Brand startups are disappearing. It is no secret that crowd funding has reframed what it means to launch a brand startup. Is it enough to create the environment for a fledgling brand to flourish? Crowd funding does help brand founders skip the second mortgage and bypass angel investors for seed money. Considering that the number of business startups has been steadily declining for decades, a new channel for brand launches has been needed for a long time.
This trend of the disappearing entrepreneur is especially concerning for our economy. We rely on brand startups more than one might think, since most new jobs are generated by startups. Additionally, the most noteworthy innovations in recent history have been the result of a startup.
Why So Few Brand Startups?
There are lots of theories about why there are nearly 45% fewer brand startups annually today as compared to the late 1970s. The theories range from skilled labor shortage due to larger organizations gobbling them up, to a lower risk tolerance of 35-year olds (the average entrepreneurial age for startups).
The population in our country is slowing, which affects the labor pool and the marketplace for new products. Additionally, technology is the fastest growing sector, freezing out startups from traditional funding.
“On the supply side, if you have fewer people, there are fewer companies being formed. On the demand side, a slowing population means less demand for new products.” Robert Litan, Economist
There are certainly bright anomalies, such as the meal kit industry, targeting millennials with money. Still, the difficulty of generating funding today, when compared to previous decades remains an enormous hurdle.
Can Crowd Funding Save Brand Startups?
56% of crowd funding campaigns never get funded on Kickstarter, and the number is closer to a staggering 90% on Indiegogo. Many individuals, with great ideas, like my recent acquaintance, Jason Belisha, with his Kickstarter campaign for The SHMEER Wallet, are not deterred. Jason applied his design degree, and developed an eco-friendly, insanely thin wallet, that can even be made from your own up-cycled socks. It is an inventive idea that appeals to a broad demographic, but like many crowd-funders, Jason has hit some snags in getting the word out about his campaign effectively.
“I’m not willing to ask my friends for the $42 contribution to Kickstarter, because they don’t have the money. Most of them are making only $20,000 a year. I have a target demographic that can afford it – but my friends are not it,” Jason shares his version of the classic marketing challenge for all entrepreneurs – how to reach your target customer cheaply, quickly and effectively.
With Kickstarter and other crowd funding, startups have added pressure of a sudden-death deadline not rigorously imposed by other funding sources. This is why anyone considering crowd funding must have built a strong pre-launch program. Many crowd funders attach themselves by paying large up-front fees to PR agencies who offer to promote the crowd fund startup. These agencies parade their success stories, implying that they are responsible for the baby brands’ success. However, crowd funding is no panacea, and marketing is no magic wand to ensure a brand succeeds.
So, even in the new landscape of crowd funding, brand startups still face the same challenges they always have.
The 5-Step Brand Startup Solution
Unfortunately, not every great idea is immediately funded – for example, Western Union flatly refused to buy in to the “toy” invented by Thomas Edison. However, fortunately, not every great idea requires funding as much as it does dedication, like the Wright Brothers, who flew first, with only their own self-funding, in a race with a heavily funded, Smithsonian-backed Samuel Langley.
With that in mind, here are the brand startup tips that truly can help vibrant, important new businesses and innovations see the light of day:
Don’t Expect an Overnight Success. Only a minuscule number of startups shoot up to high visibility and adoption in just months. Most of those are heavily funded, and fast growth companies have an even higher mortality rate. If you believe in your idea, be prepared to dig in and grow it sustainably over time. We live in a society that prefers the “quick fix” even when experience has shown us repeatedly that the “slow burn” endures.
Have a Plan B. Don’t give up on round one. No matter how carefully you have structured your business plan, every business has customers, and they are highly unpredictable. Don’t put all your eggs (or investments) in one basket, and plan to try more than one approach before you are through, especially if you have not had the benefit of a fully vetted market research study (which most startups cannot afford).
Be Flexible. Be willing to adapt your approach, your message, your channels and your resources as you explore what works and what doesn’t. Every company finds certain approaches work well, and others don’t. Why would startups be any different? The solution is to adapt, one thing at a time: the approach, the target, the message and/or the features of the product – until you get traction. If you are underfunded (or trying to go too far too fast) this part of the process gets aborted before the results are actually in!
Detach from the Initial Outcome. Don’t let your emotional attachment get in the way. Entrepreneurs are notoriously attached to their ideas. This makes them the best spokesperson and advocate for their brand startup. It also can make them stubbornly myopic when what they thought would work, ends up tanking. The ability to be dispassionate when an idea doesn’t take off initially, and tweak the offering is a crucial step many try to bypass in the quest for an overnight sensation.
Cultivate Passionate Dedication. Any idea worth being brought into the world is worth sticking with for the long haul. Perhaps brand startups are going the way of the dodo bird simply because the initial passion is used up too soon, and when obstacles present themselves, the idea fizzles from lack of long-term nurturing. This means don’t give up your day job too soon based on a dream. Honor the dream WHILE you are still earning an income elsewhere. Give your invention time to grow and build a following, so you aren’t tempted to throw the baby out with the bathwater.
As a 25-year veteran entrepreneur, I was often tempted to throw in the towel early in the game. Cultivating a new business is like caring for a new baby – it demands all your attention, and can exhaust you initially. The lure of fast, jaw-dropping revenues can be seductive, but it does not sustain momentum. The belief that an idea is just incredible that carries the new entrepreneur through the formative phases of growth that are defined by trial and error.
In other words, it is crowd funding won’t save the brand startups. Instead, a revival of a defining sense of purpose will keep the entrepreneurial spirit alive, as it once did.