Time:2024-01-28 Browse: 24
The term crowdfunding is the act of fundraising by many people making small contributions to a cause, or business.
The concept of fundraising isn’t new, but online platforms like GoFundMe and Kickstarter have made this process easier. Successful crowdfunding campaigns are on the rise yearly. According to research studies by Fundly, 6.4 million crowdfunding campaigns saw an average success rate of 22.4 percent.
If you want to learn how to fundraise for a business and are looking for ways to hold successful crowdfunding campaigns for your start-up, then this article is for you.
Table of Contents
What are the benefits of crowdfunding
Steps to kickstart a crowdfunding campaign
Begin your crowdfunding campaign
Examples of successful crowdfunding campaigns
How to fundraise for a business: moving forward
Crowdfunding your startup enables you to attract investors without rigorous bank processes, while allowing you to retain ownership of your startup. So if you’re looking to raise capital turn your ideas into a reality, here’s how crowdfunding campaigns can benefit you:
Flexible funding: Securing funding is difficult for start-up businesses. Conservative banks might be reluctant to grant loans to startups with untested ideas. A successful crowdfunding campaign can therefore be more rewarding than traditional approaches to funding.
Builds a following: A strong following before starting a business is a great advantage. A crowdfunding campaign combined with social media and press can grow loyal supporters.
It validates your ideas: Crowdfunding is a great market research method. It’s a preview of how consumers will react to products and services. Entrepreneurs can improve them after feedback.
With these crowdfunding benefits in mind, let’s discuss how you can crowdfund your startup.
Anyone can start their crowdfunding campaign with a few simple steps. To do so, you should:
For the first step, you should aim to understand what product or service people need and create something that fills that need. Researching the target market and your potential investors is a great start. Their reaction to the products or services will provide a preview of the market’s response.
The business plan should have details of the products or services offered and why people should invest in them. It should also highlight what makes the product unique from others out there. This could also involve having a clear brand positioning strategy, which could make potential investors more eager to fund your business.
Entrepreneurs should also let investors know how much they need and what they are offering in return for investments. Unless the campaign is donation-based, it could be equity, rewards, or interest on loans. Whatever it is, it should be deliverable and entice them to invest.
The crowdfunding campaign methods an entrepreneur chooses depends on the type of products and services they offer, and their objectives for growth. It could be any of the following:
Here, people give money without expecting anything in return because they believe in your project. Donations can help you raise funds without the pressure of delivering investment returns.
Equity-based crowdfunding rewards investors with company shares (equity) based on how much they invest, encouraging them to invest more. However, not all crowdfunding platforms allow this type of investment.
This funding type allows people to offer interest-based loans to startups with hopes of payback over a specific period. Crowdfunding interest rates are lower compared to banks and repayment is flexible.
In return for their support, investors get exclusive content, merchandise, discounts, etc. Entrepreneurs can use rewards to build and maintain a personal relationship with investors. Giving rewards like customized merchandise can make interactions more personal.
Although several crowdfunding platforms exist, deciding the ones to use for your campaign might be tricky. You must consider:
The purpose of your campaign
Your crowdfunding end goals, and if the platform supports such projects or has done so in the past
The crowdfunding platform model or structure
Crowdfunding platform fees for donations and missed targets and other terms and conditions
Available payment options and refund policy
Crowdfunding platform integrations and support options
Platform restrictions and regulations
These factors ensure your crowdfunding campaign starts out on the right foot to avoid setbacks with regard to time, effort and resources.
With this in mind, here are three popular crowdfunding platforms for startups.
