Got that exciting new business idea brewing in your head for the last few months… finally want to make it a reality? Or perhaps you have been itching to sell your own products for years and have finally decided you want to go for it, but don’t have enough funds to startup properly. Maybe you just want to test out if the market will actually buy it first?
Well join the crowd! There are thousands of us out there that have all dreamed of doing something exciting that we are passionate about, whether its making a movie, recording an album, developing a game, publishing a book or launching a new app or some cool new technology. Then if you fall into one of these categories you might want to consider crowdfunding.
Crowdfunding over the last few years has grown to be a popular way to try and raise capital to fund a creative project or business venture. In this article I will provide a basic introduction on How To Do Crowdfunding, to give you an overview of whats involved.
Essentially Crowdfunding is a means of raising funds for a project from a wide network of individuals usually via the internet. It involves creating awareness of your project, product or business venture to the masses through a web-based campaign, convincing them to contribute towards it. Individual referrals play a big role in creating awareness of the project. This works by a friend or contact telling another friend the existence of a project and convincing them to make a contribution towards it. This is done by several people such that ultimately many people will have contributed to the particular project.
There are a number of different crowdfunding models based on the context of the business or project:
- Donation based
- Reward based
- Lending based
- Equity based
Donation based crowdfunding
This model is based on philanthropy and often an emotional response, therefore those who contribute towards the project do not expect any returns. These projects contribute to areas such as natural disasters, climate change and social projects which are run by individuals or organisations.
Reward based crowdfunding
Reward based crowdfunding is probably the most popular and widespread of the campaign types. After determining the amount of money that needs to be raised for a successful project, the person or company behind the campaign then sets up suggested donation amounts. Each of these will come attached to a specific reward or incentive.
For instance, if an independent filmmaker decides to use reward based crowdfunding to raise money for his next independent film, he might offer people who donate $100 to the cause a mention in the film’s credits. Those who choose to donate $500 might receive a signed film poster while people who donate $1000 might get to attend a meet-and-greet. The types of rewards that can come attached to a crowdfunding campaign can cover literally anything.
Loan based crowdfunding
Also known as social lending and it involves individuals lending their money to entrepreneurs or businesses. In return, the individuals receive their original money plus interest after an agreed period of time. An example here is the LendingClub.com, who provide personal and business loans. They provide a loan-based crowdfunding portal and community that connects borrowers with investors. It gives individuals (the crowd) the ability to play the role of a traditional bank and make loans. The platform has facilitated more than $4 billion in loans, with more than $300 million in interest paid back to investors.
Equity based crowd funding
It is also known as crowd investing. Potential investors purchase shares from a company and the investor receives dividends when the company makes profits. This kind of funding is common with startup companies. There are many platforms like AngelList, CircleUp, Crowdcube and Seedrs who offer investment crowdfunding platforms. Some are only for accredited investors whilst others are open to non-professionals. Crowdcube for example allows anyone to invest alongside professional investors in start-up, early stage and growth businesses through equity, debt and investment fund options.
Step by step process of crowdfunding
Have a solid plan and goals clearly outlined
In order to convince people to contribute towards a project, the project or campaign manager (this could be you if you’re an individual entrepreneur) should be able to present a selling idea. This is your business, service or project pitch. People should be convinced that the project is worth funding. Therefore a detailed explanation of what the project is all about, a summary of how the funds will be used and what the project will achieve is necessary.
Choose a platform
The kind platform to be chosen will depend on the number of people to be targeted. If the initiator of the project requires the project to reach many people then a big crowdfunding platform should be chosen. On the other hand, if a small number of people is targeted then a niche platform should be chosen. Therefore the owner of the project should conduct adequate research when choosing a platform for a project.
Develop a marketing plan
Once a platform has been chosen, the campaign manager should develop a marketing strategy. This involves identifying the target market and choosing a marketing platform. In addition, how the actual marketing will be rolled out and the time frame expected to be taken when marketing should be outlined. The requisite resources, that is, both human and financial should be mobilized in order to make a successful marketing plan.
Build a project campaign
A project page should be built when creating a campaign. This page consists of:
- Basic information- this will make the target audience to have adequate information about the project. For example what the project is all about, its goals and reasons why the audience should support the project.
- Formulation of a funding goal- the critical factor to be considered here is the platform to be chosen since some offer fixed funding while others offer flexible funding. Fixed funding is a case where the creator of a project has to raise funds up to a certain point or else if not the creator will not receive the funds raised. On the hand in flexible funding the creator will receive funds regardless of the amounts raised.
- Choosing of the campaign period – this usually ranges between 30-60 days for best results.
- Creating a video is imperative because it creates a personal connection between both the target audience and the project creator. In addition, a video allows the audience to have more understanding of the project.
- Devise enticing rewards- the aim of enticing is to encourage many people to support the project. However the project creator should ensure that this kind of reward is cost effective.
Launching of campaign and execution of marketing plan
This involves putting plans into action. The creator should build momentum before the project starts, make sure that things are going according to plan and take corrective measures where necessary.
Leverage your strengths
The project creator’s should leverage on their strengths in order to make the project a success. If the strength is public speaking or the projector is the face of the business then these strengths are useful in marketing of the particular project.
Get the funds and complete the project
Crowdfunding is not easy, but it is worth trying. Once the funds are available, the project creator should then fund the project and make it a success in order to deliver to its backers.
Top 5 Crowdfunding Resources
Crowdfunding 100K-Learn how my business startup used these low-risk secrets to raise over $100K in startup funds!
Learn how I raised over $400k (now over $1,000,000k as of 10/14) using online marketing hacks for crowdfunding raises.
A-Z guide to creating a successful crowd funding campaign and take over your market with proof of concept!
6 experts reveal their campaign planning and marketing hacks that helped them raise 2-20 times their crowdfunding target
Learn how to raise money online with crowdfunding, using techniques that have yielded millions of dollars in 30 days
Top 10 crowdfunding websites
This is an online platform which allows people to raise funds for events. These life events may be graduation, celebrations or difficult circumstances such as accidents or illness. It is based in the United States.
It’s a global crowdfunding platform which focuses in funding innovative ideas. It has commendable support from its followers who also receive rewards from kickstarter. It is based in the United States.
An international crowdfunding website based in the United States. Its aim is to fund anyone who has a brilliant idea. It also funds charity projects and startup businesses.
This crowdfunding websites specializes in providing platform for custom apparel. It simplifies the means of selling custom made t-shirts. The website link is teespring.com
This is a US based crowdfunding website which specializes in mobilizing funds for medical expenses.
Causes.com is basically for online campaign. Its main objective is to organize awareness campaigns.
This is an e-commerce company that uses crowdfunding to advance charitable donations. It uses rewards to encourage people to participate in raising funds.
Giveforward is a crowdfunding website aimed at raising funds for various causes. For example helping families raise funds for medical bills for loved ones.
Patreon is a crowdfunding platform aimed at raising funds for artiste from patrons per artwork.
Firstgiving is a crowdfunding website which raises funds for nonprofit organizations.
Top 10 Equity Crowdfunding Websites For Startups
US website for raising equity or debt investments for startups. Only accredited investors can invest at the time of writing.
2. Early Shares
An Equity CrowdFunding Platform Crowd Funding American Small Businesses.
is an equity-based UK crowd funding platform.
A crowdfunding platform that offers both rewards-based and equity-based campaigns for small businesses.
Equity crowdfunding platform for discovering and investing in seed-stage startups, based in the United Kingdom but open to investors and entrepreneurs throughout Europe.
Equity-based crowdfunding site based in San Francisco.
Gobal social network for equity and contribution crowdfunding for small businesses, startups and social enterprises.
Helps everyone invest in startups. It’s like Kickstarter, but with equity.”
9. Equity Net
Launched in 2005 and “is the original and only patented crowdfunding platform. It is used by thousands of entrepreneurs, investors, government entities, business incubators, and other members of the entrepreneurial community to plan, analyze, and capitalize privately-held businesses.”
Crowdfunding is an interesting and useful platform to raise funds for various activities. Therefore anyone with a project and lacking adequate funds can it a try. However one should be meticulous in their planning before when choosing a platform to try and raise funds.
What other good platforms or websites have you used or recommend?