produce it and ship it. So, if you wanna know how to sell an idea and collect funding without giving up a portion of your business, then this episode is for you.

Today’s episode of This is Small Business is brought to you by Amazon Business who provides a wide product selection, business-only pricing, and account features that can make running your small business easier. [00:02:00] Amazon Business supports small business through various programs such as the Small Business Grants where Amazon Business gives over $250,000 to 15 small businesses who are Amazon Business customers. Amazon Business is committed to the growth of small businesses and invests in grants to help small businesses overcome challenges they face, freeing up their resources to focus on their mission and customers. Small Businesses are the backbone of our economy and when they succeed we all succeed. Create your free account today at amazonbusiness.com.

Also, don't forget that if you want to hear your story on This is Small Business, we have a voicemail line where you can ask questions or share your entrepreneurial story. We want to hear from you! Find the link to the voicemail line in the episode description.

[00:02:50] Josh: I'm someone who spends a lot of time outdoors, who's always loved physical activity, sports in general. I think that, you know, the formal term is soft goods, [00:03:00] but footwear, apparel, gear, outdoor gear, it's always been something I've been passionate about and throughout my professional career. I've never really given up my stance or my interest in paying attention to these types of products. I ended up essentially launching this small business, finding out different types of gear that I've always felt like there was a little bit of a gap in the market for waterproof, real waterproof products you get out there and enjoy when you're out there on the trail or out there on the water. So, I ended up launching it. I ended up coming up with different designs. I ended up consulting a lot of people that I knew and really people that I trusted and then finding, you know, a way to launch a couple of products on my own website and then also through Amazon.

[00:03:48] Andrea: Before we dive into crowdfunding, I want to just make sure we talk about the journey you took, and you started by bootstrapping. Can you tell me about the pros and cons of that journey for you?

[00:04:00] Josh: If you can bootstrap, it's absolutely amazing because your accountability is to yourself. So, that takes away so much pressure. A lot of people I know, even people in my own family, like, um, my brother had launched a startup. And we just had talked a lot about, you know, bringing investors on board and I have nothing against doing that, but you know, talking to people that I know that have launched companies and have always had that pressure of having to produce in those numbers terms, so you can't necessarily look at it as like, I really want to focus on this product. This product has to be perfect. You know, my service needs to get better. It's more focused on, you know, I've got people that are telling me that I've got to start producing some numbers or. You know, they're going to start pulling their investments out, or they need their investments, for their own families. Right. So it's, if you can bootstrap and take that pressure away from yourself, or at least away from the outside forces [00:05:00] of investors, that's amazing, but I know that that's not realistic for everybody, but I just know that the people that I've talked to, that's been a huge burden on them. It's tough to mentally get past that, at least when things aren't going as planned.

[00:05:15] Andrea: So, as a starting point, bootstrapping could be a good thing, and probably the easiest and most popular way to start. So after you went this route, you turned to crowdfunding. Why did you decide to go that route?

[00:05:30] Josh: So we launched a couple of campaigns on there and, and that's what we used, initially, and it helped us a lot. We did not use it for all of our products. We used it for our submersible line of backpacks, and, the more innovative and more unique the product, the more traction you're gonna get, like that's, that's kind of a rule of thumb is people are looking to find things that are unique. That's not a hard and fast rule. But, it does apply to a vast majority of products. What you're doing is you're delivering something that is real. [00:06:00] So you're doing this in good faith, right? And you want to create a track record of delivering. So, you know, you still have to think of it as, you know, this is a business and I am ready to essentially create pre orders for this product that I promised to deliver. So, it's a good springboard for your business, but this is still a serious thing and something that you have to approach, with a plan.

[00:06:25] Andrea: Do you need to be transparent with your customers about what you're planning to do with the money?

[00:06:30] Josh: There's kind of two approaches to that. One of it is Kickstarter does have a tool that breaks down the budgeting cost, you can lay that out, but I think at the end of the day, people are looking to get in on the ground floor of a project and their reward for essentially trusting you to create this product without having a physical item is, you know, a lot of times they will get this product, you can set different, categories of reward. [00:07:00] And then generally, for their leap of faith, for lack of a better term, you'll give them a discount.

[00:07:05] Andrea: That’s so interesting. It feels essentially like you have investors but you don’t have to give them the same level of detail. And, I want to briefly switch gears a bit. Because I know that you also got a grant through Amazon Business right?

[00:07:18] Josh: I just mentioned a couple of different ways to essentially launch a brand as a digital brand and one of the things that was very important from the start is to choose launching in the Amazon store as a foundational part of Breakwater Supply. So essentially how me or you as retail consumers can tap two or three times to purchase a product, you know, in the Amazon store. On the seller side, we can also, you know, two or three taps. We're able to send inventory into the Amazon store. We're able to, create different listings. We're able to update marketing messages. [00:08:00] We're able to, you know, adjust advertising. So, the Amazon store has been just really important for the exposure it gives us, but also for the tools that are behind the scenes.

And then as well, the grant has just been extremely important to start considering, additional products for the catalog that we're launching. Um, we've got a couple that are really, really exciting. Probably do the same thing where we, um, used Kickstarter as a proving ground and then ultimately moved to the Amazon store.

[00:08:28] Andrea: Getting the granst must have been an exciting form of validation too.

[00:08:32] Josh: A process like this that gets you recognition and exposure. And then it also allows you to even reflect on what your values and goals and principles are as a small business. Because every time that you submit to a grant program, they're going to ask you questions, you know, it's an interview. So that also allows you to reassess what you're doing and why you're doing it. [00:09:00] So I think that if it weren't for these types of questions, unless you're very disciplined on coming up with the mission that you have as a small business, these opportunities give you a chance to refine and then reevaluate what you're doing.

[00:09:15] Host: You're listening to This is Small Business, brought to you by Amazon. I’m your host, Andrea Marquez. You just heard from Josh Lipinski, the founder of Breakwater Supply. You can find out more about Breakwater Supply in our show notes on our website: Thisissmallbusinesspodcast.com.

Josh gave us a little glimpse into the effort required to start crowdfunding. It's not as easy as putting your product up online and expecting thousands or millions of people to fund your product. You need to make sure that your marketing is on point and that you establish trust by delivering on your promises.

It was also exciting to hear about BreakWater Supply’s experience with winning the Amazon Business grant. If you want to learn more about Amazon Business… Create your free account today at amazonbusiness.com.

Like Breakwater Supply, the small businesses we feature on This is Small Business are some of the [00:10:00] many small businesses selling in the Amazon store who have tapped into some of the tools and resources offered to help them succeed and grow. One of those resources is the Amazon Small Business Academy where you can find the help you need to take your small business from concept to launch and beyond. You can strengthen your skills at no cost with live and on demand trainings, Q&As, events, and even find more This is Small Business content. If you don’t know where to start, you can take the free self-assessment on the Amazon Small Business Academy site at www.smallbusiness.amazon.

So far, we've talked about how Josh funded his business using crowdfunding and bootstrapping as well as his experience of getting a grant through Amazon Business. Now we'll dig deeper into the process behind crowdfunding with my next guest: Tess Estandarte, Director of Product Marketing at Rainfactory, a digital marketing agency that helps brands with crowdfunding.

[00:10:52] Tess: Currently I'm the director of product marketing here at Rainfactory and, Rainfactory is a full service, marketing and advertising agency [00:11:00] whose specialty is on product launches and crowdfunding campaigns. I've been at Rainfactory for five years.

[00:11:10] Andrea: Can you tell me what's one thing people don't usually think about when it comes to crowdfunding?

[00:11:15] Tess: I think the most important thing to always keep in mind are the legalities involved in a crowdfunding campaign. It ranges from making sure you have the patents, the trademarks. The copyrights, intellectual property, also remember that a crowdfunding campaign, whether that be a self-starter, as we would call it, or crowdfunding. You have to sign up under terms and conditions, which I recommend you read before you sign or before you go ahead and launch because you as the campaigner or the creator have the responsibility not only to keep in touch with your backers, but also to make sure that product is shipped. And also part of that umbrella of legalities is taxation. [00:12:00] Check first with your accountant or your CFO in terms of how that Income, so to speak, income or the funds collected from your campaign could be classified accounting wise.

It could be also charity. You know, we've seen that the funds there, that are raised from crowdfunding are also considered charity because it is not, you're actually pledging your support for the product to be made, and delivered. It's a responsibility, so make sure you're prepared. You know, to face the music in case anything happens, or the other token is bask in the glory, you know, that, that your product is shipped and, and is welcomed, you know, by your community.

[00:12:40] Andrea: And when do you think entrepreneurs should start to consider crowdfunding instead of other funding opportunities?

[00:12:45] Tess: I think the most important benefit from crowdfunding is, of course, you receive funds. There's no equity dilution. It's almost like here, you know, you were given a basket of money, right? Go, go and make your product. Right? [00:13:00] You don't get that when you have to borrow money from the bank, right? I mean, there's interest, investors might require an equity stake. None of that happens with crowdfunding. The other important piece to also keep in mind is market and product validation. Right? So you basically are reaching out to, or have support, obtained from a community of users whose profile and demographics actually match the persona you had in mind for your product.

So. They will receive your product. Discussion tab on your page. It becomes an engaging discussion of like, really positive feedback, and suggestions for improvement or recommendations. That, that community is actually much more forgiving, and actually also very much more generous, of course, with their feedback. I personally would recommend doing the crowdfunding route first, just to get your product name out there, uh, brand awareness, product awareness, [00:14:00] and of course, the all important piece that really, you know, closes the loop as to why you do crowdfunding is, um, finding out ahead of time, is the market ready for your product? Or do you still have to make changes, or go back to the drawing board.

That's, that's really, really good to know early on before you get additional funding or investors, and to make sure that you have a finely, finely tuned product and it's truly ready for the market.

I think a lot of investors in the last few months of the last maybe years, we saw basically like investors becoming more prudent about, their decisions. They want to see additional information, you know, it's not just a business plan or a deck or financials that they look at, but they do truly want to know is that it does your product truly have legs for a good 5 to 10 years, right? And I think crowdfunding just offers that because the community again, it's, it's a wide spectrum, all across the world. That is if you can afford shipping to any, any part in the world. That information that you get from that campaign [00:15:00] is so valuable. You can go directly to, you know, a venture capital group or a bank, um, et cetera. Will you succeed? Who knows, right? But the chances are greater that you may get the funding and the funding terms that are more desirable if you come in, um, with data.

And I think the most important thing also to, to keep in mind is would they reorder your product? Would they, would they, um, basically recommend it to their, friends, family, peers? And that you will not get if you go directly, to a bank or investment house.

[00:15:33] Andrea: So, launching a crowdfunding campaign can actually help you secure funding in other ways because you have that information to back you up. But I'm sure this is a lot harder than some people initially assume, could you tell me what you think are some myths that people have about crowdfunding?

[00:15:50] Tess: The biggest myth I think, about crowdfunding campaigns is that they think it's easy. They think it's a fast way to become a millionaire. [00:16:00] They think it's just as easy as putting together a couple of drawings and renders and, you know, have images and slap it up on a page and the money will come. That is not the reality. And success is reaching your funding goal, your publicly declared goal. You can go to their dashboard, that is online to find out how many projects have launched. And how many, how many projects have actually succeeded? And it's not, it's not as generous as what I think what common knowledge will probably say.

It's hard work. You have to put in the time. Remember, it's also your reputation at stake as well, if you put a name up on the page. I think, just be thoughtful more than anything. It's a very long and arduous journey and you have to put in both money and sweat equity, into launching a campaign. And I would always say, just make sure that you define to yourself: why are you doing this? If it's for the money, I'd gladly show you the door because that's not the way it's supposed to be. [00:17:00] If you are doing this for a product that you've dreamed of and that, you know, that would solve a big problem for the world, right? Or make life easier for a certain, for a certain demographic of people, then your heart is in the right place and the rest will follow.

[00:17:17] Andrea: Is there any way that I could make my Crowdfunding campaign stand out?

[00:17:22] Tess: Don't scrimp on assets, either images or video. Get the highest quality that you can afford. Get the best team that you can secure because that ultimately will make or break your campaign, the quality of your images and your video. If it shows to be sloppy and poorly produced, you can just shut down your campaign right there and then, because it shows how much integrity you have that you've, you've put in the effort and the time and the money to produce these wonderful assets because of your belief in the product. Please take the time, to find a really good, video and photography team. [00:18:00] You might decide to make them a partner if, in case you cannot afford their fees. You know, give them an equity stake in the crowdfunding campaign. If you can come up with a good solid 25 photos of both product and lifestyle, then you're good. If you come up with a minute 30 second video about your product and your mission, and you enthrall your audiences from the very first second up to the one minute 30- second of that video, you're gonna do really well.

[00:18:32] Host: That was Tess Estandarte, Director of Product Marketing at Rainfactory. She talked about funding for your small business using crowdfunding. As always, here are some key takeaways from this episode:

• One. Bootstrapping is amazing because your accountability is to yourself. Your business and ideas don't necessarily need to get clouded by needing to hit a certain number each year. But the big con to bootstrapping is you might not have enough money lying around to launch your business, so another option is...
• [00:19:00] Two. Crowdfunding! Josh crowdfunded the launch some products of Breakwater supply and we learned a couple of things from his story like: you need to go in with a plan. You’re promising people a product and if you don't deliver on that promise then your reputation as an entrepreneur will be at stake. You also need to make sure you've got all your legalities in place. From your Intellectual property to reading the terms of service of the website you’re crowdfunding on thoroughly. And. To stand out, you'll want to invest in good pictures or videos. The more effort you put into making sure your campaign looks polished, the more people will want to support you.
• Three. Leverage the crowdfunding community. People who invest through crowdfunding are really passionate about your product. So they will be the first to give you honest reviews that can help you make your product better or improve your business and offerings overall. So make sure to tap into the community because many times, they are your target customer and you have a unique opportunity to hear directly from them.

[00:20:00] I'm curious – Have you been thinking about launching a crowdfunding campaign? How are you preparing yourself for that? Or maybe you've already launched one. I'd love to hear about your journey! Reach out to us at thisissmallbusiness@amazon.com to tell us what you're up to. Or let me know what you think of the episode by leaving a review on Apple Podcasts – it’s easier if you do it through your phone. And if you liked what you heard -- I hope you'll share us with anyone else who needs to hear this!

If you’re an aspiring entrepreneur, and I hope you are if you’re listening to This is Small Business. Or maybe you already have your small business up and running and you’re ready for the next step. A super valuable resource that can help you is the Amazon Small Business Academy where you can find the help you need to take your small business from concept to launch and beyond. Take the free self-assessment on the Amazon Small Business Academy site at www.smallbusiness.amazon.

That's it for today’s episode of This is Small Business, brought to you by Amazon. Until next week – This is Small Business, I'm your host Andrea Marquez -- Hasta luego -- and thanks for listening!

CREDITS: This is Small Business is brought to you by Amazon, with technical and story production by JAR Audio. [00:21:07]