You have a great idea but don't quite have the finances or the skills in place to develop a prototype. This is a pretty common problem that many prospective entrepreneurs have when it comes to seeking crowdfunding for their campaigns.
Can you successfully pursue crowdfunding without a prototype? Yes, you absolutely can! You need to be transparent about not having one and clearly lay out a plan to build it. The key is to mitigate all the risks for your backers and to assess your own needs.
So what are these risks and how do you identify them? How can you convince your backers that giving you money is a good idea even if they cannot look at your product as yet? To understand this, let's look at why a prototype is powerful in the first place.
Why Do You Need a Prototype?
Let's face it. All of us have dreams but there is no guarantee that any of these dreams might ever enter the real world. It is only when you start building your product and discover the challenges of producing it that you truly discover whether it is a viable idea or not.
The presence of a minimum viable product (MVP) or a prototype indicates a strong possibility that the creators behind the project have thought through a few of the challenges and have successfully overcome them.
A prototype also provides physical evidence that the idea is real and not imaginary. Crowdfunding campaigns are all about great ideas but translating these ideas into reality is another matter entirely.
The presence of a prototype gives backers a feeling of confidence with regards to the idea. They know that their money has some degree of safety in your hands.
This is why the likes of Kickstarter specifically state in their rules that if your product involves manufacturing and distributing a complex product, it must have a prototype. This is to ensure that your campaign follows their guidelines with regards to transparency and honesty.
So having said all of this, how can you successfully crowdfund without a prototype? Is it even possible?
Receiving Backing Without a Prototype
The first point to consider is whether you even need a prototype. Remember that Kickstarter's rules state that a product that is complex and needs intensive manufacturing needs a prototype.
So is your product a simple one? If you're launching a new game that involves cards, this isn't exactly complex to manufacture is it?
In such cases you don't need a working prototype. A lot depends on your idea and on its intended use. As long as there is nothing complex going on with it and it doesn't affect your audience's life in a critically important manner, you can raise funds without a prototype.
What if your product isn't a simple one and does have complex parts? What if you're trying to raise money for an app for example?
Well, in this case you will need a prototype but understand that you don't need one right now. This is where transparency and honesty plays a vital role.
For starters, due to their policy, Kickstarter is a no go. However, this is hardly the only source from which you can raise funds. There are other websites such as Indiegogo and Crowdfunder that don't necessarily require prototypes.
Having said that, you should be honest in your pitch about using the funds to develop a working prototype. Understand that not having a prototype does reduce your chances of success, however this can be avoided by addressing your investors' concerns right in your pitch.
So what are the risks involved from an investor's or a backer's perspective? It all comes down to the list below:
Amount sought for funding
Time frames and plan
How qualified are you to build this product? How well do you know the market and what is your experience with it? These are basic questions that your pitch will need to answer right off the bat.
Investors don't want to hear how passionate you are or how hard working you are despite your lack of experience and so on. They want data. They want facts.
Think of this as you walking your backers through your resume. Show them how qualified you are and why you're the best person to execute this.
However, what if you just don't have the expertise?
In this case, make sure you hire a strong team around you. Successful crowdfunding campaigns do this all the time. The presence of a big name or highly qualified team members lends an air of credibility to the entire project.
A good example of this approach is this campaign from Digitzs. The company is seeking funding in the extremely crowded lending technology space and therefore needs to make a huge splash. They do this pretty well by highlighting the strengths of their team as well as advisers.
Now, Digitzs has a working prototype and product but ask yourself: After reading their management bio and investor bios, would you really need to look at a prototype?
That's the effect you want to shoot for!
Another great option is to hire a co-founder who does have the expertise and skill to complete the task on hand. By offering them equity in the product's profits, you could even convince them to build a basic prototype without having to put down any hard cash.
For example, if you have an idea for an app but just don't have the coding skills or the money to invest in hiring a developer, why not attend startup conferences in your area and hire a co-founder?
Amount Sought for Funding
Here's a common mistake that those seeking crowdfunding often make. They forget that their vision is still just an idea and it isn't a finished product, prototype or no prototype.
As a result, they seek ridiculously high levels of funding that comes across as insincere to backers.
Here's an idea: How about you take reality into account when crafting your pitch? Don't aim for pie in the sky numbers but be genuine about where you're at in your journey and describe what you'll use the money for.
If you don't have a prototype as yet, the way forward is pretty clear. You will need to use the money to build a working prototype. It really is that simple.
How much money will you need to build the prototype? Ask for an amount that is 10% higher than that to give yourself a margin of safety.
Investors want to know, above all else, that you have the ability to deliver your promises and that you're being realistic about your prospects. It's fine to have a grand vision but you need to be able to translate that to real world numbers and metrics for investors to understand.
Think of it as a skill that you need to master.
Have the grand plan in your mind but don't communicate it all at once to your backers in your pitch. Instead, show them how the first phase will unfold. How will you get to the next step? Show them that in your pitch.
Then ask them for the money to get there!
Time Frames and Plan
This is closely tied to the previous point. You've figured out how much money you need to build your prototype, or to get to the next phase in your project.
Now tell your investors how long it'll take you to get there. Once again, the key here is to be realistic about your projections.
Above all else, you need to deliver within that timeline. Your credibility will take a massive hit if you don't and you're not going to recover from that setback.
So do not take this portion of your pitch lightly!
Be realistic and mention time frames within which you can actually deliver. Discuss these timelines with your team and create a high level project plan beforehand.
Preparation is the key to success with crowdfunding and if you don't have a prototype, this is doubly the case. You already have the odds stacked against you so it's in your best interest to prepare as much as possible.
Other Creative Solutions
In addition to the points above there are a few other things you can try. While these will not power your campaign directly, you can think of them as neat little boosts.
The first, and most obvious, thing you can do is to get slick with your marketing. Recruit as many influential people as you can to pitch your product and sell your idea. The more star power you have behind your campaign, the more likely it is that investors and backers will be okay with not seeing a prototype.
The next thing you can do is offer amazing perks.
No, I'm not talking about offering them a t-shirt with your face on it.
I'm talking about some really cool perks that your audience will love. Will they love being a part of the development process? Will they love witnessing the prototype working for the first time in person?
Can you make them a part of your campaign once the prototype is built? Can you get them to share it for you on social media and related channels?
A lot depends on the type of product you have on hand but brainstorm some great perks you can offer. You'll find that people who signup for great perks will become your biggest fans.
When All Else Fails
Let's say you simply cannot get traction and that the above tips still don't help you. In this case, it would be wise to pursue other options and then seek crowdfunding once you're at a more mature level in terms of product.
Seeking funding from local angel investors is a great option for many people who do not have the funding to produce prototypes. Check out angel investing clubs in your area and approach people with your idea.
I've already mentioned how you can hire a co-founder and convince them to build a prototype in exchange for equity.
The lack of a prototype is hardly a death knell for your dreams. It's just the first hurdle you'll need to overcome. Get used to it!
There are many things you can do to enhance your chances. Prepare ahead of time and anticipate any questions your backers will likely have. Above all else, be honest and upfront with your progress and time frames.
You'll find that crowd funding success will find you!