Let’s say you have this brilliant idea for a new business. Or you have a product in mind that may have the potential on making a name in the market. A “game-changer” if you must. However, there’s just one big problem. As much as you want to put it into reality– your personal fund is not enough. But what if you can ask people around the globe to fund your business? Yes! That’s possible nowadays. It’s called Crowdfunding. In this post, we will seek to understand what it is and how to prepare it for your business.
First, let’s define it. Basically, as I’ve said above, Crowdfunding is a form of capital raising through the joint effort of friends, family, companies, and individual investors. Meaning if you ask your friends or relatives to fund your business– that can already be called Crowdfunding. However, nowadays, Crowdfunding is mainly done through websites that are specifically made for it. In there you ask individuals around the globe to fund your business in exchange of ‘something’ in return (I’ll explain it later).
Don’t get it confused with the mainstream method of business financing. They’re not the same. Traditionally, for a business to raise capital, or for a new product to be funded– you need to seek wealthy investors, get bank loans, or try venture capital firms. Aside from seeking them, you also need to present them with your business plan, market research, and product prototypes. Basically, it will take more convincing efforts to make the “funding” happen with the usual method. With Crowdfunding, it’s easier. All you have to do is to choose a platform, then pitch your products or business plan. It will be shown to a wider pool of investors. If they like it– then they will fund it.
Now before we go any further, let’s check the 3 primary types of Crowdfunding so you can decide which one to use:
- Equity-Based – This kind of Crowdfunding is what most entrepreneurs use to fund their business campaign. In this method, you will ask contributors to fund your business in exchange for a financial return on their investment and share of the profits in the form of a dividend or distribution. Basically, you will allow contributors to be a part-owner of your business. Many contributors prefer funding this type as they can have a chance of multiplying what they’ve given.
- Donation-Based – As the name says, this type of Crowdfunding has no financial return for contributors. This type is usually used for non-profit initiatives, charities, disaster assistance, and medical bills. It is not recommended for a business campaign. It will be a long shot.
- Reward-Based – Individuals who plan to put up a small business usually try this type. In exchange for funding your business or product, contributors are offered with “rewards”. It can be in the form of services, or products that your business offers. Like for example– a year discount, or a freebie.
Crowdfunding Platforms you should try for your Business
Now that you have an idea about it, you probably want to try it right away. That’s good! But you may want to check these platforms that I will recommend. Most of these websites offer wider reach, advice for presentation, efficiency, validation of the concept, legitimacy, marketing assistance, and many more.
-Entrepreneur’s choice for Crowdfunding.
-Helped entrepreneurs raise $1 billion for more than 650,00 projects.
-They have a marketplace for innovative products.
-No fundraising target or deadlines to reach the target fund.
-You can apply equity, offer securities, revenue sharing, and cryptocurrency sales.
-Charge 5% (of fund collected) platform fee for all projects.
-Best for businesses that involves art, films, music, designs, and other creations.
–Helped 15 million artists, filmmakers, musicians, designers, and other creators raise $3.7 billion for more than 143,000 projects.
-There’s a deadline to meet the target fund. Or else, contributors will get their money back.
-Free to create campaigns. But the platform gets 5% share if the campaign is successful. They also charge a 3-5% processing fee.
- CROWD SUPPLY
-Best for Entrepreneurs seeking to fund their original and useful products.
-The average amount raised per successful project is $66,000.
-You can use the platform by choosing a plan. In exchange for the percentage of gross campaign sales– they offer features like campaign management, media asset creation, and a dedicated PR team.
-Best for small business campaign or startups.
-The platform offers to connect with 200,000 accredited entrepreneurs and investors.
-Raised over $150 million dollars from 12,000 Angel Investors and Venture Capital Firms.
-It’s free. But if you need services like document storage and personalized support– you can choose from Starter ($299/month) and Premium ($499/month) plans.
-Best for companies or not-so-small businesses.
-Consumer-facing companies can raise up to $50,000 with their rewards program.
-Offers equity program that can raise $50,000 or $10 million.
-Platform charges $179 per month to fundraise.
-No charge for successful campaigns. But for rewards-based raises there is a processing fee of 3.5% + $.30 per transaction
Don’t get me wrong, aside from those mentioned above– there are many more Crowdfunding websites. It has been effective for many years that’s why a lot of platforms appeared. The best one to use is for you to decide.
How to Prepare a Crowdfunding Campaign for your Business
Once you’ve chosen the Crowdfunding platform for your business, you need to prepare for the campaign. Depending on the platform, you will need to build a lead capture page. This page will allow you to showcase everything about your business (or product). From here you should sound like you are selling it. But keep it short and simple. If you’re not into equity-based, most successful campaigns include enticing offers such as a reward. Some also use the contest or raffle method to gain contributions.
Then you just need to wait for contributors to fund it. However, it is also advisable to put your efforts in promoting your campaign. Sharing it on social media platforms would help reach more people. Also, there are cases where investors suggest things to improve your pitched business or product. I suggest that you follow it and edit your lead capture page.
In Crowdfunding platforms, there are also stats; milestones that you can use to attract contributors to your future campaigns. So it’s better to start with smaller amount that you can reach faster. Even if it’s not the value you require. Here, it’s better not to be greedy but think of future opportunities.
Crowdfunding is an exciting way to raise funds in public for a purpose. However, keep in mind that even if there are many campaigns that succeed, many also have failed. You should be ready for that. But by ensuring that you put everything you got– time, energy, ideas– to succeed… it’s likely that you will also reach your goal.