Crowdfunding may seem like an unknown and scary way to help fund your business but the concept is really very straightforward and is a successful industry with hundreds of platforms. Crowdfunding is the practice of funding a project or venture via the internet with contributions from a number of people. The projects seen on the sites can range from a new business idea to a creative project or a charity raising money for a good cause. Websites act as a platform for people to advertise their project or business and people can invest funding if they think it’s worthy, often receiving a reward or thank-you in return. Crowd Funding as a concept has been around for years, including when work stalled on the Statue of Liberty, individuals came together and pledged small amounts of money to see the project finished.
Not only is it a great way to get the money and investment you need but it is also an amazing marketing and advertising opportunity, getting your business or project out to lots of people.
So how does it work? Well this can depend upon what you want funded. There are different platforms that will be best suited to ‘host’ your idea or business request, most will take a percentage of around 5% of the funds raised.
Some are based on ‘All or Nothing Funding’ where projects must get 100% of their funding request or they get nothing. They usually involve substantially larger goals and are much more likely to be successful at achieving their goals as they provide more detailed information on the campaign. Others are ‘Flexi Funding’ where you keep whatever you raise whether you hit target or not. Both are open to ‘Over Funding’ where you have hit your target and the money keeps on coming in- Great!
Rewards Crowdfunding: Businesses/entrepreneurs pre-sell a product or service to launch a business concept without incurring debt or sacrificing equity/shares. This has worked well for musicians or producers who can offer previews or products to investors who have funded their project.
Equity Funding: The backer receives shares of a company, usually in its early stages, in exchange for the money pledged. The company’s success is determined by how successfully it can demonstrate its viability. A business plan will need to be provided with at least a 3 years’ worth of financial projections.
Charitable/Social enterprise: Charities looking for donations for projects to be funded with little or no reward other than supporting a worthwhile cause.
So, if you are interested in Crowdfunding for your business or project here are some ‘Top Tips’.
- Choose the right platform
- Start by sharing with friends/family/current contacts
- Get your supporters behind you, motivate them and they can spread the word
- It is important to get off the zero mark early
- Tell your story- sell your passion- clearly
- Use videos and pictures
- Rewards can lead to higher funding
- Line up a few backers before you start
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