How to Raise Money for Business Using Crowdfunding Sites

How to Raise Money for Business Using Crowdfunding

How to Raise Money for Business Using Crowdfunding Sites

If you are considering using crowdfunding for business financing, here is how to raise money for business using crowdfunding sites.

Crowdfunding has been around since 2003. And during its early stage, musicians, and movie makers were the main forces behind the initiative.

It was used for producing content for fans, paid for by fans.

This fund raising method in recent years has shown to be a truly viable source for funding creative and business projects alike.

However, the first step to leveraging this opportunity is to determine whether it is the right approach for your kind of business or project.

To successfully raise money using crowdfunding you need to draw a crowd in a form of social exercise. And some businesses are perfectly suited to this form of financing.

So you’ve got a brilliant business idea, but lack the credit, the collateral or even a bank that can support your vision?

You even reached out and tried to fund your business through friends and family, but discovered they lost their houses and jobs to the last year’s flooding incidence?

Well…

Crowdfunding websites are now connecting startup entrepreneurs with investors and patrons; persuading individuals to give funding donations to new business ideas, small and medium enterprises (SMEs) across the globe.

Therefore,

Understanding  the crowdfunding concept and how it works can ensure you run a successful crowdfunded campaigns that  meet your goal and beyond.

 

What is Crowdfunding?

Crowdfunding is the practice of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount of money, typically via the Internet.

 

 How Crowdfunding Works?

Traditionally, business owners are usually subject to the conditions of individual angel investors or banking loan officers. Now it is possible to pitch a business plan to the crowd.

Now here is the gist:

Crowdfunding provides a new strategy for startups or early stage companies to take their ventures to the next level – by rolling out a product or service to the masses.

Generally, the way crowdfunding works is that an individual or business pitches an idea, sets a fundraising goal and set deadline for raising the funds.

According to Social Media Examiner, potential patrons can review the pitches on crowdfunding sites and decide if there are any they would like to support.

On most crowdfunding sites, people are not investing in the project or business; rather, they are funding it.

In return, they are rewarded if the project succeeds, but don’t end up owning any part of the business or project.

Though rules may differ from site to site, or location; but this is in part due to regulations under review by the U.S. Securities and Exchange Commission (SEC).

Thus, this may change in the future or different at your own location.

We have set out few steps below on how to raise money for business using crowdfunding sites and launch your project successfully.

 

 

How to Raise Money for Business Using Crowdfunding Sites

 

#1. Target the Right Audience

Many of the successful projects on crowdfunding sites target a specific, narrowed audience.

It’s not a waste of time to first understand who your targets audiences are before using these techniques.

Doing your market research and focusing on a passionate niche can help you succeed and grow the business.

But wait:

Knowing the project is perhaps, the key to crowdfunding success.

This is because your product is the first step to understanding your market.

Knowing what your target audience wants and how you plan to achieve their needs with the product or service define everything crowdfunding campaigns.

For example;

Your target audience might be focused in a particular geographic area, community, religion, or industry that shares a common background.

They be male or female who most be interest in what you have to offer!

This market segmentation would help you respond to everyone quickly enough, and pre-written answers to the questions of this audience will also help a lot.

 

 

 #2. Craft your Business Elevator Pitch

How do you rise above the crowd and stand out?

Who are you and why do you want my money?

What makes your project different from the competition?

It is often shown that people who contribute to a crowdfunded project are not only buying into the project or idea, they are also buying into the person or persons behind it.

If you don’t have an engaging story to tell them, then your crowdfunding bid could be a flop.

This is your one chance to make a first impression among other projects simultaneously running on the same platform or site.

Your pitch is a description of your project, specifying what benefits or rewards patrons will receive if the fundraising is successful.

With crowdfunding, donations are usually sought in return for special rewards.

So, this could mean free product or even a chance to be involved in designing the product or service.

In addition, create and use a compelling name, description and images as part of your project as these will help you stand out.

Remember to include a video pitch and keep things short and concise; with a clear call to action.

 

 

How to Raise Money for Business Using Crowdfunding Sites

How to Raise Money for Business Using Crowdfunding

 

 

#3. Select the Right Crowdfunding Sites that suit your goal

Now:

You need a place to tell your story.

If you are thinking of how to raise money for business using crowdfunding; there are different sites out there with different services, and different rules.

There are a multitude of websites or companies that can facilitate your funding project, especially those based outside the U.S., and each caters to a specific audience.

But all depend on what you want to get out of it:

  • Do you want rewards based crowdfunding (i.e. contributions unlock rewards) or an equity based service (i.e. funding party becomes a shareholder)?
  • Do you need to keep a potion of the funds even if a campaign does not meet its intended goal?

 

Do doubt, there are over 700 crowdfunding platforms around the world today. Of which some of them like RocketHub has redirected its focus as more venture capital than crowdfunding.

But then;

Kickstarter and Indiegogo have raised a combined $3 billion for entrepreneurs. And produce the most consistent results.

Kickstarter came online in 2009 and its best for creatives, art, film, games, music, and publishing.

While Indiegogo was launched in 2007, which is best for pretty everyone; from general creative projects to charity, entrepreneurship and humanitarian geared groups.

Be sure to check out the following crowdfunding websites that offer entrepreneurs the opportunity to generate funds for their businesses around the world.

 

List of Top Crowdfunding Websites for Entrepreneurs:

 

 These are just a few.

You can research as many platforms as necessary to find one that best supports you, your idea and your funding campaign.

However, it is important to note:

Your responsibility to review the terms and conditions of such sites carefully before submitting your campaigns!

Most crowdfunding websites charge 5 percent commission if you meet your funding goal. And if a campaign is unsuccessful, no money is charged.

 For example,

Indiegogo offers the option to keep your funding even if a goal is not met. Their fee is 5% of all funding. Processing fee is 3% plus $0.30 per credit card transaction.

 

 

#4. Create Your Funding Goal and Timeline

To succeed in this bid, crate a funding goal that could be easily achievable.

“People engage things: a) when they’re brand-new, or b) when they’re nearing a deadline. We lose interest in that middle space.” –  Craig Mod.

On Kickstarter—one of the most popular crowdfunding sites. If you don’t reach your funding goal by the deadline, no money will be changed.

As Kickstarter says, this “protects everyone involved. Creators aren’t expected to develop their project without necessary funds, and it allows anyone to test concepts without risk.”

Pledges are made with a credit card; if you’re backing a project, your card won’t be charged until the project is successfully funded.

Now the question:

Is your funding goal realistic?

If its a more larger project, you can break the project into bits and campaign for small funding say $5 or $10 at a time instead of higher bids.

Again,

It could be even worse if you meet your goal but then realize you underestimated how much money you needed.

You probably need more than what it costs to produce your project?

Have a good financial projection regard your project.

Some of these tips are covered in this article:

Read: How to Develop a Winning Business Plan in 5 Easy Steps

 

30 to 60 days is the most effective time period for the vast majority of funding campaigns.

 

How to Raise Money for Business Using Crowdfunding Sites

How to Raise Money for Business Using Crowdfunding

 

#5: Have a Plan on How to Spend the Money

Most people aren’t going to fund your campaign out of the goodness of their hearts. Your close friends and family will, but the rest of the world want to get something valuable.

What rewards can you offer those contributing to your project growth?

For the most part,

Crowdfunding has been used to fund new companies or products in exchange for equity in the company: or simply to receive initial product offerings.

Again;

No matter how cool your idea is, most people will want to know that you’ve got a plan that will get you there.

Ricebowl project suggests that you:

“Give a detailed explanation of how exactly you’ll be using their money and keep all costs transparent. This will build trust in you and credibility in your project.”

— Ricebowl project

You may present a short business plan and an explanation of why the money will take your enterprise to the next level.

 

 

#6: Leverage your Social Networks

When it comes to marketing your idea online, you need to know who you’re targeting and how best to reach them.

But first;

How far do you need to reach out?

The best starting point is your circle of trusted friends, families and colleagues who can help spread the word of mouth.

If you can get them on board with your idea, they can be your greatest evangelists.

From there,

You’ll have to move beyond friends and convince those targeted audience that will boost your project to its funding goal.

This goes back to understanding your product and its targeted audience.

  • Are they people who love sports or movies?
  • Are they people who love cooking or travels?

Ensure you appeal to their interests and reward them with related benefits to your project.

Offer your audience the rewards they will love to taste, use or hear.

Don’t forget:

It’s important to note that most of your audience may not be familiar with crowdfunding and how it works.

Tap in to social networks that they may be able to access.

So, as the business owner or marketer, you may have an extensive network of friends and family that will contribute to get the ball rolling.

Chances are you’ll need to use social media, email marketing and other communication tools to drive your community to your project at a crowdfunding site.

Be prepared to staying active on social media sites, until the crowdfunding campaign is complete.

 

 

Wrapping up:

Now you have it: How to Raise Money for Business Using Crowdfunding Sites.

So;

If you are confident that your business is a solid crowdfunding candidate, you must prepare to mount a campaign by pulling together all the information you will need to get approved and out standing for your loan offering.

Having a big customer list to draw from and the ability to offer incentives are going to be great advantages.

You have a finite period to get a large group of investors to rally around your cause and it is up to you to drive it with all the tools at your disposal.

From knowing your product and its benefits, the people; with email to social media…How do you get your projects noticed… and funded?

A quick look at the active projects on Kickstarter or IndieGoGo will show that you’ve got a lot of creative competition out there.

To catch the eye of potential investors, you need to stand out, engage your community and close the deal.

 

 

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