When it comes to gathering funds to establish or build your business, crowdfunding is an increasingly popular option, where a huge number of individuals chip in their money to make things happen. Here’s how you do it.
Crowdfunding is a type of crowdsourcing and alternative financing that includes soliciting monetary contributions from a large number of individuals to sponsor a project or initiative. It enables entrepreneurs to raise cash without sacrificing too much equity. It has evolved through time into a viable option for raising capital for company ideas.
In this article, you’ll learn why crowdfunding for business is so powerful, and essential tips on creating a successful campaign, and some crowdfunding examples sprinkled throughout for inspiration. Plus, you’ll get a rundown on some of the best crowdfunding sites to fund your next venture.
1. Work out how much you need to raise. The number should be primarily based on how much money you need in order to do what you’re trying to do – be it bringing a new product to market, or launching a business. But it should also take into account how much you expect you’ll actually be able to raise. Some platforms only let you collect the money if you meet your fundraising target, but even if that isn’t the case, campaigns exceeding their targets often generate lots of excitement among backers. Therefore, it might be worth setting your crowdfunding target a little lower than the amount you’re actually aiming to raise, so you have a higher chance of pushing beyond it.
2. Pick your platform. There are lots of platforms out there. The first factor you’ll use to decide between them is the type of reward you plan to offer, as some platforms focus on equity crowdfunding (Crowdcube, Seedrs), some focus on rewards (Kickstarter, IFundWomen), and others focus on fundraising for social enterprises or non-profits (UpEffect, Chuffed). Once you’ve filtered them based on that, you’ll want to compare the costs of each platform. These might be made up of payment-processing fees as well as a varying percentage of each contribution raised through the platform.
3. Design your rewards tiers. You’re aiming to incentivize all kinds of people to contribute to your campaign, so think about the different amounts people might choose to give, and make sure there is an appropriate reward for everyone – from the people putting in $10 to those chipping in $1,000. Remember, rewards don’t have to be costly at your end, they can be as simple as a thoughtful personalized note or a piece of low-cost swag that still helps someone feel connected to your campaign.
4. Build a crowd. Start building a list of people who you plan to put your campaign in front of. These might be your customer base (if you’re an existing business), social media followers, or a big list of friends and family (plus their friends and family). Though you can post about your campaign on your social channels, emailing is likely to lead to better conversion because it’s easier to guarantee an email will reach someone’s inbox, than it is to get someone’s attention on their social feed.
5. Create campaign content. Crowdfunding campaign pages are incredibly visual, so you’ll want to make sure you have great photos and maybe even a video introducing yourself and your venture or product. As well as multimedia assets, you’ll want to put a lot of thought into all the written copy as well – from the introduction text and the FAQs to the description of rewards – to make sure that everything is as clear and engaging as possible. Check out other campaigns on your crowdfunding platform for inspiration and to see the level you need to reach.
6. Develop a promotion plan. Figure out exactly how you will promote your campaign while it’s live. Plan on sending regular emails (with different content each time) to people on your email list, as well as regular social media posts. Not everyone will choose to give money the first time they are asked, so you’ll want to build a narrative and excitement over time about what you are building. If your product or business is especially novel, you might be able to get the press to cover your crowdfunding campaign, so build that into your promotion plan as well.
7. Secure advance support. A little secret about many crowdfunding campaigns is that they aren’t funded totally by people who just stumble onto the page. To get momentum going, you’ll want to have a few people lined up to contribute as soon as the campaign goes live. That way, when others click through to the page they won’t see something that no one has funded. Money isn’t the only way to support a crowdfunding campaign, so see if you can line up an even bigger group of people to spread the word through their networks once the campaign goes live.
8. Launch your campaign. If you’ve put in the work beforehand and created compelling assets, built a great list of potential supporters and figured out how to put your campaign in front of them, you should launch it with a bang. Even if things start a little slowly, don’t lose hope and keep promoting your campaign and collecting contributions.
9. Keep your supporters in the loop. Once your campaign has closed and you’ve (hopefully) raised the money you need to launch your project, make sure you keep all your backers in the loop with regular updates on how things are going and when they can expect to receive their rewards.