How to crowdfund for success!
Crowdfunding is essentially a method to raise funds. The success of your campaign and funding raised is mostly dependent on the platform you have chosen.
What is crowdfunding?
Crowdfunding is essentially a method to raise funds. It can be used by organizations, businesses, start ups and individuals alike, they can ask for money (usually a small amount)from a large group of people. It also makes use of the big networks in social media and also in crowdfunding websites in order to bring investors and entrepreneurs together creating a big pool of potential investors. It is a forum for anyone who wants to pitch an idea and in return for those who want to invest money in those ideas, even a small amount.
Steps for success!
Visualize your idea
The most important thing to keep in mind when you start your crowdfunding campaign is to do your research and solidify your idea. Search your competitors, see if your idea will be useful and unique and start your marketing plan. It will be even better, if you visualize your idea by integrating a video to your campaign. In this early stage of the campaign you should figure out your target audience, who is your product for, who will be interested? When you establish your target audience you should be able to share your findings with your investors.
Promote your campaign
Share your vision, why is your idea special and why is that your passion? After you choose the right platform and establish your idea you could find the right networking and specific advertising events in order to promote your campaign effectively.
Feedback is essential in order to evaluate your project’s success or lack of. It is a way to improve your future business decisions, internalize what went according to plan, what could have been different and what didn’t go as planned.
Types of crowdfunding
This type is quite common and offers the donors a reward for their investment. For example, investors might receive the product earlier or at a discount. Rewards might be a clever way to attract more investors and spark the interest of the existing ones, it will also draw attention to your business. On the other hand, the only problem with this sort of crowdfunding is that if you raise a large amount of money you will need a big donor base. And finally, you might need to return some funds if you do not reach your goals.
Generally donation based crowdfunding usually involves non profit organizations that want to raise funds to improve their services. Investors donate in these types of businesses because they believe in the organization’s cause and do not receive an ownership interest. The downside in this type is that often donations are lower than expected and campaigns fail to reach the funding goal.
In equity based crowdfunding you can offer shares of your company in exchange for your investors funds. You can also raise a big amount of money in investments with that method. Some of the cons of this type include that this funding pitch requires a lot of information about the company operations.
Pros and Cons
Crowdfunding is the easy access to a variety of investors or supporters in order to grow your business. This type of platforms are a great opportunity for businesses and individuals alike to grow their audience and receive their funding. Another benefit is that most of this projects are reward based as mentioned above, which allows the investors to receive a reward for their investment or even participate in the launch of a new product.
Some disadvantages include the fees you must pay and instructions you should follow for participating in crowdfunding sites. Furthermore, if you do not reach your funding goals in some cases the funds will return to investors.
Popular crowdfunding platforms
The right steps for successful campaign
- Evaluate the platform’s fee structure
- Customization and ease of use
- Getting your pitch
- Get accepted by the platform
- Be transparent
- Focus on marketing
- Receive payout for your campaign
Crowdsourcing or Crowdfunding?
Crowdfunding shouldn’t be mistaken for crowdsourcing. Crowdsourcing allows companies to find people to work from anywhere in the country or around the world. As a result, crowdsourcing lets businesses tap into a variety of skills and expertise without incurring the normal overhead costs. Crowdsourcing involves taking a larger job separated into smaller ones that people work on separately. The difference in crowdfunding is that it doesn’t search for workers’ labor, instead it raises funds so businesses or individuals can accomplish their goals.
- Poor marketing strategy
- Not enough preparation
- Overpromise to investors
- Lack of campaign transparency
The right platform makes a difference!
Remember to choose the right platform for your campaign! The success of your campaign and funding raised is mostly dependent on the platform you have chosen. Some crowdfunding sites specialize in certain types of campaigns like non profit etc. Do your research on cost and the availability of investors before you decide on one, in order to make your campaign more visible and reach your goals.