When it comes to starting a new business or implementing a new product idea for an existing business, it is by no means a small task. One of the first hurdles that entrepreneurs have to overcome is financial capital. Even a solid business plan can’t come to fruition without funding. Not everyone has sufficient personal or business savings to be able to give life to their next big idea.
The oft-used solution is to take out a business loan. Indeed, loans are a good way to obtain a large sum of money to get your new business or new product going. Crowdfunding is another relatively newer way to go about things. If this is the way you plan to go about things, you should keep some things in mind:
Crowdfunding is based on small donations
Generally speaking, crowdfunding entails generating small amounts of money from a large number of people so that your foundational financial needs are met. Fundraising usually takes the form of donations. These donations shouldn’t be treated like gifts, however. Generally, crowdfunding campaigns are run based on promises. These promises usually take the form of products or services that you can provide once you obtain enough money. It is then very important that you fulfill these promises or else risk angering a lot of people who gave you the money. You may be perceived as ‘stealing’ the money.
Sometimes, your crowdfunding campaign may not be successful. These can be due to various factors, but even with a stellar project, you need to know how to market it. Fortunately, we have come up with a few pointers to get you started.
Implementing a crowdfunding campaign
No one can donate if they don’t know your idea exists in the first place. Spread the word. Tell others on social media and such. The more people that know about your startup, the more money you are likely to raise.
Crowdfunding generally has a smaller community backing it. For this reason it is much easier to gauge interest in your product or service with like-minded people. Additionally, it will be much easier to appeal to a smaller audience and resonate with them. In that regard, it is important to resonate with potential donors. While some fundraising platforms return investments to donors, monetary incentive won’t win over everyone. Provide detailed information about your startup. Explain what you are doing and why. Audiences need to know what it is that they are donating towards and how it will help them. Include photos and videos that explain things in an eye-catching way. Include a part of your own personal story and the story behind the business. People who empathise are more likely to donate than those who just see you as another business owner.
And while people can resonate with your ideas, they sometimes still need nudging and reminding. On your website or fundraising page, be sure to include links which they can easily click on and follow through on.
If you are doing a B2B campaign instead of a B2B campaign, it’s important for you to know which kinds of businesses you would like to raise funds from. Often funding can come in through legal contracts with specific stipulations. This kind of fundraising is normally referred to as peer-to-peer fundraising.
Eventually, a successful crowdfunding campaign may draw the attention of professional business investors. Once you’ve got investors, your promises start to matter a lot more. For most startups that don’t crowdfund on a continuous basis, bringing in investors is a step towards the realization of your vision.
It’s all good and well to seek out crowdfunding on some obscure corner of the online world, but there are a variety of popular crowdfunding platforms. We outline here a few of the more popular ones that you may utilise to promote your fundraising campaign.
- Kickstarter – Kickstarter is the most popular crowdfunding platform due to its vast amounts of success stories as well as its mentions in the media. The mission of Kickstarter is creative projects promotion. It also tries its best to protect the funds of its donors. Part of this protection is that funds can not be released until after the target goals have been met. When goals are not met and fundraisers fail, Kickstarter is there to refund a portion of the money to the donors.
While Kickstarter expresses creative freedom both in its audience and mission statement, the types of startups that can be registered are less varied compared to the others. For example, Kickstarter requires you to be selling a product and have a working prototype. What this means is that your service needs to be tangible.
- GoFundMe – GoFundMe is generally thought of as a personal crowdfunding platform. This does not exclude businesses from the platform though. The audience around GoFundMe is a lot more empathetic and personal. For this reason, it is important to use emotional appeal to make the most out of the platform.
The restrictions to register on the platform are much lower. Finance handling is also much less hands-on with GoFundMe. All funds raised at the end of the fundraising period go towards you. There aren’t any goals that the platform checks to see if you are actually raising enough money. Additionally, GoFundMe does not provide any refunds.
- Facebook – Facebook fundraising is primarily aimed at peer-to-peer fundraising. Here, having contacts in the right places is what gets you noticed. It may be worth it to look into various social media tactics in order to better utilise the platform. Facebook does make it much easier for others to donate as all donations are done through the website itself. Also, shared posts will include a donate button along with it.
The network does take a hands-off approach to funding. Facebook does not take responsibility for any funds missing or otherwise. Audiences have to carefully curate potential startups and entrepreneurs have to be wary that they are actually receiving their money. Facebook does, however, take 5% of the donation cuts.