So, you have decided to launch your own business, you know what you need to realise your business concept, and you know exactly what your product or service will be like and what problems it will solve! Nonetheless, you lack the financial means to establish your business.
If this sounds like you, an online fundraising initiative, often known as crowdfunding campaign, could be for you.
Is it possible to launch a crowdfunding campaign on your own? Indeed, it is. The main consideration is deciding which crowdfunding platform you will use. But before you jump in and use a web builder to develop your own good-looking website to raise funds for your business, you should carefully weigh the advantages and disadvantages of existing crowdfunding platforms as they are not all the same.
We advise you to compare crowdfunding platforms based on the suggested forms of financing, the platform’s success rate, and the platform’s audience. This article will discuss website crowdfunding methods that have a track record of success.
Kickstarter and Indiegogo
Certainly, crowdfunding allows to you attract investment from investors from across the world, but do not think you will get it with "no questions asked". You will need to validate your business idea and reward your investors (known as "backers") in crowdfunding or fundraising campaigns.
There are several well-known crowdfunding platforms, but we will only look at the two most popular options here.
The first of these is Kickstarter. With this platform, you must raise the whole amount sought in the specified time frame in order to get the funds. For example, if you want to raise £5,000 over two months but only reach £4,500 in the timeframe, you will not get your funding.
For the crowdfunding campaign to succeed with this all-or-nothing method, you must first pass your funding target. You must remember to take into account the platform fees. The platform will charge you 5% and there will also be fees for the money to be transferred to your online account (roughly 3%).
If you run your campaign on the Indiegogo site, you get all of the money you raise goes even if you do not reach your ultimate funding goal. You will still have to pay the necessary charges and fees but Indiegogo accepts both PayPal and Stripe payment methods, making money transfers significantly easier for those in developing countries. Why? Because Kickstarter only works with Stripe, which is not available in many third-world nations..
In terms of additional distinctions between the two main platforms, Kickstarter is geared towards more artistic ideas. Indiegogo on the other hand accepts any business type. However, it is significantly less well-known on social media than its competition.
The essentials of the fundraising campaign
No one will simply invest in your business, no matter how brilliant and ground-breaking your idea. You must do the groundwork and create a compelling pitch to attract backers. In general, your campaign will run for three to six months. It will include the publication of well-thought-out blogs and posts about the business idea and product on social media and other relevant locations.
You need to pique as many people’s interests as possible. Ideally, you will capture the contact details of those who engage with your content so you can subsequently send out an announcement and a funding request as part of your fundraising campaign.
Also, regardless of how camera-ready you are, you should record a brief video summarising your concept, what you want to achieve, the challenges you will solve, and where the money will go. People may be willing to invest in your business, but they are not reckless with their money so you will need to make a credible pitch. Try to ask for the bare minimum you need to start the business.
Pros and cons of crowdfunding
If you are thinking about how to exploit crowdfunding to finance your project, campaign, or business, there are a few things to consider.
Pros
- It could be a cost-effective way to raise funds.
- Presenting a proposal or business idea via the internet is an efficient technique to attract media attention.
- Sharing your idea can help you improve your product or idea thanks to online feedback and expert suggestions.
- Presenting your idea online is a smart way to test your idea with the wider populace; if consumers are ready to invest, your concept is likely to succeed in the market .
- Sponsors can keep track of your progress and may be prepared to help you promote your business through their contacts and networks.
- Ideas that may not appeal to traditional investors can often be funded more simply.
- As a by-product of the funding process, your backers sometimes become your most devoted consumers.
- Crowdfunding is a realistic option even if you have had problems securing bank loans or traditional finance.
Cons
- Not all ventures are accepted for crowdfunding so it is not always any simpler than more conventional methods of raising funds.
- You will need to put in a lot of effort to generate engagement before the project goes live. This can involve a significant investment of time, resources, manpower and finances.
- If you do not reach your funding goal, your investors will usually get their money back, leaving you with nothing.
- Failed projects can damage your brand and the reputation of those who funded you.
- If you have not protected your business idea, someone might see it on a fundraising website and plagiarise your idea.
- If you miscalculate your offer, you can end up giving away too much of your company to investors.
Conclusion
Crowdfunding will take anything from one to three months. Also, there is no such thing as a ’free lunch’ when it comes to crowdfunding. You will have to compensate your backers at the end of the campaign. This could be something as simple as shipping them your product but could be more substantial. You will also need to keep track of the donation amount.
Remember, you are receiving a loan in exchange for something of value to the backer. This exchange will help you start your business but in exchange the backer will get a sufficient return on their investment.
Copyright 2023. This post was made possible by Maria Blomgren.