What Owners Need to Know About Crowdfunding – Maddie Purcell

What Owners Need to Know About Crowdfunding - Maddie Purcell

Looking for a way to fund a new product or offering, but not sure if a loan or angel investment is right for you? Have you considered setting up a crowdfunding campaign on KickStarter or Indiegogo? This week, Maddie Purcell, founder of Fyood Kitchen, shares her story of setting up a successful crowdfunding campaign, and what lessons she imparts to others.

Rich: Our guest today is the founder of Fyood Kitchen, an award-winning startup that puts on cooking competition parties, no experience required. Launched in early 2017 with a successful crowdfunding campaign, Fyood has expanded over the past three years from a quirky date night adventure into a premier team building event, outstanding birthday, anniversary, or bachelorette party, and one of the buzziest social experiences in the region.

In 2018 our guest created the Experience Maine Gift Guide to promote the quality and variety of experiential businesses in Maine. As local and national spending shifts towards experiences instead of things, she saw an opportunity to grow the experiential side of the Maine economy by helping other providers take advantage of the main brand.

Most recently, she launched Portland Rising a professional Women X Ultimate Team, and Maine’s first pro women team in any sport dedicated to showcasing women performing at the highest level, inspiring greatness and creating a world class sports experience here in Maine. She has been nationally recognized as the 2018 Outstanding Young Entrepreneur of the Year by SCORE, the 2020 Maine Young Entrepreneur of the Year by the U.S. Small Business Association, and named to the 2018 Maine Biz Next List. Let’s dive into what owners need to know about crowdfunding with Maddie Purcell. Maddie, welcome to the podcast.

Maddie: Thanks for having me.

Yury: Maddie, could you tell us a little bit about Fyood and how exactly did it start?

Maddie: Yeah. Going back in history now, but Fyood kitchen came into being when I realized that I needed a social outlet that had an activity at the center of it. I was a big foodie but felt sort of disconnected from the creative side of the cooking process. I wasn’t allowed to cook without a recipe, even though I knew food really well and loved it. And then thinking about the behind the scenes experience of getting to play in a professional kitchen and have access to all these huge mixers, walk-ins, those were all the ”what’s” that went into it.

And that’s what I thought Fyood was about at the beginning for the first year or so. What it’s turned out to be about over time is the connection that people are able to develop with each other as they go through this mystery ingredient cooking challenge. They come in and they don’t know if they can do it, they’re not sure if they’ll be successful, and then they get to rise to the challenge, think creatively together and then enjoy a delicious meal. So it’s really about the connection in the end.

Rich: Now Maddie, you also work with SCORE who we’ve had on the show before. What’s that relationship been like for you?

Maddie: Honestly, fantastic. When I first started my business, I could not believe that a resource of that caliber was available for free. It seemed like something that I should be investing money I didn’t have into. And I worked with Nancy Strojny who of course is an incredible mentor. But then also what I find is so wonderful about doing business in Maine is I’m able to be a SCORE mentor as well. So I mentor folks who are thinking about crowdfunding campaigns, I give workshops on how I’ve used PR to boost my business and then how other people can too. So SCORE is really a holistic value adding enterprise I find for any stage of business around here.

Yury: Maddie, you mentioned crowdfunding. For those that are not familiar with the term or don’t really know how it works, can you give us a little bit of an explanation of what it is, or maybe start with just a definition of crowdfunding?

Maddie: Sure. So crowdfunding is raising money very generally from a whole bunch of people to achieve your goal or to support your dream. And it can be used to launch a business or to fund a personal emergency or things like that, or as an ongoing subscription based model. So there’s a whole bunch of new ways that you can use crowdfunding to achieve your goals.

Yury: Awesome. Thank you.

Rich: So crowdfunding has been in the news before, people don’t always really understand it. What are some of the misconceptions that people have with crowdfunding that you’re trying to get people to understand that it’s not really like that?

Maddie: All right, here’s the thing. When crowdfunding first started out, it was this sort of like panacea, like magic pill. You can do a crowdfunding campaign and you’ll get buzz and people will find it just because you’re doing crowdfunding. That was a decade ago and it’s not the case anymore. What I think a lot of people who are considering it don’t understand right off the bat is crowdfunding is a tool, it’s not a standalone answer. And so you have to do the work in advance. You have to know how you’re going to use this tool. If you just create a crowdfunding campaign, even a wonderful crowd funding campaign, and throw it up without thinking about how you’re marketing, who wants to support this campaign, what your target audience is, how you reach them, the campaign’s not going anywhere.

Rich: That makes a lot of sense because I’ve seen this kind of thing happen over and over again at the beginning. Just the idea that you’re doing something novel is newsworthy and people will be attracted just to the idea of crowdfunding. But now that it’s been around for a little while, that’s no longer a reason in itself to invest in a business. That’s what I’m hearing you say?

Maddie: Yeah, 100%. And then crowdfunding can also be very helpful for certain kinds of industries, but it’s not one size fits all. There are many different platforms that you can use depending on what target audience you’re trying to reach and what your brand is in general. If it’s not a consumer product, it would be hard to do a traditional crowd funding campaign towards it. Like if you’re building industrial equipment or something like that, why would someone want to invest in that? And what reward can you offer them that lights up just a normal person to support this dream? So there’s definitely a question of which platform to use and we can get into those if you’re interested in specifics.

Yury: Let’s do it at a later date, at a later point in the interview, because I have a couple of other questions. You talked about specific products or different industries. And in preparation for this interview, when I was looking into what are the successful crowdfunding programs or the products, I discovered a lot that I didn’t even expect to be a part of the crowdfunding campaign.

For example, Eric Reese, kind of the leader of the lean startup movement, he crowdfunded one of his books which was only available to those that supported him through one of the platforms. It wasn’t available to a mass publication, I guess it wasn’t on your typical Kindle or Amazon or whatnot. It was just to those that believed in him. Our contributor, John Lee Dumas, several years ago he launched his Freedom Journal again. So you know, we’re going from books to kind of like a self-help journals or diaries. I was also surprised to see that Super Troopers, the second part or the second volume of the hilarious comedy was also crowdfunded. So you know, speaking about these different examples or experience, are there any particular types of businesses that are best suited for crowdfunding?

Maddie: There are a couple that are very successful if you know how to use the tool, right. One example is board games. Board games are like, if you’re a board game nut, you probably go to Kickstarter to find all of your new board games.

Yury: Exploding Kittens. Have you heard of that?

Maddie: Exactly. It’s a classic brought to us by crowdfunding. Another really big industry for that is consumer tech, especially wearables. Or have you seen those coolers with everything built in, the blenders and the music and things like that. Sort of like fun tech that you want to own that requires an investment to make happen.

Yury: I think one of the successful fitness trackers, Pebble, actually was crowdfunded as well.

Maddie: Well you know, I think that might lead us into another part of crowdfunding, which is that there’s a lot of work to do before the campaign, but also afterwards. I feel like Pebble had some mishaps. They were maybe overfunded and couldn’t quite deliver on their promises to their crowd.

Rich: What does that mean to be overfunded in a crowdfunding campaign? Because it sounds wonderful to me and to a lot of the producers.

Maddie: Well it can be. It depends what kind of infrastructure you have set up. So a lot of, like for instance, a board game might set like a $10,000 target for their campaign, but they might actually think that they can bring in $2 million and in that case they’ve planned for it. But if you are just trying to raise $10,000 and then you get $2 million and you have to send rewards and create on a level that you might not have budgeted for, if your rewards don’t go down in price by the amount of scale you’re able to provide, you can get into trouble pretty quickly with not having a budget plan for if you’re too popular.

Rich: Interesting. And this kind of gets to a question I had for somebody who’s hearing this and really wasn’t familiar with crowdfunding and they’re like, so what do you get out of it? What does somebody get when they invest in a company that’s crowdfunding? Do they get fame, do they get a fortune, is there a monetary reward here? Or is it just that they get a good feeling that they’ve helped a micro entrepreneur out there somewhere?

Maddie: So traditional crowdfunding, it’s not for a monetary reward, although there is in Maine now equity crowdfunding. Or I actually think you still have to be accredited to go that route. But generally crowdfunding is there’s certainly the feel good in a lot of people, especially if it’s a smaller campaign or a local campaign where you’ll be backing it, like in support of something. But where you’re able to make this something that’s sexy and that people want to get involved in is by the rewards you offer. And generally there has to be some sort of a matchup between what kind of reward you’re offering and your product or service. So that the same people are interested in those two things. So there’s a strategy in and of itself.

And that’s partly why consumer products are a natural fit because your reward can be your product. For Fyood Kitchen, we’re a service. And so we actually use crowdfunding, I would say at least equal parts, if not more. So for building an early audience and a bunch of people who were excited about getting in on it with us as much as the funds to buy our kitchen equipment, you know?

Rich: And so what did the people get? Did they get like a free night of Fyood or whatever it might be, their name on the wall?

Maddie: Yep. Yeah, so we did presales in large part, and it was at a discounted rate from what it would be later on. So people who backed through the crowd funding campaign were in with a lower rate ticket. But then even there, you want to be able to provide a range of rewards that fit people’s pocket books at different levels. So we had some custom parties at the top and things where we would really make an incredible one off experience for you. And then at the lower levels we had a thank you card, which is a typical crowd funding campaign for like a $1 or $5 donation.

But what we did to make it Fyood- like was we threw in, so at Fyood each round starts with a basket of mystery ingredients. It’s four and they don’t necessarily go together. And so we made a custom Fyood basket list of ingredients for each person at that level and sent them their Fyood to buy their own ingredients to play at home, even though they weren’t investing in a level that would bring them to Fyood in person.

Yury: So it’s not necessarily the monetary award it’s just more or less like supporting an individual or supporting the idea without really expecting anything in return. Would it be a fair statement, or are you still expecting more than what you give?

Maddie: It really depends on the backer. If it’s your uncle, probably there’s a lot of personal support there. But hopefully it’s someone who’s really interested in your product, too. And it depends what your motives for using the crowdfunding campaign are. Are you trying to build an audience? Are you trying to actually fund the production? Do you need a certain amount of scale, for instance, to produce your board game? But generally having tantalizing rewards is a best practice and you want people to be wanting what they invest in, even if they decide, I’m really here for the person, right?

Rich: So it’s funny, because I had a buddy of mine who did run his own crowdfunding for a video/card game, kind of a hybrid thing. And of course I invested in it and I got the card game that went along with the iOS app and stuff like that. So that’s a way of building awareness of your product, too. Which brings me to a question, how do we raise awareness? Now that there are so many people doing crowdfunding, do we need to have built up our own marketing campaign just to raise awareness to raise funds? Is that now where the market place of crowdfunding is?

Maddie: 100%, it really is a tool. And there’s small odds that if you do everything right, you can get featured on the front page of the crowdfunding platform and a lot of strangers will find you. But if you don’t have a strategy for how you get, first of all the early momentum, and secondly, how you fund your campaign in full even if you don’t get highlighted randomly by some act of God, then you need to know how you’re going to get the backing that you need regardless.

So if you have your own email list, that’s wonderful. And that’s, I think with like Eric Reese and John Lee Dumas and people like that, Amanda Palmer is a classic crowdfunding example. If you have a really large audience that’s already invested in what you do, then you can just send them to your crowdfunding campaign. But if you’re starting out and you don’t have an email list yet, how are you going to get people to the campaign. Don’t launch and see what happens, have a plan.

Yury: Gotcha. You mentioned crowdfunding platforms a couple of times, and I think it’s a very opportune moment to actually talk about them. They are different ones like Kickstarter and Indiegogo. So how do you choose what’s the right platform, or are there any specific platforms for a specific niche, products or categories? You also mentioned that some people can also get crowdfunded for their personal needs, like GoFundMe or something like that. How can we choose? And what are the principles of selecting the right platform?

Maddie: So it’s a little bit of a research project, and different types of campaigns might be successful on one platform and not on another. There are now hundreds, if not thousands of easily accessible platforms. And so it comes down to the format of the campaign you want to run. And then honestly, the brand of the platform and does it match the brand of what you are putting forward?

I would say Kickstarter is still the gold standard and the most recognizable brand in the game. And that tends to be great for commercial projects. Two things that scare people about Kickstarter and make them want to go check out other platforms right off the bat are that it’s all or nothing. So if you don’t hit your funding goal, whatever you set at the beginning, the money is returned to the backers, nothing comes to you, nothing is charged and your campaign just does not succeed. And so that can scare some people off.

And then there’s also a time bounded limit. And some people see that as a stress point or a negative when they’re thinking about the campaign. But in my experience, watching a lot of campaigns and running my own, the time boundedness is actually one of the strongest tools you can use because it gives people a reason to do this now. And you can generate buzz and excitement around a 30 day campaign in a way that you can’t around something that people could do at any time during the year. Like why would they do it now? So the launch excitement, and then ‘it’s closing, you might miss out’ excitement being built into a campaign is something that I think puts people at ease when they’re first thinking about crowdfunding, but can really be a tool when used to their advantage.

Rich: Scarcity is a powerful motivator, for sure. So the more I hear from you, the more I’m feeling like this Kickstarter or crowdfunding campaign is really like a traditional marketing campaign at this point. There’s no blue ocean anymore. So if somebody today is listening and they were looking for funding options and maybe they couldn’t go a traditional route and they felt like crowdfunding was right for them. Can you kind of give us a simple step by step process that you might recommend so that they increase their chances of being successful with a crowdfunding campaign?

Maddie: Yes. I’d say three big, don’t miss things. The first one is showcase your passion. Especially if you’re going this route because you’re just starting and you need people to believe in it. The best way to do that is to show up and show them why it matters to you. So an engaged creator in, especially an engaged creator on video, even if you’re not super comfortable on video, normally can be a huge boost towards getting people who are interested in what you’re doing to the point of being, “I want to support this, I see why this matters. I’m excited. I want to make it happen.”

Rich: Who’s not comfortable in video post pandemic? I mean, don’t we all live on Zoom anyways now?
We’re all practicing for our crowdfunding campaigns.

Maddie: And so using video, but starting with why it can be tempting to get hung up in like the rewards and the budget and the nuts and bolts of the campaign. But when you’re thinking about why someone backs, it’s not really because of the mechanical technicianship that you can use to cut out your puzzle pieces or whatever it is. It’s because this is going to give them an experience and you’ve created something and invested in something that has defined something they can believe in.

So if people aren’t familiar with the Simon Sinek start with why, I found that to be an incredible useful resource for basically any type of crowd funding campaign. And then the third thing that I would suggest is when you’re planning your campaign and you’re doing your budget, you want to be looking at all of the possible outcomes. Like what happens if you just barely hit your goal, versus if you oversubscribe it, can you still provide your rewards without losing money. That kind of type of thing.

Be aware in your budgeting that there are fees and taxes related to the money that ends up being about a 10% fee if you go through Kickstarter, I think it’s 5% Kickstarter and then 3% to 5% payment processor. So just make sure that’s in your budget. If you know it’s there, great. If it sneaks up on you, not so great.

But the thing that can be really helpful for figuring out how am I actually going to make this happen, especially if you’re new to the business if you’re just launching or it’s a new project, is make a list of the people you think will donate. Make a list of people you think might back your project and make sure that those people know about it ahead of time.  So this is basically just marketing, but you want them to be able to feel invested in it and part of the story, so when it launches, they’re ready to get on board.

Momentum is a big part of the crowdfunding game. And so if people see that other people are backing it, that makes them more likely to back. It’s just psychology at that point. But in Fyood’s case, what I found was that of the list of people I thought would back, 50% did. And that was half of my crowd funding, like my total and 50, the other 50% of what got us to our goal was people totally out of the blue. I never thought that they would have backed it so you can find them, but you just need a plan for how you’re going to get there in the first place.

Yury: Are you still friends with those that did not back you up?

Maddie: You know, not everything is for everybody.  

Yury: Well, you know, with the backing and approach you still can utilize those that don’t give or don’t support you as a resource to syndicate the message. So just because they forgot to open up their wallets, you can still rely on them to spread the word and then share the message.

Maddie: 100%. And it can be very helpful to think out your campaign in advance. So there tends to be sort of this reverse bell curve to crowdfunding campaigns where there’s all this excitement and buy in right at the beginning around launch, and then it goes quiet in the middle. And sometimes there are days where there’s like almost nothing happening. And as the founder, you get a little scared in those times. But if you know that it’s always a reverse bell curve that helps to handle it when you’re in that. And then there’s this ramp up again towards the end and a time is running out kind of thing.

And so if you can find ways to keep people engaged in the campaign during that low point in the bell curve. Whether that’s you’re doing an interview with somebody, or you’re having an article come out, or maybe an influencer is going to be talking about your product or your service or something like that, someone who speaks to your audience. If you can schedule those in advance, because you know that the momentum is a big part of the game and it’s challenging in the middle, then you’re setting yourself up for success.

Yury: So you would suggest to plan for the valley of despair and the typical entrepreneurship timeline when you kind of get to the low point and you’re like, “Oh, should I still keep on going? Or should I hang my shoes?”

So you gave us a lot of recommendations and suggestions, very valuable content. But Maddie, based on where you started, what would you do differently today if you were to relaunch the same program? And would your program still succeed the way you did it back then versus the environment today?

Maddie: I think a little part of the appeal back then was that I was a baby entrepreneur and a lot of people wanted to support that. But I think the same type of campaign could be successful in that beginner form now.

One thing I’ve just learned a lot, since Fyood was basically my business education. And since I started, I’ve learned everything I now know about marketing and branding and getting a message out clearly and things like that.

And for Portland Rising, we actually did sort of a crowdfunding campaign. It was a league wide fundraiser technically, but each player on our pro team had four jerseys available at $150. And it was a fundraiser towards the teams. And what I learned how to do with that was to make it a big deal. So there’s several different ways that you can ask for help and you can do it in a plea sort of way. Like, I need this to go on, please help me. And that can be extremely effective and you can also do it in a, “Here’s this awesome thing that is happening. And there’s so much excitement and buzz around it and you want to get on board because it’s happening regardless and we want you to be a part of it, but it’s succeeding without you”.

The first time I did a crowdfunding campaign, it was definitely in the, ‘please help me make this happen’. And it was successful that way, but the second one was possibly even more successful with being like, “This is awesome. I hope you want to be a part of it, but we’re doing it regardless.”

Yury: Awesome. So emotional triggers play a significant role. Whether we focus on a small group of people who want to kind of like, you could think about the Maslow’s hierarchy of needs, self-actualization, you are helping someone to raise above the crowd versus, “Hey dude, you’re really missing out. Look at them, they’re having a good time. Don’t you want to be there?” That is awesome. Thank you.

Rich: And you mentioned that you’re now helping other entrepreneurs with crowdfunding, showing them the ropes. What’s maybe one thing that people still don’t get, or what’s the very first thing that you try to impart to them when you’re sitting in front of an entrepreneur who thinks crowdfunding is the end all be all for their business?

Maddie: I think we’ve gone over the two big ones already, but they’re definitely worth repeating. Just that crowdfunding isn’t a magic pill. You need to know how you will fund your campaign and who will want to back it before you start, and that it’s not the right fit for every type of business. So if you’re making a new medical device or whatever this thing is that’s not very sexy, it would be hard to deliver to consumer anything like that, crowdfunding probably right now in its current stage isn’t the right fit for that, unless it’s a super creative campaign.

Yury: Alright, well Maddie, we have arrived to a part where we ask the staple question of all of our guests. So are you ready for this?

Maddie: Let’s go.

Yury: All right. So what is one thing you would change if you could to improve the business ecosystem here in Maine?

Maddie: Honestly, I think it would be sort of what I was talking about with how I would do crowdfunding differently the second time. I feel like sometimes we’re still talking about Maine and business and the entrepreneurship scene here in sort of like a small, it’s harder here, there aren’t as many resources and that kind of thing. And we’re sort of focusing on this isn’t quite the right fit, but please help me side of it. Whereas, I’ve found incredible opportunities in that same scene. And I think it depends how we brand it and talk about it.

And there certainly are people who are cheerleading for what’s already here, but I mean, doing business in Maine with literally one degree of separation is an incredible bonus. Like for starting Portland Rising, we just sat down with the city and the owners of all the other sports teams and figured out the best way to succeed from there so we didn’t have to reinvent the wheel. Huge bonus compared to starting something in New York or anything, and basically anywhere else, because there’s this really collaborative we’re in it together and we want to see more Maine attitude here.

So I think I would just shift the brand conversation from how can we make it better, to let’s celebrate more what we have and recognize what a strength that can be.

Yury: Fantastic. Thank you.

Rich: Maddie. This has been fantastic. And we know that there are going to people out there who want to check you out online, where can we send them?

Maddie: So my most consistent place I show up is in my Instagram stories. If you’re an Instagram user, that’s @MadelinePurcell, M A D E L E I N E. And @FyoodKitchen, and @PortlandRising are on Insta as well. And apart from that, I mean, I’m on the social platforms. But if I’m giving a workshop or I’m going on a podcast or something like that, it’s going to be an Instagram story, even if it’s not anywhere else.

Rich: Fantastic. And give us the website for Fyood.

Maddie: Fyoodkitchen.com.

Rich: Awesome Maddie, thank you so much for your time today.

Maddie: Thank you both.

Rich: Alright, here we go with the fast takes. For a full transcript of today’s episode with Maddie and all the links she shared with us, head on over to our website at fastforwardmaine.com/53. Yeah, this is our 53rd episode, and we did record this remotely due to the Coronavirus. It is not the first time, as we did record Chris Brogan and John Lee Dumas during our virtual summit, but this one definitely felt different being in our remote spaces. And luckily Maddie was an amazing guest, so that just made it easy.

Speaking of that, we always do a fast take at the end of each episode. So Yury, what was your fast take for today?

Yury: Thank you, Rich. And as you mentioned earlier, especially for those that didn’t hear us, my fast take is actually going to consist of three fast takes. So you’re getting one and two bonuses guys.

Alright. So here are my fast takes. If you’re launching your campaign, remember key elements, start with ‘why’, show your passion and consider different outcomes of your campaign – good or bad – and ultimately focus on the logistics that may be associated with it. These are my fast takes, Rich. What about you, what are your fast takes?

Rich: Mine was that crowdfunding is a very interesting alternative source of funding, but people need to keep in mind that it’s a campaign and not a shortcut. You need to build an audience and build a desire within that audience, if you want to succeed.