I’m often asked if I recommend crowdfunding. The answer really depends on what kind of crowdfunding and on your particular situation.
Fundraising can be a rewarding experience, but it can also be a difficult road to reaching your goal if you don’t pick the right fundraising method. This is where crowdfunding can come into play, as you’re deciding what’s best for your type of fundraiser. Whether you’re raising money for a personal emergency, a memorial, IVF, or even to. Crowdfunding uses the web to collaboratively fund projects, company growth, or expansion. Kickstarter and Indiegogo are two of the best known project-funding platforms in North America. Crowdfunding is an off-shoot of crowdsourcing where many people collaborate (by contributing ideas, labor, testing) to help make or improve a product. Unlike traditional forms of raising investment, crowdfunding is totally public and requires a tonne of interaction. Therefore you have to ensure that you, as a person, have the right approach and the right characteristics for such a public facing role. Is Crowdfunding Right For You? Crowdfunding is a marketing tool that engages customers and promotes brand awareness. Crowdfunding is when a group of people collectively finance the efforts of individuals, organizations, or businesses.
Crowdfunding is probably the oldest way of raising funding that exists! Long before we had Wall Street and venture capital, communities got together to pool resources for projects. Over 30 years ago, Ben and Jerry’s first equity funding came from about 1,200 Vermont residents investing a minimum of $126 each.
About ten years ago, Indiegogo launched and internet-enabled rewards-based crowdfunding took off. In 2009, Kiva started letting US-based companies crowdfund zero interest loans. Two years ago, Title III of the JOBS Act went into effect making it much easier to do a nationwide investment crowdfunding campaign.
Donation or perks-based crowdfunding is a great tool when you want to prove that there is demand for your product or service. You need to invest quite a bit to market your campaign so that you can get lots of people to support whatever it is you’re offering. Due to the sheer volume of companies trying to raise money this way, there is intense competition and it can be very challenging to get attention for your campaign. You’re lucky if you break even by the time you factor in the marketing and fulfillment costs. Therefore, I definitely don’t recommend using this tool for the purpose of raising money. If you think of this kind of campaign as a marketing expense rather than a way to raise money, it can be a valuable tool in your toolbox.
If you are looking to raise money for your business, I recommend investment crowdfunding. Unlike perks-based crowdfunding, this type of crowdfunding allows you to offer an actual investment opportunity to supporters. You can offer equity, debt, convertible notes, SAFEs – any kind of investment that you want. Because this type of crowdfunding involves offering securities, it is more highly regulated than perks-based crowdfunding. You need to jump through some legal hoops and have a lawyer draft your offering documents to be able to take advantage of this type of fundraising, but the results can be well worth the effort! When you offer an investment opportunity to the public and anyone can invest, it is much easier to find the right investors for you and to raise money on YOUR terms. Fewer businesses are using this type of crowdfunding compared to perks-based, so it is much easier to stand out from the crowd.
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23 Jun Is Crowdfunding the Right Choice for You? Here are Five Questions to Help You Decide
As a consultant who has worked with hundreds of businesses, I’ve always come across this question – will crowdfunding work for me? Is it the right choice for my business?
My answer to this question is always a set of five important questions. I’ll elaborate on them in a while, but before you read the rest of the article, try writing down the answers to these questions.
1. Is your idea good enough for people to support?
2. Do you have the support of a large network of backers (before going public?)
3. Do you have clear and transparent milestones?
4. Do you have enough knowledge of the crowdfunding platform you want to use?
5. Do you have strong knowledge of how crowdfunding works?
Tough questions eh?
Don’t worry. I’ll elaborate on each of the questions above to help you find your answer.
Idea:
Crowdfunding is tough.
You’re asking the public to financially support your project. What is the one thing that would attract people to invest in your project?
The idea. The product. The end result.
The public will only help if your idea or your product is innovative and exciting.
But we all know, having an idea is not enough. You need to build your reputation. You need to build a list of people who want to support you. You need backers to make crowdfunding work.
This leads to our next question – do you have backers?
Backers:
Statistics of 2019 show that 16.01 million backers had supported 439,891 projects on Kickstarter.
There are millions of people out there ready to back your project. Getting their attention and their support though is one of the most difficult challenges of crowdfunding.
The only way you can get backers is when you have an audience of supporters from your local community. Friends, acquaintances, colleagues, etc play a critical role in helping you build your brand.
If you don’t have local supporters, you can try connecting with influencers and people in the industry who can support your project.
To kickstart your project, you should ideally have 100 people willing to contribute. Say, each person contributes $20, 100 people would mean $2,000. Once you achieve this on the platform, other people would be interested to support you further.
Backers are also your first customers, your beta testers and much more. Convince them, win their trust and they will continue to support you!
Milestones:
Any project that opens itself for public funding must have clear milestones.
An unspoken rule of crowdfunding is transparency. Keep your supporters updated about your milestones, your setbacks and your progress. You need to win their trust if you want their support for long-term.
This is why, it’s particularly important to breakdown your project deliverables in achievable milestones (these are displayed in a separate tab on the platform). Each milestone is assigned a funding goal, so if you have your numbers ready, you’ll have greater success in meeting your goals.
Platform:
Choosing the right crowdfunding platform is important.
Is Crowdfunding Right For Young
Depending on the type of crowdfunding model you’re using (link to crowdfunding model article), you need to know about how the particular platform works.
For rewards-based funding, Kickstarter and Indiegogo (link to Kickstarter vs Indiegogo article) are the top platforms, but they are also quite different from each other.
If you’re opting for rewards-based funding, it’s necessary to know how these two platforms operate and what are their distinctive features.
Crowdfunding:
The premise of crowdfunding is simple – get the crowd to fund your projects.
The execution is tough.
Is Crowdfunding Right For Youtube
The first step to crowdfunding is research. Conduct in-depth research of your industry and the platform that best suits it.
Also try to research on similar projects. Comb through top projects and study every detail. The more knowledge you gather, the better your chances of running a successful campaign.
Crowdfunding is one of the most innovative methods to earn capital without having to visit banks, lenders or investors. But it requires work. It requires a significant investment of time, planning and smart marketing.
If you have a great product, all you need is a solid strategy and crowdfunding can work wonders for you.
Is Crowdfunding Right For Your Life
Want to know if your project is the right fit for crowdfunding? Let’s talk! SAMIT PATEL crowdfunding marketing agency.