Expert Interview with Letitia Wright for Mint.com
Dr. Letitia Wright has a huge heart for entrepreneurs. She loves their energy and the twinkle in the eyes they get when talking about their product. She's passionate about helping them because she has personal experience seeking help for running her own business and coming up empty handed.
Wright started her career as a chiropractor, and while she loved the medical part of her job, she struggled with the business side. There weren't enough clients and she needed a marketing strategy. The lowest point of her journey was when she went to hire a practice management company to help her troubleshoot the business issues and they told her she didn't make enough money to be one of their clients.
She focused on learning about business herself, eventually creating a TV show in 2000 for entrepreneurs called "The Wright Place," which offers advice, resources and growth strategies to small business owners.
"I never wanted anyone to feel the punch in the stomach that I felt," she said.
She stopped seeing patients in 2004 to focus on growing her business career and hasn't looked back. In the past several years she's thrown much of her energy at becoming a go-to source for information on crowdfunding, constantly reading new information, following trends, keeping up to date on SEC best practices and growing her knowledge on what is a relatively new way to raise capital for a project.
Working with private clients as well as running her own successful crowd-funding campaigns to pay for a book and workshop has given her plenty of insight on the ins and outs of open source fundraising.
With the economy still struggling and credit being hard to come by, Wright couldn't have picked a better time to become an expert in alternative methods of paying for an idea.
"You can crowdfund anything," she said. "It's fantastic."
Wright answered questions for Mint about crowdfunding. Here's what we learned:
What's the biggest misinformation about crowdfunding?
People assume that as long as you're on Indiegogo or Kickstarter, the money will start flooding in. But it's not set it and forget it.
"You do have to have a specific plan. You do have to pour energy into it every day," Wright said.
There are more than 500 crowd-funding websites out there, and more coming out every day. If you've only checked two, then you haven't done enough homework. Find the site that best aligns with your tribe, the people you engage with and who support you and who you support in return.
Another misunderstanding is that you can raise millions of dollars for free, but the reality is a good campaign will cost money; you need to research and create and easy-to-understand and high-quality presentation to your potential funders.
What are the advantages of crowdfunding?
There are several advantages to crowdfunding that Wright mentioned. Among them:
- Because it's not a loan, you avoid going into debt.
- If you do it right, you'll get the benefit of extra publicity; you'll often get in front of a market that might not have been aware of you.
- If you do need a loan, you'll have a better chance of getting it because you can demonstrate interest in your product via the amount of money you've raised and the number of presales you have.
"Crowdfunding can take you three steps ahead of the game," Wright said.
Of course, there are still downsides, Wright mentioned, including:
- A lot of people still don't know what crowdfunding is. Wright suggested using the word "fundraising" instead and making sure to explain what you're doing in a way that your "tribe" (or like-minded supporters) will understand.
- If you don't manage it properly, you can look like you're begging; don't tell people about how you're broke or close to eviction. That doesn't inspire confidence.
- If you fail at crowdfunding, you can end up damaging your reputation with your tribe, which will make it difficult to bring them on board next time.
What types of businesses do you think should try crowdfunding?
"I think all kinds of businesses should try crowdfunding," Wright said. "I haven't come across businesses that shouldn't try it."
That said, there are some niches that have a harder time then others raising money this way. Wright said she frequently gets requests from college students seeking advice on crowdfunding their education. Only 30 percent of people who crowdfund are successful at it, Wright said, and students aren't often in the minority.
"It's a really, really tough sell if you don't have a community behind you," she said.
Who has the easiest time raising money?
"Gamers by far," Wright said. "Gamers are killing it in the crowdfunding community."
When video game makers decided to do an end run around the corporations who'd traditionally manufactured them and sell directly to avid players, they brought crowdfunding to the public eye.
"Gamers have easily raised millions and millions of dollars because that's an insatiable tribe," she added.
What are some best practices when trying to raise capital via crowdfunding?
The number one best practice is understanding exactly what your project is, and trying to focus it on one thing rather then trying to do too many things at once.
"You should be able to say it in one sentence," Wright said. "If you have to explain it, it's dead in the water."
In addition, you want to make sure to have your tribe formed ahead of time and be willing to connect with someone else's tribe to help expand yours. Don't assume your tribe will come to you, either. You have to go to them where they are and talk to them in a way they understand.
"My tribe is very internet savvy, so I'm able to reach entrepreneurs and the entertainment industry with electronics," Wright said. But she cautions, "Crowdfunding isn't just online, it's offline." It's important to show up to events held by members of your tribe and to make real connections.
Don't just rely on Twitter and Facebook to get the word out about your efforts; they won't make the sale.
"The whole point of crowdfunding is money, not just to get people to like you on Facebook," Wright said. "I tell people, stop smoking hopium. Money is money and likes are likes."
You only get a chance to get in front of people once or twice, so make sure to ask them to give you money.
What are some no-no's?
- Don't call people donors when you're not a nonprofit.
- Don't call people investors because crowdfunding is not an investment.
- Make sure your rewards are relevant to whatever you're selling.
- Not doing enough updates. Think of crowdfunding as a 90-day cheerleading practice, Wright said.
How long should a campaign run?
While there is no set time limit for a campaign, Wright recommends people use websites where they can go 90 days.
"You have three to six times to get into people's budgets," she said. "They will support you if they can have another 30 days to work you into their budget."
What do you see as the future of crowdfunding?
Wrights predictions for 2014 include:
1. Crowd equity is going to massively change. This is where you'll be able to sell shares of your company online. It's going to be huge; you can raise $1 million you can have actual investors getting actual returns. We're already doing $6 billion-$7 billion; crowd equity is going to double that.
2. A lot of films are using crowdfunding to raise money offering those who contribute money a chance to appear in the film. Wright predicts that there's going to be an actor or some actress who's fed up from trying to get parts the traditional way going and will instead just buy parts via crowdfunding. "I can see TMZ talking about it," she said. "I can see that person turning into a semi-major personality."
3. Finally, she expects to see some kind of scandal that will showcase the seedier side of crowdfunding: People getting ripped off. "Crowdfunding has been a golden child for awhile," she said. "Someone's going to punch it in the eye." This will force the industry to address the lack of oversight and to try to figure out a way to protect crowdfunders.
Follow Wright on Twitter.