Crowdfunding may be just the right opportunity to make your idea a reality.
When traditional loans and self-funding aren’t options, platforms have popped up all over the internet to give businesses another way to get their product dream into the hearts and minds of people who might just make it happen.
If your idea is compelling, people will want to dump some cash into it. But, let’s start at the beginning here with the obvious question.
Crowdfunding is a super accessible way to raise money for your small business product idea or start-up when traditional funding options aren’t available to you.
And there are several different ways to approach it—from selling shares of your budding company to providing proportional rewards for funds offered.
It’s like Shark Tank but you are pitching your idea to the whole world.
The benefits of crowdfunding—successfully—are pretty convincing. If the idea has legs (in the eyes of the crowd), you’ll have the cash to make it a reality.
A huge bonus for crowdfunding is that it is NOT a loan. Think of it as a grant. With traditional funding, it can take lots of time and energy to achieve your goal. Crowdfunding is much more efficient.
Crowdfunding can promote your product campaign while simultaneously getting the word out about your business on social media platforms and the internet! Free marketing is pretty nice.
It can also help prove out and further develop your idea with the help of your new investors.
The different ways to approach crowdfunding can influence the success of your campaign.
The two main types you’ll see are rewards-based crowdfunding and equity-based crowdfunding. From the names alone, you might be able to suss out what the difference is, but let’s dig in a little.
Rewards-based is a brilliant way to crowdfund.
By putting up incentives for increasing tiers of financial support, you can raise money quickly. But, often, if you don’t hit your target amount by the end of the campaign, your funders haven’t been put out a dime and you are back to the drawing board.
So, the pressure is on to attract enough attention (and money) to hit that target in time. You pick your rewards, so it makes sense to make them enticing.
Various levels of rewards are given to those who donate their money to your worthy business idea. Usually, they have a reward-less tier for those that just want to give money. Following that, you’ll have ever-increasing tiers with product-based rewards.
Using a rewards-based approach means you’re raising money without selling off an equity stake in your business. Your crowdfunding is achieved entirely through donations in exchange for future rewards.
PROS
CONS
Equity-based crowdfunding moves away from rewarding your donors with gifts to providing your donors with a piece of the company in exchange for working capital.
By taking donations from investors, the contribution will add to the success of your business long term. Their investment means that they are rooting for the continued success of your company.
While this may seem like auctioning a piece of your company in return for donations, you have the potential to raise larger sums.
As opposed to other investment funding avenues, crowdfunding will usually allow for all investments to be pooled into one single investment, simplifying reporting requirements.
PROS
CONS
The key to success for crowdfunding is the power you hold in your marketing campaign. You need your campaign to stand out.
In doing this, there are multiple ways that hold onto investors by offering donors more than just the satisfaction of helping achieve a small business or crowdfunding goal.
When you give your investors rewards or equity in return for donations you create a financial conduit that benefits both the donor and your business.
I know it’s a cliché but it is true.
Try employing relatability and emotion by personalizing your description. Step away from the business jargon in your pitch and outline why you need donors and why they’d be lucky to get on board.
It has been found that those who use more personal and emotional language in their pitches are more likely to make their target, which illustrates why women have more success in crowdfunding than men.
Get social! Self-promotion will be key to your eventual success.
Utilize all social networks you have and build a following. Post regularly, and keep your socials updated.
When you build a following, you allow more emotional investment which allows for more people to approach your crowdfund and dish out that sweet cash.
Obviously, you first have to figure out how much you need to get your project going. You’ll also want to add some buffer to that amount for contingencies as well.
Now that you have that number, how are you going to make it happen?
If your team consists of just yourself, you’ll have a full-time job getting the campaign in front of enough willing early adopters. If you have a few more people, you can start gaming out how you can expand your reach and hit that goal.
There is a set of people that just love getting in early on things.
That’s why you see them lined up around the block to get the newest iPhone or gaming system.
Rewards-based crowdfunding sites attract just those types of people that want the next great invention before everyone else. With your rewards tiers, you are giving them that early access.
Start small, with something symbolic like their name on a special page. Then, move on up to offering bigger and better product rewards.
Note that you only want to offer up as much product as you can reasonably deliver.
You’ve achieved your funding goal and now the pressure is really on. Time to dish it out!
You’ll want to give your backers a timeline on when they can expect their amazing new thing. Then, work hard to build and ship your goods out to your loyal customers.
Once the shipments are on the way, you can relax into the realization that you have a business!
The obvious first step to crowdfunding is finding the right platform to launch your great idea. There are tons of great sites out there.
Here is a handful to get you started:
By now, you must be convinced that crowdfunding can be an excellent resource to help kickstart your next business adventure (or your exciting foray into scientific discovery).
So go, entrepreneurs! The world is your crowdfunding oyster!
Though it’ll take luck, a giant leap of faith, and a lot of preparation for you to actualize your crowdfunding goals, crowdfunding is obviously a valuable and viable means for your business to raise money and achieve your business goals.