You want to commence a startup, but is the lack of money holding you back? We’ve got good news: there are plenty of ways to get started with Crowdfunding.
Crowdfunding is the best way to get your idea off the ground! The idea has been around for a few years now, but it’s only recently that we’ve seen the rise of startups relying on crowdfunding to finance their business ventures.
According to statistics, the global growth of the crowdfunding market is expected to maintain a CAGR of 16% between 2020 and 2025. Apart from traditional funding methods such as bank loans or grants, crowdfunding is a unique method of raising money for starting a business. Here, individuals or startups use various online platforms to gain funding for a project. Today, crowdfunding platforms allow millions of people worldwide to pursue their dreams with the help of networks of supporters.
If you’re considering launching a crowdfunding campaign, it’s essential to do your homework before you start.
This guide will highlight everything from the best platforms to use and how to ensure your campaign is successful with some tips to help get you started on your journey today!
– What crowdfunding platform should I choose?
– How much money should I ask for?
– What rewards should I provide my backers?
– Should I offer discounts or early bird specials?
The ultimate guide to running an effective crowdfunding campaign has all of the answers!
How does crowdfunding work?
Crowdfunding works by individuals or organisations investing in (or donating to) projects in return for a potential profit or reward. Imagine you want to promote a project that requires a considerable investment. You could think about asking your millionaire friends or your local bank for a loan; what if, instead, many people wanted to support your project. Now suppose you could ask those million people what they think about your business to give you feedback for improvements or changes, and at the same time, they would each talk to their friends about your project, expanding your reach exponentially. This is how crowdfunding works.
Types of crowdfunding
There are different kinds of crowdfunding to choose from. Each type has different benefits for businesses and investors. You will need to consider which one is right for your business, project or venture.
Rewards
Here the money backer gets some kind of benefits or a specific package. It could be goods, books, tickets to events or gifts – startups often reward backers with discounts, products, and services. It’s a good funding source, and it can be easy if you’ve got innovative products or a loyal customer base.
Equity
It is possible for backers to invest money in return for shares in your project. Equity crowdfunding is an emerging form of this fundraising technique that gives investors the opportunity to invest in companies in exchange for equity, rather than loans. This type of investment offers more benefits than traditional forms of crowdfunding because it provides investors with greater opportunities for profit as well as the potential for an ownership stake in a company.
Donation
Donation-based crowdfunding is a way of raising money by asking a large group of people to donate. They offer no rewards to contributors apart from the satisfaction of donating to a worthy cause. On average donation-based campaigns last around 40 – 60 days. This gives people enough time to donate to a project they are passionate about.
Debt
This type of crowdfunding is different from all the above. Also called peer-to-peer lending, crowdlending or marketplace lending, debt crowdfunding works similarly to a term loan from a bank.
Platforms for crowdfunding
The second thing is choosing the platform. The good news is that each of these platforms concentrates on different niches – so depending on what you need the most from a fundraising site, there’s something here for you.
1. Crowdcube – Allows investors to choose promising projects they wish to back.
Target location: UK
Model: Equity-based
Ideal for: Investment, business, start-up, startup, entrepreneur, small business, equity, crowdfunding, angel investors, business finance.
2. Seedrs – Seedrs is the leading online crowdfunding platform and the most active investor in private companies in the UK.
Target location: UK
Model: Equity-based
Ideal for: startups, individual investors, small businesses, entrepreneurs, angel investors, venture capitalists,
3. Kickstarter – It is a global crowdfunding platform for aspiring entrepreneurs and small scale businesses.
Target location: Global
Model: Reward-based
Ideal for: Artists, musicians, techies, filmmakers, designers, startups, small scale businesses, etc.
4. Indiegogo – It is a clear choice for many individuals as it has a track record of success in helping to fund more than 800,000 ideas worldwide since 2008.
Target location: Global
Model: Reward-based
Ideal for: Techies, Startups, small scale businesses, service-based causes, etc.
5. GoFundMe – launched in 2010, GoFundMe has become one of the largest fundraising platforms online, raising more than $9 billion from over 120 million donations.
Target location: Global
Model: Donation-based
Ideal for: Service-based causes, Startups, Artists, Designers, etc.
6. RocketHub – RocketHub is a global crowdfunding platform for venture capitalists, therefore, startups can use it to raise funds for their businesses.
Target location: Global
Model: Donation-based
Ideal for: Small scale businesses, startups, artists, scientists, social projects, etc.
7. SyndicateRoom – This crowdfunding platform connects ambitious investors with trailblazing organisations, and it is excellent for multi-sector private investments.
Target location: Global
Model: Equity-based
Ideal For: Startups and small scale businesses
8. Crowdrise – Crowdrise is an online fundraising platform for charities, nonprofit organisations, corporate foundations, and events.
Target location: Global
Model: Donation-based
Ideal for: Charities, Social events, etc.
Selecting which platform clearly depends on your product, target audience, offerings for investors, and crowdfunding goals.
Setting up the campaign
It’s time to design your crowdfunding campaign page. Each platform has its own specific campaign guidelines, so read them carefully before setting up your campaign.
Craft an attention-grabbing title for your campaign
Choosing a clear and concise campaign title is vital. Your potential backers have thousands of projects to choose from, so you want them to be aware of your project as clearly as possible.
The three components of a good, simple title are:
- Your product or project name
- A clear idea of what your product or project is
- What is unique or attractive about your product or project
Identify your target audience
The next step in a crowdfunding campaign is identifying the target audience. What are their interests, values, and desires? It’s important to understand your potential backers’ motivations in order to make a compelling case for why they should invest.
Ask yourself:
- Who are you targeting through this campaign?
- What does their profile look like?
- What is their story?
- Can they possibly relate to your application in any way?
- Why should they buy your idea?
Set a fundraising goal
This is where you are required to set a funding goal that you wish to achieve through this campaign. Setting goals helps to draw a clear picture of what you are trying to achieve in your campaign.
Before setting the right amount of money, have a clear idea of:
- How much money does your startup require?
- How many people are expected to pledge for your business idea?
- Do you have a backup plan in place if you don’t get the funding you need
The funding goal can’t be changed at any later stage of the campaign, so take your time, think it through and make an informed decision.
Develop and share a compelling story
The story you tell is the most important aspect of your crowdfunding campaign.
It’s what will evoke an emotional response in your supporters and it’s what will convince them to donate their money.
Storytelling has been a tradition for centuries, but it wasn’t until recently that we saw storytelling become such a huge part of marketing campaigns.
Today, businesses all over the world are using stories to connect with their audiences on an intimate level and create emotional bonds with them so they can make more sales.
It’s important that when you’re developing your story, it has a compelling narrative that will compel people to donate or share with their networks. While articulating your ideas, try to describe the following:
- Main product idea
- It’s potential benefits
- How it functions
- It’s unique selling proposition
- Your passion behind the idea
Plan Rewards
Crowdfunding is a way to raise funds for any type of project, business or personal. It offers contributors an opportunity to invest in projects and receive rewards at the end of successful campaigns. Rewards can be anything from a t-shirt to exclusive access to the beta version of a product or service.
Reward people by giving them rewards that money can’t buy: Limited editions, exclusive events, unique experiences, early product samples- a way of rewarding your close enthusiasts.
Promote your campaign
Communication is essential to a crowdfunding campaign! Promoting your crowdfunding campaign through social media is a great way to get the word out about your project and generate more interest.
There are several ways to promote a crowdfunding campaign, such as:
Email lists: Email marketing is a simple way to promote your campaign and ask people for their support! As you developed your idea and conducted market research, you should have gathered contact information for individuals who are interested in what you’re offering.
Social media: You can make use of commonly used platforms like Twitter, Facebook, LinkedIn and Instagram to get the word out. It’s a good idea to link your campaign to social media so that supporters can share information about the campaign with their networks.
Blogs and forums: Promoting your crowdfunding campaign through blogs and forums is one of the best ways to increase visibility and raise money. If you are looking for a way to promote your project, here’s what you should do:
- Find relevant blogs in your niche that will be willing to post an article about your campaign.
- Identify forums within your niche as well as any related niches that have active members who might be interested in promoting or discussing your topic.
- Reach out to these bloggers and forum participants with a short message explaining why they should support you.
Press and Paid advertising: Pitch your campaign to local news outlets, including newspapers, blogs, TV and radio stations, and podcasts. You can even pay for ads on social media and other websites, in print, or on TV and radio, but it’s best to use all of your free promotional resources first.
Stay active during the campaign
Now that your campaign is up and running, you need to keep in mind that your project backers and potential backers must be kept in the loop as you move forward.
Most of your funding will come in the first few days and last few days of your campaign. Though, stay active in promoting your campaign throughout its entire duration.
Here are some ideas:
- Keep your contacts informed about your campaign progress through social media updates or blog posts.
- Highlight any significant milestones.
- Post photos from any fundraising events related to your cause.
- Express gratitude to your supporters and publicly recognise the top five donors.
Fulfil your promise
The campaign to fund the promotion of a new product has ended and you successfully raised $100,000. In order to thank your backers for their support, you want to send them some kind of reward in recognition of their investment.
You may have promised them rewards in return for their contributions. It’s important that you follow through on this promise by giving them something of equal or greater value than they initially pledged.
You may also need information from them for their rewards; mailing address, email, colour preference, etc. If you already have any of the rewards on hand, send them out right away. If not, let each donor know when they can expect their rewards to be delivered.
Announce your success
This is time to softly pat yourself on the back!
You just finished your crowdfunding campaign and are ready to announce its success! Whether you raised $100 or $1000, this is a great time to show off what you have accomplished.
Even though you personally thank your donors, you should always thank them as a whole on your website and social media pages.
To wrap up!
No doubt, crowdfunding is an incredible opportunity!
Now, anyone with a great idea and the ability to execute it can raise the funds needed to succeed.
Whether you’re an entrepreneur, a designer, an inventor, or an artist, this guide will help give you the strategies and tactics as well as the confidence you need to make your campaign a huge financial success.
Unlike a fundraising event (which is typically a one-day affair), a crowdfunding campaign can last weeks and even months and requires maintenance on your part.
Invest your time and energy to make your campaign as unique as possible!
Best of luck and happy funding!
