How to Raise Money for Business Using Crowdfunding SitesAbbakin
So you’ve got a brilliant business idea, but lack the credit power, the collateral or even the bank that can support your vision right? You even reached out and tried to fund your business through friends and families, only to discovered they lost their houses and jobs to the last year’s flooding incidence or during the corona virus pandemic? This post will let you understand how to raise money for business using crowdfunding sites. You will also need responsive website designs, social media marketing, corporate branding and search engine optimization strategies to grow your business, increase your online visibility and make more sales.
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 mass producing content for fans, paid by other fans via a kind of free donations. This fund raising method in recent years has shown to become 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 for your kind of business. To successfully raise money using the crowd funding process; you need to draw a crowd in a form of social exercise. Thus, some businesses and community projects are perfectly suited for this form of social financing.
What is Crowdfunding and How It Works?
If you are a small business owner or a celebrity thinking of using the crowd or group of friends to financing a business idea; crowd funding websites are now connecting startup entrepreneurs with investors, patrons; and persuading individuals to give out funding donations to new business ideas, small and medium enterprises (SMEs) across the globe.
Therefore, understanding the crowd funding concept and how it works is the best way to maximise our crowdfunding campaigns, do as to meet your financial goal and beyond. According to Wikipedia, 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.
Traditionally, business owners are usually subject to the fund raising conditions of individual angel investors or the commercial banks for loan officers. Now, crowd funding provides a new strategy for startups or early stage companies to pitch their business plans to the crowd. Generally, the way crowd funding works is that an individual or business pitches an idea, sets a fundraising goal set deadline for raising the funds using any available crowd funding websites; so that potential patrons and contributors can decide if they would like to support.
On most crowd funding campaigns, people are not investing in the project or business; rather, they are funding it. If the project succeeds, they are rewarded in return. But one thing you note about this; they don’t end up owning any part of the business or project. Though rules may differ from site to site, or due to regulations in your location/country under review. Below is our proven step by step steps guide on how to raise money for business using crowdfunding sites.
“Crowdfunding is the social media version of fundraising. It is a form of crowdsourcing.”
How to Raise Money for Business Using Crowdfunding Sites
#1. Target the Right Audience
Many of the successful projects on crowd funding sites target a specific, narrowed audience. So, 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, launch start and grow the business.
Again, having a good knowledge of the project itself 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 about crowd funding campaigns.
Your target audience might be focused in a particular geographic area, community, religion, or industry that shares a common background. They may be male or female within a particular age group who must be interest in what you have to offer! This market segmentation would help you respond to everyone quickly enough; and pre-write answers to the questions of each audience groups.
#2. Craft your Business Elevator Pitch
It is often shown that people who contribute to a crowd funded project are not only buying into the project idea, they are also buying into the person(s) or personalities behind it. How do you rise above the crowd and stand out? Who are you and why do you want the money? What makes your project different from the competitions?
If you don’t have an engaging story to tell them, then your crowd funding bid could be a flop. Your brilliant elevator pitch is your one chance to make a first impression among other projects simultaneously running on the same platform or site as yours. Your pitch is a description of your project or product; specifying what benefits or rewards the patrons will receive if the fundraising exercise turns successful.
With crowd funding, donations are usually sought in return for special rewards. So what are going to give back to your buying community? This could mean free products or even a chance for them to be involved in designing and distributing the products or services.
In addition, make sure you create and use compelling brand name, product description and high resolution and beautiful images as part of your project designs. These will help your funding campaigns stand out from the crowds. Again, remember to include video pitch; keep things short and concise – with a clear call to action.
#3. Select the Right Crowdfunding Websites
If you are thinking of how to raise money for business using crowdfunding; then you would need a web-place to tell your story. There are a multitude of crowdfunding websites or companies that can facilitate your funding project, and each caters to a specific audience; based on your location.
There are different websites out there with different services, different rules and different charges. Some of them are best for general creative arts, films, games, music publishing. Others are best fits for charity projects, entrepreneurship and humanitarian geared groups. So you can research and find out the platforms that best supports your idea and your funding project. The best crowd funding website for your business would depend on what you want to get out of it:
Do you want rewards based crowd funding – where contributions would unlock rewards? Or an equity based service – where funding party becomes a shareholder? Do you need to keep a potion of the funds even if your campaign does not meet its intended goal?
No doubt, there are over 700 crowd funding online platforms around the world today; of which some of them like RocketHub has shifted its focus as more venture capital than crowdfunding. But then; when it comes to crowd funding; Kickstarter and Indiegogo are among the major players in the industry. Both have raised a combined $3 billion for entrepreneurs and have produced the most consistent results.
Be sure to check out the following crowdfunding websites that offer entrepreneurs the opportunity to generate funds for their businesses around the world. Most crowdfunding websites charge 5% commission if you meet your funding goal; and if a campaign is unsuccessful, no money is charged. It’s your responsibility to review the terms and conditions of such sites carefully before submitting your campaigns!
List of Top Crowdfunding Websites for Entrepreneurs:
- Kickstarter (U.S., U.K. and Canada.)
- Angel List
- Endurance Lending Network
- Grow Venture Community
List of Popular Crowdfunding Websites in Nigeria
#4. Create Your Funding Goal and Timeline
On most crowd funding sites, pledges are made with credit cards. And if someone is backing a project, his/her card won’t be charged until the project is successfully funded. That is; if you don’t reach your funding goal within its deadline, no money will be changed. This allows creators to test concepts without risk.
Therefore, to succeed in your campaign bid, make sure you create a funding goal that is easily achievable. Your funding goal should be realistic. If it’s a 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. 30 to 60 days is the most effective time period to run vast majority of funding campaigns.
It could be even worse if you meet your goal but then realize you underestimated how much money you needed. So, you probably need more than what it costs to produce your project? You need to have a good financial projection regard your project. Some of these issues are covered by creating a good business plan for your business at the very start.
Just as Craig Mod put it:
“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.
#5: Be Clear 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. So what rewards can you offer those contributing to your project growth? For the most part, crowd funding 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 or excited your idea is, most people will want to know if you’ve got a plan that would get you there. You may present a short business plan and an explanation of why the money will take your enterprise to the next level.
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
#6: Leverage Your Social Networks
When it comes to marketing your business online, you need to know who your target audience are and how best to reach them. You need to also decide how far 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 and project ambassadors.
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. 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, hear or feel.
- Are they people who love sports or movies?
- Are they people who love cooking or travels?
As the business influencer or marketer, you may have an extensive social network of friends and families who will contribute to get the ball rolling. But, it’s important to note that most of your audience may not be familiar with the crowd funding campaign strategy and how it works. So, tap in to social media networks that they can easily access.
Chances are you’ll also need to use email marketing, bulk SMS messaging and other digital media to communicate and drive your community to support your project that is currently running on a crowd funding website. Most importantly, be prepared to stay active on social media sites like Facebook, Instagram, Twitter, YouTube and the rest of them until your crowd funding campaign is completed.
Wrapping up: How to Raise Money for Business Using Crowdfunding Sites
Now you have everything you need on how to raise money for business using crowdfunding sites. So what next? If you are confident that your business is a solid crowd funding candidate, you must prepare to mount a campaign by pulling together all the information you’ve got. Just go ahead, setup your campaign, get approved, and out shine competitors to win that loan offerings.
Having a big follower and 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 nail it with all the tools at your disposal. From knowing your product and its benefits, the people; and with social media to email broadcast…that is how 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. So to catch the eye of potential investors, you need to stand out, engage your community and close the deal. It’s this article helpful? Let us know you best crowd founding experience in the comment section. To keep the conversation going, follow us on Twitter, Facebook @abbakinglova.